Extreme Networks (EXTR) 8-K Extreme Networks Reports Third Quarter Results

Exhibit 99.1

FOR IMMEDIATE RELEASE

For more information, contact:
Extreme Networks
Investor Relations	Public Relations
408/579-3030	408/579-3483
investor_relations@extremenetworks.com	gcross@extremenetworks.com

EXTREME NETWORKS REPORTS THIRD QUARTER RESULTS

SANTA CLARA, Calif., April 25, 2006– Extreme Networks, Inc. (Nasdaq: EXTR), the leader in open converged networks, today announced financial results for its fiscal third quarter ended April 2, 2006.

Net revenue for the quarter was $85.5 million, compared to $91.9 million in the third quarter of fiscal 2005. Net income for the third quarter was $2.8 million, or $0.02 per diluted share on a GAAP basis. Excluding stock-based compensation expense of $1.3 million, non-GAAP net income for the quarter was $4.2 million or $0.03 per diluted share, compared to a net loss of ($1.2) million or ($0.01) per diluted share reported in the third fiscal quarter of 2005.

These results are in line with the preliminary results announced by the Company on April 6, 2006.

“Our improved profitability compared to last year is a bright spot in our results,” said Gordon L. Stitt, CEO of Extreme Networks. “Now, with the recent launch of our BlackDiamond^® 12K chassis and further enhancements to our ExtremeXOS^™ operating system, our goal will be to balance an improved business model with revenue growth.”

Revenues in the U.S. were $33.9 million in the quarter, representing 40 percent of total consolidated revenue, down from $40.7 million or 44.3 percent of revenue in the same quarter a year ago. International revenues were $51.6 million or 60 percent of total revenues compared to $51.2 million or 55.7 percent of total revenues, in the third quarter of last fiscal year.

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Gross margin for the third quarter on a GAAP basis was 54.1 percent. Excluding expense for stock-based compensation of $0.2 million in the current quarter, gross margin was 54.3 percent, an increase from 51.4 percent in the same quarter a year ago. This marks the ninth consecutive quarter in which gross margins have increased on a year-over-year basis.

Operating expenses for the quarter, on a GAAP basis, were $44.1 million. Excluding stock-based compensation of $1.1 million in the current quarter, operating expenses were $43.0 million or 50.3% of sales, a reduction of $3.5 million compared to $46.5 million of operating expenses, excluding the $2.0 million expense related to a technology agreement in the same quarter a year ago.

Cash provided by operating activities during the third quarter was $3.1 million. The Company continued to execute on its $50 million share repurchase program by repurchasing 2.8 million shares for $13.8 million, leaving cash, cash equivalents and investments at the end of the third quarter of $444.7 million. Since announcing the program in October 2005, the Company has repurchased a total of 4.2 million shares for $20.6 million dollars.

Extreme Announces Contract to sell Santa Clara Real Estate

On April 24, 2006, Extreme announced that it has entered into a contract for the sale of its current corporate headquarters campus in Santa Clara, California at a price of $70 million. Completion of the transaction is subject to successful re-zoning of the property for residential development. The transaction is expected to be completed in the next 15 - 21 months. The Company intends to relocate its corporate headquarters to an improved facility in the Santa Clara area.

Quarterly Business Highlights

• Extreme Networks continues to promote rapid adoption of triple play carrier and enterprise networks as a founding member of the Triple Play Alliance, an independent global association of leading network equipment and software vendors with an interoperability test and demonstration lab near Munich, Germany. Triple play is the ability to deliver voice, video, and data traffic for residential markets, and converged data services and hosted VoIP for business subscribers.

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• With Metro Ethernet Forum (MEF) certification of the BlackDiamond 12K, Extreme’s newest carrier switch, Extreme Networks offers a fully MEF-certified end-to-end switching family. The 12K provides telecom carriers with Multidimensional Ethernet for delivering triple play residential services and business Ethernet private line and private LAN services.

• The UK’s Royal Botanic Gardens relies on Extreme Networks to digitally catalogue its entire extensive collection of specimens, periodical titles, prints and drawings.

• AirTight Networks, the leader in wireless perimeter security solutions, and Extreme work together to secure and optimize high performance wired and wireless LANs with wireless intrusion prevention and performance management.

• As the premier network hardware provider, Extreme Networks will power Interop Las Vegas 2006 with its BlackDiamond and Summit switches and ExtremeXOS network operating system.

Conference Call

Extreme Networks will host a conference call to discuss these results today at 5:00 p.m. EDT (2:00 p.m. PDT), for more information visithttp://www.extremenetworks.com/aboutus/investor/ Financial information to be discussed during the conference call is posted on the Investor Relations section of the Company’s website (www.extremenetworks.com).

Extreme Networks

Extreme Networks is a leader in open converged networks. Its innovative network architecture provides Enterprises and Metro Service Providers with the resiliency, adaptability and simplicity required for a true converged network that supports voice, video and data, over a wired and wireless infrastructure, while delivering high-performance and advanced security features. For more information, please visitwww.extremenetworks.com

Non-GAAP Financial Measures

Extreme Networks provides all financial information required in accordance with generally accepted accounting principles (GAAP). In the first fiscal quarter of 2006, the Company adopted Financial Accounting Standards Board Statement No. 123(R), which requires companies to recognize the compensation cost associated with share-based payments in their financial statements. As a result, the financial statements for the three and nine months ended April 2, 2006 include the new stock-based compensation expense of $1.3 million and $4.8 million, respectively; however, comparable prior year periods are not required to be restated. Therefore, to supplement Extreme Networks’ consolidated financial statements presented in accordance with GAAP, the Company has provided non-GAAP financial information, which is adjusted to exclude all stock-based compensation expense. This non-GAAP reporting provides for comparable financial information and can enhance the understanding of the Company’s ongoing performance as a business. Therefore, Extreme Networks plans to use both GAAP and non-GAAP reporting internally to evaluate and manage its operations.

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Extreme Networks is a registered trademark of Extreme Networks, Inc., in the United States and other countries. All other marks are the property of their respective holders.

This announcement contains forward-looking statements that involve risks and uncertainties, including statements regarding our expectations for future operating results. Actual results could differ materially from those projected in the forward-looking statements as a result of certain risk factors, including, but not limited to: our effectiveness in controlling expenses, fluctuations in demand for our products and services; a highly competitive business environment for network switching equipment; the possibility that we might experience delays in the development of new technology and products; customer response to our new technology and product; a dependency on third parties for certain components and for the manufacturing of our products; and our ability to successfully conclude the sale of our corporate campus. We undertake no obligation to update the forward-looking information in this release. More information about potential factors that could affect our business and financial results is included in our filings with the Securities and Exchange Commission, including, without limitation, under the captions: “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Risk Factors,” which is on file with the Securities and Exchange Commission (http://www.sec.gov).

EXTREME NETWORKS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per-share amounts)

(Unaudited)

	Three Months Ended					Nine Months Ended
	April 2, 2006		March 27, 2005			April 2, 2006		March 27, 2005
Net revenues:
Product	$	69,148	$	76,835		$	228,063	$	243,770
Service		16,302		15,073			48,096		43,525
Total net revenues		85,450		91,908			276,159		287,295
Cost of revenues:
Product(1)		30,432		35,692			99,875		109,951
Service(1)		8,806		8,954			26,002		25,568
Total cost of revenues		39,238		44,646			125,877		135,519
Gross margin:
Product		38,716		41,143			128,188		133,819
Service		7,496		6,119			22,094		17,957
Total gross margin		46,212		47,262			150,282		151,776
Operating expenses:
Sales and marketing(1)		23,148		23,946			73,026		70,941
Research and development(1)		14,456		15,329			46,389		45,586
General and administrative(1)		6,505		7,254			19,732		21,918
Amortization of deferred stock compensation(1)		—		2			—		69
Technology agreement		—		2,000			—		2,000
Total operating expenses		44,109		48,531			139,147		140,514
Operating income (loss)		2,103		(1,269	)		11,135		11,262
Other income, net		1,383		829			3,739		4,582
Income (loss) before income taxes		3,486		(440	)		14,874		15,844
Provision for income taxes		645		817			2,030		3,025
Net income (loss)	$	2,841	$	(1,257	)	$	12,844	$	12,819
Net income (loss) per share - basic	$	0.02	$	(0.01	)	$	0.11	$	0.11
Net income (loss) per share - diluted	$	0.02	$	(0.01	)	$	0.10	$	0.10
Shares used in per share calculation - basic		120,940		121,444			122,230		121,041
Shares used in per share calculation - diluted		122,818		121,444			124,050		124,211
____________ (1)      Includes stock-based compensation expense as follows:
Cost of product revenue	$	147		—		$	513		—
Cost of service revenue		77		—			277		—
Sales and marketing		500	$	14			1,876	$	39
Research and development		363		4			1,330		98
General and administrative		228		—			763		—
Amortization of deferred stock compensation		—		2			—		69
Total stock-based compensation expense	$	1,315	$	20		$	4,759	$	206

EXTREME NETWORKS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

	April 2, 2006		July 3, 2005
Assets
Current assets:
Cash and cash equivalents	$	82,696	$	127,470
Short-term investments		312,527		127,889
Accounts receivable, net		27,490		30,778
Inventories		20,583		25,943
Prepaid expenses and other current assets		13,713		12,410
Total current assets		457,009		324,490
Property and equipment, net		47,801		50,438
Marketable securities		49,489		185,045
Other assets		21,859		23,641
Total assets	$	576,158	$	583,614
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	21,562	$	18,283
Deferred revenue		34,100		36,688
Accrued warranty		6,428		7,471
Convertible subordinated notes		200,000		—
Other accrued liabilities		42,783		42,462
Total current liabilities		304,873		104,904
Other long-term liabilities		12,661		16,913
Deferred revenue, less current portion		9,026		13,785
Convertible subordinated notes		—		200,000
Total stockholders’ equity		249,598		248,012
Total liabilities and stockholders’ equity	$	576,158	$	583,614

EXTREME NETWORKS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Nine Months Ended
	April 2, 2006			March 27, 2005
Cash flows from operating activities:
Net income	$	12,844		$	12,819
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		9,141			12,605
Provision for doubtful accounts		1,166			—
Provision for excess and obsolete inventory		929			795
Deferred income taxes		3			15
Amortization of warrant		3,679			5,675
Amortization of deferred stock compensation		—			69
Stock-based compensation		4,728			—
Loss on disposal of assets		—			50
Net changes in operating assets and liabilities:
Accounts receivable		3,533			1,422
Inventories		4,431			2,990
Prepaid expenses and other current and noncurrent assets		(4,542	)		(10,751	)
Accounts payable		3,279			3,045
Deferred revenue		(7,347	)		(4,834	)
Accrued warranty		(1,044	)		(424	)
Other accrued liabilities		(4,173	)		(3,379	)
Net cash provided by operating activities		26,627			20,097
Cash flows from investing activities:
Capital expenditures		(6,504	)		(4,647	)
Purchases and maturities of investments, net		(48,383	)		(13,336	)
Net cash used in investing activities		(54,887	)		(17,983	)
Cash flows from financing activities:
Proceeds from issuance of common stock		4,092			4,264
Repurchase of common stock		(20,606	)		—
Net cash provided by (used in) financing activities		(16,514	)		4,264
Net increase (decrease) in cash and cash equivalents		(44,774	)		6,378
Cash and cash equivalents at beginning of period		127,470			59,164
Cash and cash equivalents at end of period	$	82,696		$	65,542

EXTREME NETWORKS, INC.

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

(In thousands, except per-share amounts)

(Unaudited)

	Three Months Ended					Nine Months Ended
	April 2, 2006		March 27, 2005			April 2, 2006		March 27, 2005
GAAP net income (loss)	$	2,841	$	(1,257	)	$	12,844	$	12,819
Adjustments:
Stock-based compensation		1,315		20			4,759		206
Income tax effect		—		—			—		—
Total non-GAAP adjustments		1,315		20			4,759		206
Non-GAAP net income (loss)	$	4,156	$	(1,237	)	$	17,603	$	13,025
Non-GAAP net income (loss) per share — basic	$	0.03	$	(0.01	)	$	0.14	$	0.11
Non-GAAP net income (loss) per share — diluted	$	0.03	$	(0.01	)	$	0.14	$	0.10
Shares used in per share calculation — basic		120,940		121,444			122,230		121,041
Shares used in per share calculation — diluted		122,818		121,444			124,050		124,211