Extreme Networks (EXTR) 8-K Extreme Networks Reports Second Quarter Financial 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 SECOND QUARTER FINANCIAL RESULTS

Continued Growth in Metro Service Provider Market

SANTA CLARA, Calif.; Jan. 28, 2009– Extreme Networks, Inc. (Nasdaq: EXTR) today announced financial results for its second quarter ended December 28, 2008. For the quarter, net revenue was $87.5 million, compared to $92.5 million in the year-ago quarter.

Net income on a GAAP basis was $2.5 million or $0.03 per diluted share. That compares to the year-ago net income of $4.1 million or $0.04 per diluted share.

Excluding stock-based compensation charges, non-GAAP net income for the second fiscal quarter of 2009 was $3.5 million or $0.04 per diluted share, which compares to non-GAAP net income of $5.5 million or $0.05 per diluted share in the year-ago quarter. A reconciliation of GAAP to non-GAAP financial measures is included in the accompanying financial tables.

“Our focus on high performance, cost-effective network solutions in the enterprise and carrier markets positions us well to deliver on the promise of converged networks in an economy where customers are demanding the greatest return on their investment,” said Mark Canepa, president and CEO of Extreme Networks.

For the second fiscal quarter of 2009, revenues in North America (U.S., Canada, and Central America) were $33.4 million, revenues in EMEA (Europe, Middle East, Africa, and South America) were $42.2 million, and revenues in APAC (Asia Pacific and Japan) were $11.9 million. That compares to the year-ago revenues of $40.5 million in North America, $35.7 million in EMEA, and $16.3 million in APAC.

During the quarter, cash and investments increased by $0.9 million from the first fiscal quarter of 2009.

Conference Call

Extreme Networks will host a conference call to discuss these results today at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time). A live webcast and replay of the call will be available athttp://investor.extremenetworks.com/. Financial information to be discussed during the conference call is posted on the Investor Relations section of the Company’s website (www.extremenetworks.com).

Non-GAAP Financial Measures

Extreme Networks provides all financial information required in accordance with generally accepted accounting principles (GAAP). To supplement our consolidated financial statements presented in accordance with GAAP, we are also providing with this press release non-GAAP net income. In preparing our non-GAAP information, we have excluded, where applicable, stock compensation (a non-cash charge). Because of the non-cash nature of this charge, we believe that excluding it provides both management and investors with additional insight into our current operations, the trends affecting the Company and the Company’s marketplace performance. In particular, management finds it useful to exclude the non-cash charge in order to more readily correlate the Company’s operating activities with the Company’s ability to generate cash from operations. Accordingly, management uses these non-GAAP measures, along with the comparable GAAP information, in evaluating our historical performance and in planning our future business activities. Please note that our non-GAAP measures may be different than those used by other companies. The additional non-GAAP financial information we present should be considered in conjunction with, and not as a substitute for, our financial information presented in accordance with GAAP. We have provided a non-GAAP reconciliation of the Consolidated Statement of Operations for the fiscal quarter ended December 30, 2007 and December 28, 2008, which are adjusted to exclude share-based compensation expense for these periods. These measures should only be used to evaluate the Company’s results of operations in conjunction with the corresponding GAAP measures for comparable financial information and understanding of the Company’s ongoing performance as a business. Extreme Networks uses both GAAP and non-GAAP measures to evaluate and manage its operations.

Extreme Networks, Inc.

Extreme Networks provides converged Ethernet networks that support data, voice and video for enterprises and service providers. The company’s network solutions feature high performance and high availability switching that deliver insight and control enabling customers to solve their real-world business communications challenges. Operating in more than 50 countries, Extreme Networks provides wired and wireless secure LANs, data center infrastructure and service provider Ethernet transport solutions that are complemented by a global, 24x7 service and support. For more information, visit:http://www.extremenetworks.com

Extreme Networks is either a trademark or registered trademark of Extreme Networks, Inc. in the United States and/or other countries.

# # #

This announcement contains forward-looking statements that involve risks and uncertainties, including statements regarding acceptance of the Company’s newer products in the market and its expectations regarding its products. 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: fluctuations in demand for the Company’s products and services; a highly competitive business environment for network switching equipment; its effectiveness in controlling expenses, the possibility that the Company might experience delays in the development of new technology and products; customer response to its new technology and products; the timing of any recovery in the global economy; risks related to pending or future litigation, and a dependency on third parties for certain components and for the manufacturing of the Company’s products. The Company undertakes no obligation to update the forward-looking information in this release. More information about potential factors that could affect the Company’s business and financial results is included in its 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.”

EXTREME NETWORKS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

	December 28, 2008			June 29, 2008
	(unaudited)			(1)
ASSETS
Current assets:
Cash and cash equivalents	$	34,318		$	70,370
Short-term investments		11,188			42,922
Accounts receivable, net		44,285			64,417
Inventories, net		22,275			13,942
Deferred income taxes		287			254
Prepaid expenses and other current assets, net		5,023			4,654
Total current assets		117,376			196,559
Property and equipment, net		43,843			43,348
Marketable securities		98,013			112,380
Other assets, net		14,033			13,474
Total assets	$	273,265		$	365,761
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	27,722		$	16,921
Accrued compensation and benefits		13,013			18,956
Restructuring liabilities		2,847			2,612
Accrued warranty		3,516			4,824
Deferred revenue, net		32,411			31,284
Deferred revenue, net of cost of sales to distributors		15,220			14,138
Other accrued liabilities		24,056			27,728
Total current liabilities		118,785			116,463
Restructuring liabilities, less current portion		5,213			6,777
Deferred revenue, less current portion		8,079			9,006
Deferred income taxes		503			403
Other long-term liabilities		795			1,058
Commitments and contingencies
Stockholders’ equity:
Convertible preferred stock, $.001 par value, issuable in series, 2,000,000 shares authorized; none issued		—			—
Common stock, $.001 par value, 750,000,000 shares authorized; 128,108,535 issued at December 28, 2008 (127,358,570 June 29, 2008) and capital in excess of par value		946,286			943,283
Treasury stock, 39,625,305 shares at December 28, 2008 (11,053,877 June 29, 2008)		(149,665	)		(48,303	)
Accumulated other comprehensive income (loss)		1,367			(723	)
Accumulated deficit		(658,098	)		(662,203	)
Total stockholders’ equity		139,890			232,054
Total liabilities and stockholders’ equity	$	273,265		$	365,761

(1) The information in this column is derived from the Company’s consolidated balance sheet included in the Company’s Annual Report on Form 10-K for the year ended June 29, 2008.

EXTREME NETWORKS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share amounts)

(unaudited)

	Three Months Ended						Six Months Ended
	December 28, 2008			December 30, 2007			December 28, 2008			December 30, 2007
Net revenues:
Product	$	72,580		$	77,427		$	146,929		$	151,572
Service		14,968			15,103			30,145			29,920
Total net revenues		87,548			92,530			177,074			181,492
Cost of revenues:
Product		31,411			31,039			61,544			62,295
Service		7,446			8,511			15,407			17,121
Total cost of revenues		38,857			39,550			76,951			79,416
Gross profit:
Product		41,169			46,388			85,385			89,277
Service		7,522			6,592			14,738			12,799
Total gross profit		48,691			52,980			100,123			102,076
Operating expenses:
Sales and marketing		25,776			25,050			51,633			49,588
Research and development		13,924			17,154			30,529			33,645
General and administrative		7,412			8,592			15,851			15,115
Total operating expenses		47,112			50,796			98,013			98,348
Operating income		1,580			2,184			2,110			3,728
Interest income		870			2,860			2,293			5,633
Interest expense		(19	)		(21	)		(69	)		(41	)
Other income / (expense), net		768			(249	)		1,316			(491	)
Income before income taxes		3,199			4,774			5,650			8,829
Provision for income taxes		733			638			1,546			1,060
Net Income	$	2,466		$	4,136		$	4,104		$	7,769
Basic and diluted net income per share:
Net income per share - basic		0.03			0.04			0.04			0.07
Net income per share - diluted		0.03			0.04			0.04			0.07
Shares used in per share calculation - basic		88,323			114,530			99,823			114,217
Shares used in per share calculation - diluted		88,363			115,725			99,925			115,498

EXTREME NETWORKS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(unaudited)

	Six Months Ended
	December 28, 2008			December 30, 2007
Cash flows from operating activities:
Net income	$	4,105		$	7,769
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		2,745			3,707
(Gain) loss on value of option to put securities		(6,778	)		—
Mark to market, trading loss (gain)		6,778			—
Provision for doubtful accounts		(56	)		265
Provision for excess and obsolete inventory		819			1,324
Deferred income taxes		68			(240	)
Amortization of warrant		—			1,349
(Loss) on retirement of assets		94			(7	)
Stock-based compensation		1,396			2,429
Changes in operating assets and liabilities, net
Accounts receivable		20,188			(6,709	)
Inventories		(9,157	)		2,533
Prepaid expenses and other assets		(928	)		2,830
Accounts payable		10,801			(4,926	)
Accrued compensation and benefits		(5,943	)		3,241
Restructuring liabilities		(1,329	)		(4,182	)
Accrued warranty		(1,307	)		(474	)
Deferred revenue, net		200			(21,972	)
Deferred revenue, net of cost of sales to distributors		1,082			22,361
Other accrued liabilities		(4,970	)		(27	)
Net cash provided by operating activities		17,808			9,271
Cash flows provided by (used in) investing activities:
Capital expenditures		(3,334	)		(2,068	)
Purchases of investments		(25,166	)		(171,393	)
Proceeds from maturities of investments and marketable securities		28,164			76,247
Proceeds from sales of investments and marketable securities		46,225			59,679
Net cash provided by (used in) investing activities		45,889			(37,535	)
Cash flows (used in) provided by financing activities:
Proceeds from issuance of common stock		1,614			2,733
Repurchase of common stock, including expenses		(101,363	)		—
Net cash (used in) provided by financing activities		(99,749	)		2,733
Net decrease in cash and cash equivalents		(36,052	)		(25,531	)
Cash and cash equivalents at beginning of period		70,370			71,573
Cash and cash equivalents at end of period	$	34,318		$	46,042

EXTREME NETWORKS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

GAAP TO NON-GAAP RECONCILIATION

(In thousands, except per share amounts)

(Unaudited)

	Three Months Ended
	December 28, 2008		December 30, 2007
Net income - GAAP Basis	$	2,466	$	4,136
Non-GAAP adjustments
Stock-based compensation expense	$	1,004	$	1,407
Total non-GAAP adjustments	$	1,004	$	1,407
Net income - Non-GAAP Basis	$	3,470	$	5,543
Non-GAAP adjustments
Cost of product revenue	$	75	$	122
Cost of service revenue		61		65
Sales and marketing		328		410
Research and development		311		398
General and administrative		229		412
Total non-GAAP adjustments	$	1,004		1,407