Extreme Networks Shares Downgraded To Hold At Wunderlich

In a report published Friday, Wunderlich Securities analyst Matthew S. Robison downgraded the rating on Extreme Networks Inc (NASDAQ: EXTR) from Buy to Hold, while reducing the price target from $6 to $2.80.

In the report Wunderlich Securities noted, "Extreme (EXTR) continued the pattern of missing expectations in alternating quarters with a F3Q15 warning of magnitude comparable to that of F1Q15, except that estimates have come down since then. Also, it is Ground Hog day for the CEO who, like last year, will take over sales management for the June quarter, at least."

Although the company appears poised for campus networking, especially in education and large venue niches, its "inability to deliver sustained profit" indicates that it needs "narrower focus," Robison said.

Extreme Networks guided to a non-GAAP loss of $0.07-$0.09 per share on revenue of $118-120 million. This marks a downward revision from its prior guidance for EPS of ($0.03)-$0.02 on sales of $130-140 million. The company has warned of a miss of about $17 million for the the September quarter, while it results indicated a shortfall of $15.4 million to the initial sales guidance.

"Gross margin is expected to be about 160bps lower than prior expectations due mostly to absence of absorption on low sales, but also to currency-related price pressure overseas," Robison wrote.

Extreme Networks has also announced the departure of the sales leader who started in early October. "Our understanding is that other recent sales department hires will stay on and that the CEO will run the department again until a replacement executive is found," the report mentioned.

The revenue and EPS estimates for FY15 have been reduced from $579.0 million to $543.0 million and from $0.13 to -$0.07, respectively.