MANUFACTURING

Extreme Networks, a leader in open converged networks, announced financial results for its fiscal first quarter ended Sept. 26, 2004. Net revenue for the first quarter of fiscal 2005 was $95.1 million, up three percent from $92.2 million in the fourth fiscal quarter of 2004, and up nine percent from $87.4 million in the year-ago first quarter. On a GAAP basis, the Company recorded net income of $4.1 million or $0.03 per diluted share in the first fiscal quarter of 2005, up from the net income of $2.6 million or $0.02 per diluted share in the first fiscal quarter of 2004. "Our positive financial results represent another quarter of market adoption for our innovative switching solutions that Enterprises and Metro Service providers are using to build open converged networks," said Gordon Stitt, president and CEO of Extreme Networks. "We are very pleased to have increased revenue, profitability, gross margins, and cash flow, while controlling our expenses." Operating income for the first quarter of fiscal 2005 totaled $4.7 million, an operating margin of 5.0 percent of net revenues, up from $1.2 million or 1.4 percent of net revenues in the year-ago period. The Company's improved operating margin was the result of higher revenues, expanded gross margins, and decreased operating expenses as a percentage of sales. Total gross margin was 53.2 percent of revenues during the fiscal first quarter of 2005, compared to 52.5 percent in the fiscal fourth quarter of 2004, and 51.4 percent in the year-ago first quarter. Operating expenses declined to 48.2 percent of revenues, from 56.4 percent in the fiscal fourth quarter of 2004, and from 50.0 percent in the year-ago first quarter. Cash and cash equivalents, short-term investments, and marketable securities increased to $439.9 million during the quarter, up from $425.7 million at the end of the fiscal fourth quarter 2004, and up from $403.3 million at the end of the fiscal first quarter of 2004. Revenues in the U.S. were $40.4 million in the first quarter of fiscal 2005, or 42 percent of total consolidated revenue; international revenues were $54.7 million or 58 percent of total consolidated revenue. In the first quarter of fiscal 2004, revenues in the U.S. were $36.4 million, or 42 percent of total consolidated revenue; international revenues were $51.0 million, or 58 percent. Management Expectations For the quarter ending Dec. 26, 2004, the Company currently anticipates that its revenues will be up one to five percent relative to the Sept. quarter just completed. The Company anticipates that gross margin as a percentage of net revenue will be similar to the 53.2 percent reported in Sept. The Company anticipates total operating expenses will be in a range of $46 to $47 million. New Customers -- The State of Florida Department of Transportation District Five became the latest agency to deploy Extreme Networks' open convergence network solution. They installed a converged network, the Intelligent Traffic Management System, to manage IP video and data applications reaching from as far as Disney World to Daytona Beach using Extreme's BlackDiamond, Alpine and Summit switches. -- Britain's Trader Media, which publishes the popular Auto Trader books, magazines, as well as the UK's busiest automotive website, chose Extreme Networks for a high-performance infrastructure. The Extreme network provides Gigabit Ethernet connections at the edge of the network to manage the more than two million monthly user visits. -- Extreme Networks' carrier-class resiliency allows KAMO's K-PowerNet to deliver a reliable, multi-state Metro network to better serve customers. This leading-edge data, voice and video service provider in the four-state metropolitan areas in Kansas, Arkansas, Missouri and Oklahoma, is using Extreme Networks' innovative Ethernet Automatic Protection Switching (EAPS), which delivers sub-50 millisecond recovery on ring-based routed or switched Gigabit Ethernet networks. -- Extreme Networks was also selected by Oakland County, Michigan to provide a leading edge Ethernet network infrastructure for its e-Government initiative. The new Extreme Metro network replaced an ATM infrastructure and will be used to run converged applications, such as point-to-point IP video streams. -- Extreme Networks and one of the UK's leading communications companies, Call Center Technology (CCT), formed a strategic partnership to deliver converged voice and data communications solutions. The partnership brings together CCT's expertise in IP telephony technology and applications from Avaya with Extreme Networks' high performance Ethernet switching expertise. CCT will resell Extreme Networks' portfolio of high-performance communications solutions while providing a single point of contact for customer consultancy, sales, services and support.