MANUFACTURING

Extreme Networks, a leader in open converged networks, today announced financial results for its fiscal second quarter ended Dec. 26, 2004. Net revenue for the second quarter of fiscal 2005 was $100.3 million, up 20 percent from $83.4 million in the year-ago second quarter, and up 5 percent from $95.1 million in the first fiscal quarter of 2005. The Company recorded net income of $9.95 million or $0.08 per diluted share in the second fiscal quarter of 2005, up from the net loss of ($5.6) million or ($0.05) per diluted share in the second fiscal quarter of 2004. "We are very pleased with our continued growth in sales, gross margin and profitability," said Gordon Stitt, president and CEO of Extreme Networks. "Our performance reflects the positive response from customers for our innovative networking solutions that allow customers to build converged networks that easily embrace emerging applications, such as voice. Our two-tier network architecture, that includes our new, voice-class Aspen switch for the edge, is being adopted by enterprises and metro Ethernet service providers." Revenues in the U.S. were $43.4 million in the second quarter of fiscal 2005, or 43.3 percent of total consolidated revenue. U.S. revenues were up 54 percent from the $28.2 million in the year-ago quarter. International revenues were $56.9 million or 56.7 percent of total consolidated revenue, up from the $55.2 million in the year-ago quarter. Revenues in the Company's European region, including the Middle East and Africa, were up 21 percent in the second quarter of 2005 compared with the second quarter of fiscal 2004. Operating income, for the second quarter of fiscal 2005 totaled $7.8 million, an operating margin of 7.8 percent of net revenues, up from an operating loss of ($5.8) million or (6.9) 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 53.8 percent of revenues during the fiscal second quarter of 2005, compared to 53.2 percent in the fiscal first quarter of 2005, and 48.5 percent in the year-ago second quarter. Operating expenses declined to 46 percent of revenues, from 48.2 percent in the fiscal first quarter of 2005, and from 55.4 percent in the year-ago second quarter. Other income and expenses for the quarter included $3.9 million for a foreign consumption tax refund, which increased earnings per share by $0.03 per share. Cash and cash equivalents, short-term investments, and marketable securities increased to $446.8 million during the quarter, up from $439.9 million at the end of the fiscal first quarter 2005, and up from $412.6 million at the end of the fiscal second quarter of 2004. Management Expectations For the quarter ending Mar 27, 2005, the Company currently anticipates that its revenues will be flat to up five percent relative to the December quarter just completed. The Company anticipates that gross margin as a percentage of net revenue will be similar to the percentage reported in the December quarter. The Company anticipates total operating expenses will be in a range of $47.5 million to $48.5 million. Quarterly Highlights: Surpassed 10 Million Ports Shipped Since Founding: By reaching this major milestone, Extreme demonstrates strong market acceptance for its innovative networking technology. Shipped new Aspen switch: Extreme readies the network for voice at the edge with new high-performance switch. The Aspen switch is the second chassis Extreme has delivered in 12 months. Extended Unified Access Architecture: Extreme shipped new Summit 300-24 to support voice convergence over wireless with this cost-effective Layer 3 switch. Appointment of Mike West as Chairman: Extreme broadened its Board of Directors with industry veteran West, who brings more than 30 years of experience in growing high-tech communications companies from emerging to market leader status. Selected as network for American Student Assistance (ASA): The BlackDiamond and SummitÒ switching solutions selected as data center infrastructure for the ASA, one of the most respected Federal Family Education Loan Program guaranty agencies, having helped more than 1.4 million students. Powered Toronto Research Network: GTANet, Canada's newest education and research network, is being powered by Extreme switching to allow multiple research institutions to collaborate over multiple, high-speed network connections. Networked the RSNA 2004 Show: Extreme provides the network infrastructure for the RSNA 2004 show, a medical gathering that draws more than 60,000 attendees. Selected for Healthcare Network: The Santa Barbara Regional Health Authority selected Extreme to gain a converged network solution for meeting maximum uptime and performance requirements. Powered a Record-Breaking Event: Extreme's switching solutions serve as the infrastructure for the Guinness Book of World Records' largest gaming festival, the Dreamhack LAN Party.