January 09, 2013, 2:26 PM — Extreme Networks is laying off 13% of its workforce, or about 90 employees, in an effort to reduce expenses by $7 million per quarter.
According to an 8-K filing with the SEC this week, the Ethernet switch maker implemented a cost reduction plan on Dec. 31, 2012, after downgrading results for its fiscal second quarter, which ended on that date. The plan was announced last week.
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The plan "provides for a reduction in the current number of employee positions at the Company by approximately 13%," according to the 8-K. Extreme's headcount was about 690 employees at the end of its fiscal first quarter, which ended Sept. 30, 2012.
The cost reduction plan calls for eliminating several management staff positions, consolidating operations in California and North Carolina to reduce real estate costs, and integrating data center and alliances sales teams under a single sales structure, according to the 8-K.
Extreme anticipates completing its restructuring by Sept. 30. The company expects to incur charges of $5.5 million to $7.0 million in its second quarter for non-recurring employee-related termination benefits, including severance payments and continuation of medical insurance benefits.
For its second quarter, which the company will report later this month, Extreme warned that revenues will come in under previously stated guidance -- $75 million to $77 million vs. $78 million to $85 million. The shortfall is due to delays in customer expenditures in the U.S. and in the Europe/Middle East/Africa regions.
Net income, excluding charges and other expenses, is expected to be in a range of $2.5 million to $3.0 million, which is below the low-end of the range of previously provided guidance primarily due to lower than expected revenue.
Extreme laid off 110 people, or 16% of its workforce, 18 months ago. The company has been struggling to grow, with market share remaining flat at 1.3% of the $20 billion Ethernet switch market in 2010 and 2011, according to Dell'Oro.
Third quarter share was 1.1%, flat with 2011's third quarter, according to Dell'Oro.
Jim Duffy has been covering technology for over 25 years, 21 at Network World. He also writes The Cisco Connection blog and can be reached on Twitter @Jim_Duffy.