NEW YORK--(BUSINESS WIRE)--The law firm of Kirby McInerney LLP reminds investors that a class action lawsuit has been filed in the U.S. District Court for the Northern District of California on behalf of those who acquired Extreme Networks, Inc. (“Extreme Networks” or the “Company”) (NASDAQ: EXTR) securities during the period of July 27, 2022 through January 30, 2024, inclusive (“the Class Period”). Investors have until October 15, 2024 to apply to the Court to be appointed as lead plaintiff in the lawsuit.
[Click here to learn more about the class action]
On January 25, 2023, Extreme Networks announced the resignation of its CFO, Remi Thomas, and simultaneously revealed that compared to the first quarter of 2023, Extreme Networks’ backlog had fallen to $542 million, its Product Book to Bill Ratio had fallen from 1.3x to 0.9x, and its Service Book to Bill Ratio had fallen from 1.4x to 1.2x. On this news, the price of Extreme Networks shares declined by $2.81, or approximately 14.5%, from $19.31 on January 24, 2023, to close at $16.50 on January 25, 2023.
On August 24, 2023, Extreme Networks revealed that its backlog had dropped to $267.3 million, a significant decrease of about $245 million year-over-year and $275.7 million over the previous six months. On this news, the price of Extreme Networks shares declined by $2.81, from $27.68 on August 24, 2023, to close at $25.16 on August 25, 2023.
Later, on November 1, 2023, the Company further disclosed that working through the backlog was creating an “air pocket of demand” among end customers, leading to a more cautious revenue growth forecast of “mid-to-high single digits” for fiscal year 2024. Additionally, Extreme Networks projected that its backlog would normalize to between $75 million and $100 million by the end of the fourth quarter of 2024. On this news, the price of Extreme Networks shares declined by $2.76, from $20.62 on October 31, 2023, to close at $17.86 on November 1, 2023.
On January 8, 2024, Extreme Networks updated its business outlook, lowering its revenue projections for the second quarter of 2024 and its long-term forecasts. On this news, Extreme Networks’ share price declined by approximately $1.29, from $17.52 on January 8, 2024, to close at $16.23 on January 9, 2024.
On January 31, 2024, Extreme Networks disclosed that its revenues for second quarter of 2024 were $296.4 million, down 7% year-over-year, and that product revenue had plummeted by 37% year-over-year to $186.6 million. The Company also revealed that its product backlog had normalized during the quarter and that it had decided to clear out channel inventory in the March quarter, anticipating a $40 million to $50 million reduction in channel inventory for the third quarter. This move was expected to mask demand due to inventory clearing from the channel. Contrary to previous revenue growth expectations, Extreme Networks updated its guidance to show that it was projected to experience lower revenues for fiscal year 2024. During an earnings call, President and CEO Edward B. Meyercord III acknowledged that the company’s “baseline business” was likely to achieve only about $1.1 billion in annual revenues. On this news, the price of Extreme Networks shares declined by $3.13, from $16.64 on January 30, 2024, to close at $13.51 on January 31, 2024.
The lawsuit alleges that Extreme Networks did not reveal it was facing declining client demand because its customers had over-ordered products during the COVID-19 pandemic. To compensate for this drop in organic demand, the company allegedly relied more heavily on fulfilling backlog orders than it had disclosed to investors.
If you purchased or otherwise acquired Extreme Networks Securities, have information, or would like to learn more about this investigation, please contact Thomas W. Elrod of Kirby McInerney LLP by email at investigations@kmllp.com, or by filling out this CONTACT FORM, to discuss your rights or interests with respect to these matters without any cost to you.
Kirby McInerney LLP is a New York-based plaintiffs’ law firm concentrating in securities, antitrust, whistleblower, and consumer litigation. The firm’s efforts on behalf of shareholders in securities litigation have resulted in recoveries totaling billions of dollars. Additional information about the firm can be found at Kirby McInerney LLP’s website.
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