Extreme Networks Cuts 18 Percent Of Workforce; Plans To 'Rely More On Channel Partners'

Extreme Networks on Thursday disclosed plans to restructure by cutting 18 percent of its global workforce -- 285 jobs -- and investing in software and cloud services for the channel.

Some sales positions were included in the job cuts, and Extreme plans to fill those gaps by working more closely with solution providers, said Ed Meyercord, president and CEO of Extreme, during a conference call.

"In certain markets, rather than have the fixed costs of a direct sales team or people in place, we'll cover that through the channel and channel partners," Meyercord said. "We're going to rely more heavily on our channel partners to cover different geographies." Extreme did not respond to requests for additional comments on its channel strategy.

The 285 layoffs will reduce operating costs for the San Jose, Calif.-based networking company by $40 million in fiscal year 2016, with the restructuring initiative costing upward of $15 million, according to a company filing with the U.S. Securities and Exchange Commission. The job cuts will impact "the majority of company departments, and both domestic and international locations," according to the filing.

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"It's kind of a mess over there right now," said a top executive at one East coast solution provider and Extreme partner who spoke on condition of anonymity.

Last month, Meyercord was named the company's third CEO within the past five years, replacing Chuck Berger, who resigned from his position and from the company's board April 19. Extreme earlier this month reported total revenue dropped to $119.6 million, down 16 percent year-over-year, for its third quarter of fiscal 2015. The revenue decline included a 21 percent drop in product sales.

Extreme aims to turn things around by creating a new go-to-market strategy that leverages its network management, policy and application analytics with its wired and wireless platforms. The strategy is centered on building software and service solutions for partners, said Meyercord, with plans to increase investments on its ExtremeXOS network operating system and a heavier push into software-defined networking.

"They asked [partners] for feedback of what we wanted to see from them and it was more services," said the solution provider executive. "It's the way Extreme needs to change their business model. … [Partners] really want recurring revenue services."

Contrary to disappointing sales numbers seen in the most recent quarter, partners CRN spoke with said their Extreme business is actually growing.

"Our business almost doubled with Extreme last year," said Craig Tarnoski, vice president of sales for Comm Solutions, Malvern, Pa. "Layoffs and [Extreme's effort to] refocus have been non-issues for us. It's been business as usual."

Extreme has been supporting Comm Solutions with market development funds, which has helped the solution provider stage more customer events and educational seminars, he said.

"It's been very collaboratively to this point … It's been a good working relationship with Extreme,’ Tarnoski said.

PUBLISHED MAY 21, 2015