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W.R. Hambrecht’s Ryan Hutchinson yesterday upgraded shares of Extreme Networks (EXTR) to Buy from Hold, and set a price target of $6.50.

Hutchinson said his upgrade of the network equipment company is “based on our belief that the corporate reorganization that has been underway over the last six months is beginning to take hold.” He says Extreme is “on the brink of resuming a growth trajectory.”

Hutchinson says CEO Mark Canepa has taken several important steps to turn the company around, including:

  • Focusing on key vertical markets.
  • Re-aligning product groups.
  • De-layering management structure; adding key hires.
  • Reinvigorating the North American sales staff.
  • He adds that with the stock trading at at enterprise value/calendar 2007 revenue multiple of under 1x, “the risk/reward is compelling” (the market cap is $546 million; the company had $204 million in cash at year end).

    He sees Extreme earning 7 cents a share in the June 2007 fiscal year, and 15 cents in fiscal 2008. He expects revenues this year of $348.6 million, up from a previous estimate of $343.2 million; nonetheless, that is down from $358.6 million in fiscal 2006. But he sees revenue rebounding to $379.5 million in fiscal 2008; that’s up from his old estimate of $368.8 million.

    Extreme shares yesterday were up 20 cents at $4.66.

    EXTR 1-yr chart

    extr chart

    Source: Extreme Networks: Early Signs of a Makeover