Good day, ladies and gentlemen, and welcome to the Extreme Networks First Quarter Fiscal 2014 Financial Results Conference Call. As a reminder, this call is being recorded. I would now like to introduce your host for today's conference, John Kurtzweil, CFO. Please go ahead.

Thank you, Mercy. Welcome to the Extreme Networks First Fiscal Quarter of 2014 Conference Call. On the call with me today is Chuck Berger, Extreme Networks' President and CEO. This conference call is being broadcast live over the Internet and is being recorded on behalf of the company. The recording will be posted on Extreme Networks' website for replay shortly after the conclusion of the call and will remain there for the next 7 days. The presentations and the recordings of this call are copyrighted property of the company, and no other recording or reproduction is permitted unless authorized by the company in writing. By now, you have had a chance to review today's first quarter fiscal 2014 earnings press release. For your convenience, a copy of the release and supporting financial materials are available on the Investor Relations section of the company's website at www.extremenetworks.com. This conference call contains forward-looking statements that involve risk and uncertainties, including statements regarding the company's expectations regarding its financial performance, the impact of the Enterasys Networks acquisition, strategies for growth of customer demand, development of new products, customer acceptance of the company's products, customer buying patterns and spending patterns and overall trends and economic conditions in the company's markets. Actual results could differ materially from those projected in the forward-looking statements as a result of certain risk factors, including, but not limited to, a challenging macroeconomic environment worldwide, fluctuations in demand for the company's products and services, a highly competitive business environment for network switching equipment, the company's effectiveness in controlling expenses, the possibility that the company might experience delays in the development of new technologies and products, customer response to its new technologies and products, risks related to pending or future litigation, the dependency on other parties for certain components for the…

Thanks, John, and good early morning to everyone on the call. Thanks for joining us. It's an extremely exciting time at Extreme Networks as we completed our first fiscal quarter on September 30 and announced the completion of the acquisition of Enterasys late last week on November 1. First, let's talk about the quarter. This morning, we reported first quarter revenues of $75.9 million, reaching the high end of our guidance, stopping year-over-year revenue declines and meeting our internal annual plan. At $0.06 earnings per share, we are at the high end of guidance on earnings and up $0.02 versus the prior year's first quarter. Our cash balance was $199.4 million at the end of the quarter. We are particularly pleased with these results given the challenges we faced during the quarter. July and August are seasonally slow business months in virtually every region globally. Additionally, we continue to face shortages of our most popular products through the end of August. I am happy to report that by the end of September, our inventories were back at the levels needed to support our revenue run rate going forward. Looking ahead, product shortages will not be an issue. Finally, we announced our planned acquisition of Enterasys in the middle of the last month of the quarter. Fortunately, the announcement did not disrupt our quarter end revenue close. We continue to focus on building partnerships to create leverage and allow us to fight above our weight. In addition to our existing partnerships with Ericsson and the partnership we announced last quarter with Lenovo, we signed partnerships with Aviat and SGI during the quarter. Aviat will be reselling Extreme switches and routers along with their microwave networking solutions, and SGI will be reselling our products along with their high-performance data center solutions, with…

Thank you, Chuck. I will now provide a review of our fiscal Q1 financials and our financial targets for Q2 of fiscal 2014. Revenues for Q1 were $75.9 million, which is at the high end of our guidance of $72 million to $77 million. Sequentially, the first quarter is typically down, and this quarter was no different. Revenues were down $3.5 million from Q4 or 4.5% and essentially flat year-over-year. As was discussed last quarter, we again experienced key component shortages, which were essentially resolved in September. Overall, North America is a tough market right now. APAC is holding their own. Lat Am has line of sight to continuing growth, and EMEA was surprisingly strong, especially the Eastern region. Product revenues were $61 million, a decrease of 5.4% or $3.5 million sequentially, and service revenues at $14.9 million were flat sequentially. Americas revenues were $31.7 million and were down 19% or $7.4 million from Q4 FY '13. North America was a primary contributor to the decrease in revenue, as was expected, due to the product shortages early in the quarter and the timing of summer upgrades for our campus products. The region was also impacted by a large customer's decision to delay capital spending during the quarter and will linger that way through the end of the calendar year. The September quarter is typically our weakest quarter of the year. EMEA revenues were $30.8 million, up 15% or $4 million from Q4 FY '13. Southern Europe, including the Middle East, were the weakest regions, with stronger results in the Eastern region, where several large infrastructure projects broke loose during the quarter. Asia Pacific revenues were $13.4 million, essentially flat sequentially from Q4 FY '13. We had solid performance in both China and Korea. Overall, GAAP and non-GAAP gross margins were…

[Operator Instructions] Our first question is from Mark Kelleher from D.A. Davidson. Mark Kelleher - D.A. Davidson & Co., Research Division: First question on the guidance. The -- you've got an interesting quarter here, where you've only got 2 months of the acquisition. What does the linearity of the revenue and the expenses look like? Are they completely in line or is one shifted to different parts of that quarter?

This is John. On revenue, it's a light month for the Enterasys product line. There'd be plus or minus about $10 million in the first month of the quarter that we're not including. And then as far as expenses go, on the Enterasys side, they were pretty linear throughout the quarter. Mark Kelleher - D.A. Davidson & Co., Research Division: Okay. And second question is on the component shortages. You mentioned that those have been resolved. What did that do to you in the quarter?

Basically, it had the same effect it's had on us, frankly, for 2 prior quarters as well, which was, as we took orders from our customers, we had to delay filling those orders, which often resulted in us drop shipping directly from our distribution centers to customer sites, which increased our overhead due to the shipping costs. Probably far worse than that and really hard to quantify is the fact that the channel also had very low inventory. So run rate business, where customers, our partners, our resellers and the customers that needed the network solution, when they couldn't get it from us, probably fulfilled it with somebody else's product. So it created customer SAT issue with the customers that we were able to close business on during the quarter. And I fear we lost some run rate business as a result of it. With the September buildup of inventories that was done very deliberately, we won't have that problem as we go through this or future quarters. Mark Kelleher - D.A. Davidson & Co., Research Division: Okay. And last question on the merger. You mentioned that you're going to combine the operating systems. Can you just remind me what you said on the timing of that?

We believe we can have that done in the next 18 to 24 months.

The next question is from Christian Schwab from Craig-Hallum Capital.

Congratulations on a fantastic quarter and closing a very accretive acquisition. As we look to the new reseller agreements, adding to Lenovo, now SGI and Aviat, how many other reseller agreements are we targeting? And at what point -- I know that there is -- especially in the cloud type of products, that the sales cycle isn't an immediate close. When would be kind of the inflection point for us to measure the success of these reseller agreements, in particular, Lenovo and SGI, which are targeted particularly at the cloud and the data center?

Christian, so the Lenovo agreement, which we announced last quarter, will start to go into full swing actually this month. Lenovo plans a fairly significant launch of their service business in North America coming into the middle of this month, November, with the major launch in the Asia Pacific region coming in the first calendar quarter. So I suspect you won't see a lot of business from them in the December quarter, but we should see a pickup coming into the March quarter. We just, a few days ago, signed the SGI agreement. I think that will probably be also more of a March quarter event in terms of creating any significant revenues. We have a number of other discussions in place with other IT vendors across a pretty wide space. But we can't really talk about those until we bring them to fruition as well.

Fabulous. So over the next 2 to 3 quarters, we shouldn't be surprised to see other reseller agreements, I guess. Is that fair?

That's absolutely fair.

Excellent. What was the interest rate on the credit facility?

It's about 3% -- 3.3% is what we expect to be having, and that includes all costs in.

Excellent. And then how soon will -- the OpEx synergies, obviously, are going to take a little bit more time. But how soon should we see some contract manufacturing scale synergies?

Well, when we looked at it, we just were able to see the bill of materials for the Enterasys product line on Friday, the first day of the close. So we're going through -- we're looking at part by part on their builds, part by part on our build. We expect to get some synergies maybe a little bit this quarter. The full -- not the full set, but we get a lot more synergies from Broadcom and Alpha in the March quarter. So the supply chain is really moving forward. And they're actually -- I was talking with them, and they're actually pretty stoked about having more scale so they can actually go out and do what they see in their job. So this is a shot out to you, Frank. You got to go get that money for us. Now -- and Frank is our Executive Vice President of Operations. On the R&D side, I wouldn't expect to see much, if any, in terms of cost reductions out of R&D over the next 12 months or so, as our -- the 18 months as they are working to consolidate the product lines. And then on the sales side, what we expect is that the sales management is really the area where there is some overlap. Chris Crowell is the new Head of Sales. We only need 1 head of sales, so we're -- we'll get a little bit this quarter, but I would expect to see it into the spring time frame. And on the G&A side, it will really come after we merge our ERPs and get the benefits out of IT and G&A.

[Operator Instructions] Our next question is from Rohit Chopra from Wedbush.

First question, I just wanted to ask, Chuck, you talked about a large customer delaying some purchases. Can you talk a little bit about that? Is that a carrier? Is that just a large enterprise customer? Maybe just expand on that, if you don't mind.

Sure. And there was actually a couple of things that impacted our North American results in the first quarter. But specifically, to that point, there is a very large manufacturing customer who has typically bought between $2.5 million and $3 million a quarter from us on a very predictable basis. In the September quarter, they announced, fairly publicly, a reduction in CapEx, driven by a delay in a couple of their new products, and their purchases went almost to 0 during the quarter, which, obviously, puts a pretty big hole in our regional target of $21 million to $22 million. Additionally, North America had an incredibly strong June quarter, with the team pushing very hard to meet year-end accelerators. And I think they cleaned most of the knives out of the drawer and took them around to rebuild their pipeline coming out of an incredibly strong June quarter. So I think, as you look at North America, we saw both of those impacts. Unfortunately, the CapEx reduction of this particular customer, although we've seen a couple of orders already from them in this quarter, probably it won't reach historic levels. So I think we'll still be a little challenged in North America in the December quarter.

Okay. The -- just wanted to touch on about the target model. After you get your synergies or if you want to think about 2 to 3 years out, what does the target model looks like?

Well, we look at -- we should have gross margins that are a little bit higher than where we're at today, so they're probably in the 56% range. And that -- in the press release, what we did put out, we did put out a target model that have operating income of 10% or greater. And with that, those synergies are there and then when we get there, we get the revenue growth, then we can move the model up from there. But our first target is to get and maintain a 10% target.

Okay. Two other questions. One, on that front, I just want to get a sense on the capabilities that Enterasys had as far as SDN. I know what you guys have. But if you can just talk a little bit about where they are on that front. Why don't we just start there and I'll ask the last one after that.

Sure. So we've been emphasizing the virtualization capability that we've always had in Extreme OS, XOS, as beginning of our move towards SDN, as well as support for OpenFlow and OpenStack. Enterasys will benefit from that, as well as their NetSight manager is a huge step towards separating the control plane from the data plane and allowing through software on, essentially, commodity hardware management of the network.

Okay. Now last question was just on products. I know Enterasys had a wireless product and had some security capabilities. Can you talk about maybe the synergies you can achieve with selling of wireless and maybe some combination from a product standpoint?

One of the key benefits of the acquisition, frankly, is gaining a complete wireless portfolio. As you know, we have, in the past, OEM-ed our wireless products for Motorola. While they are excellent products and we've had some major wins with those at some of the largest casinos and manufacturing firms in the world, they did not give us great margins, running at roughly half the gross margins of our wired product lines and frankly, as an OEM, didn't give us the ability to do what we think we do best, which is innovate and develop technology that outstrips our competitors in the marketplace. So one of the most exciting things about the acquisition is having now our own wireless product line. That's a complete product line. We'll have AC products out in the first quarter. And we've -- if you see in our press release, we just had a major win for the Lincoln Financial Field, the home of the Philadelphia Eagles, where wireless access for the fans will be across Enterasys' wireless products, joining the Patriots stadium, where we are already doing that. We have a number of other sports venue and venue deals in the pipeline that I think provide us all a testament to how good the wireless product line that we now have as part of Extreme is.

This ends our Q&A session. I would now like to turn the call back to Chuck Berger for closing remarks.

Thank you. And again, thanks, everyone, for joining us on the call this morning. We're very excited about the performance that we delivered in the September quarter. I've been here now 6 months, and we've had 2 solid quarters. And we plan to continue that trend, as you can see, from the projections that John gave you. On top of that, we're an entirely different enterprise now with the combination of Enterasys, double in size, with a complete product line and a major force in the Ethernet networking marketplace. So we look forward to talking to you at the end of next quarter with even better results.

Ladies and gentlemen, thank you for participating in today's program. This concludes the program. You may all disconnect.