As filed with the Securities and Exchange Commission on February 5, 1999
Registration No. 333-

----------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

----------------
EXTREME NETWORKS, INC.
(Exact name of Registrant as specified in its charter)

Delaware 3576 77-0430270
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification No.)
incorporation or Classification Number)
organization)

10460 Bandley Drive
Cupertino, California 95014-1972
(408) 342-0999
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)

----------------
Gordon L. Stitt
President
Extreme Networks, Inc.
10460 Bandley Drive
Cupertino, California 95014-1972
(408) 342-0999
(Name, address, including zip code, and telephone number, including area code,
of agent for service)

Copies to:
Gregory M. Gallo, Esq. Jeffrey D. Saper, Esq.
Jay M. Spitzen, Esq. J. Robert Suffoletta, Esq.
J. Howard Clowes, Esq. Robert G. Day, Esq.
Gray Cary Ware & Freidenrich LLP Wilson Sonsini Goodrich & Rosati
400 Hamilton Avenue Professional Corporation
Palo Alto, California 94301-1825 650 Page Mill Road
(650) 328-6561 Palo Alto, California 94304-1050
(650) 493-9300
----------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.

----------------

If any of the securities being registered on this Form are being offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act") check the following box. [_]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration number of the earlier effective
registration statement for the same offering. [_]

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the
same offering. [_]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [_]

----------------
CALCULATION OF REGISTRATION FEE

- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Proposed
Maximum
Title of Each Class of Aggregate Amount of
Securities to be Registered Offering Price(2) Registration Fee
- -----------------------------------------------------------------------------------------

Common Stock ($0.001 par value)........... $51,750,000 $14,387
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------

(1) Includes shares which the underwriters have the option to purchase to
cover over-allotments, if any.
(2) Estimated solely for the purposes of determining the registration fee
pursuant to Rule 457(o) promulgated under the Securities Act.
----------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act or until the Registration Statement shall
become effective on such date as the Securities and Exchange Commission,
acting pursuant to said Section 8(a), may determine.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell these securities and it is not soliciting an offer to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS (Subject to Completion)
Issued February , 1999

COMMON STOCK

-----------

Extreme is offering shares of its common stock. This is our initial
public offering and no public market currently exists for our shares.
We anticipate that the initial public offering price will be
between $ and $ per share.

-----------

We have applied to list the common stock
on the Nasdaq National Market under the
symbol "EXTR."

-----------

Investing in the common stock involves certain risks.
See "Risk Factors" beginning on page 5.

-----------

PRICE $ A SHARE

-----------

Underwriting
Price to Discounts and Proceeds to
Public Commissions Extreme
-------- ------------- -----------

Per Share.................... $ $ $
Total........................ $ $ $

The Securities and Exchange Commission and state securities regulators have not
approved or disapproved these securities, or determined if this prospectus is
truthful or complete. Any representation to the contrary is a criminal offense.

Extreme has granted the underwriters the right to purchase up to
additional shares to cover any over-allotments. Morgan Stanley & Co.
Incorporated expects to deliver the shares of common stock to purchasers on
, 1999.

-----------

MORGAN STANLEY DEAN WITTER

BANCBOSTON ROBERTSON STEPHENS

DAIN RAUSCHER WESSELS
a division of Dain Rauscher Incorporated
, 1999

[Inside front cover]

The following statements appear on this page

Internet technologies have enabled a new generation of computing applications
that are burdening today's enterprise LANs. However, the performance of
yesterday's legacy routers is being taxed by the high volume of traffic created
by these applications.

This has opened up an opportunity to improve the state of the art of enterprise
networking...

Leveraging Ethernet and the Internet protocol - today's most dominant and stable
LAN technologies - and combining them with wire-speed Layer 3 switching, the
Extreme Networks solution enables the enterprise LAN to deliver more information
faster, while allowing businesses to accommodate future growth.

The Extreme Networks solution uses the same hardware, software and management
architecture for end-to-end simplicity across the enterprise LAN - to desktops,
segments, servers and the network core. This makes it easier to manage and
scale enterprise LANs, while reducing network ownership costs.

[text to accompany inside spread, next to diagram]

Depicted on this page is an enterprise LAN architecture with Extreme Networks'
products.

High Performance
Wire-speed Layer 3 switching
Non-blocking architecture
10/100/1000 Mbps Ethernet

Easy to Use and Implement
Consistent architecture
Consistent product feature set
Web-based management

Scaleable
Speed, bandwidth, network size, QoS
Support future applications
Upgrade from layer 2 to Layer 3

Quality of Service
Policy-based QoS from Layer 1-4
Prioritize applications
Allocate bandwidth

Lower Cost of Ownership
Less expensive, yet faster than legacy routers
Leverages existing knowledge and resources
Reduces enterprise LAN complexity

TABLE OF CONTENTS

Page
----

Prospectus Summary.................. 4
Risk Factors........................ 5
The Company......................... 17
Use Of Proceeds..................... 19
Dividend Policy..................... 19
Capitalization...................... 20
Dilution............................ 21
Selected Consolidated Financial
Data............................... 22
Management's Discussion And Analysis
Of Financial Condition And
Operating Results.................. 23

Page
----

Business......................... 32
Management....................... 47
Certain Transactions............. 53
Principal Stockholders........... 54
Description Of Capital Stock..... 56
Shares Eligible For Future Sale.. 58
Underwriters..................... 60
Legal Matters.................... 62
Experts.......................... 62
Additional Information........... 62
Index to Consolidated Financial
Statements...................... F-1

You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information different from that
contained in this prospectus. We are offering to sell, and seeking offers to
buy, shares of common stock only in those jurisdictions where offers and sales
are permitted. The information contained in this prospectus is accurate only
as of the date of this prospectus, regardless of the time of delivery of this
prospectus or any sale of the common stock.

We are a California corporation and will reincorporate in Delaware prior to
the consummation of this offering. Our principal executive offices are located
at 10460 Bandley Drive, Cupertino, California 95014-1972 and our telephone
number is (408) 342-0999. Our fiscal year ends on June 30. We maintain a
worldwide web site at www.extremenetworks.com. The reference to our worldwide
web address does not constitute incorporation by reference of the information
contained at this site. In this prospectus, "Extreme," "we," "us" and "our"
refer to Extreme Networks, Inc. and all of its subsidiaries, unless the
context otherwise requires. BLACKDIAMOND, EXTREME ETHERNET, EXTREME NETWORKS,
EXTREMESWITCHING, EXTREMEWARE and SUMMIT are trademarks of Extreme which may
be registered or pending registration in certain jurisdictions. All other
brand names and trademarks appearing in this prospectus are the property of
their respective holders.

Until , 1999 (25 days after commencement of the offering), all
dealers effecting transactions in Extreme common stock, whether or not
participating in this offering, may be required to deliver a prospectus. This
delivery requirement is in addition to the dealers' obligation to deliver a
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.

PROSPECTUS SUMMARY

You should read the following summary together with the more detailed
information regarding our company and the common stock being sold in this
offering and our financial statements and notes thereto appearing elsewhere in
this prospectus.

THE COMPANY

Extreme Networks is a leading provider of next generation local area network
(LAN) switching solutions that meet the increasing needs of enterprise LANs.
Through the use of our custom ASICs and a common hardware, software and
management architecture, we offer our customers LAN solutions with increased
performance, scalability, Policy-Based Quality of Service, ease of use and
lower cost of ownership. Our products incorporate non-blocking Layer 3
switching functionality in ASICs, resulting in products that are less expensive
than software-based routers, yet offer improved performance throughout the
enterprise LAN from the network core to the desktop. The Dell'Oro Group
estimates that the market for Layer 3 switching totaled $577 million in 1998
and is expected to increase to approximately $3.4 billion in 2001.

The increased use of high-bandwidth, mission-critical applications, the
widespread implementations of intranets and extranets, and the ubiquity of
Internet technologies have burdened the LAN infrastructure with unpredictable
traffic patterns and unpredictable traffic loads. To address the need to
improve LAN performance, new and faster technologies employing multiple
hardware and software protocols were developed. These multiple protocols caused
enterprise LANs to become more complex, expensive and difficult to manage in
part because of the need for multiple-protocol routers that are based on
software and expensive CPUs. With the wide acceptance of Ethernet and the
Internet Protocol, the need to support a multi-protocol environment has
diminished. Extreme has developed Layer 3 switches based on our custom ASICs
which function as less expensive and significantly faster routers. Our Summit
stackable and BlackDiamond modular product families provide end-to-end LAN
switching solutions that meet the requirements of today's enterprise LANs by
providing increased performance, ease of use, scalability, Policy-Based Quality
of Service and lower cost of ownership. We sell our products through domestic
and international resellers, OEMs and field sales and our customers include
Barnes and Noble, Compaq, Lockheed Martin, MSNBC and Pennzoil.

THE OFFERING

Common stock offered................................ shares
Common stock to be outstanding after this offering.. shares(1)
Over-allotment option............................... shares
Use of proceeds..................................... We intend to use the
proceeds for general
corporate purposes,
including working capital
and capital expenditures.
See "Use of Proceeds."
Proposed Nasdaq National Market symbol.............. EXTR

SUMMARY CONSOLIDATED FINANCIAL DATA
(in thousands, except per share data)

Year Ended Six Months Ended
June 30, December 31,
----------------- ------------------
1997 1998 1997 1998
------- -------- -------- --------
(unaudited)

Consolidated Statement of Operations
Data:
Net revenue............................ $ 256 $ 23,579 $ 6,104 $ 30,851
Gross profit (loss).................... (132) 8,682 2,547 15,246
Total operating expenses............... 7,928 22,641 9,038 19,483
Operating loss......................... (8,060) (13,959) (6,491) (4,237)
Interest expense, net.................. (79) (326) (83) (201)
Net loss............................... (7,923) (13,868) (6,465) (4,843)
Pro forma basic and diluted net loss
per share............................. $ (.44) $ (.14)
Shares used in per share calculation... 31,701 35,929

At December 31, 1998
----------------------
Actual As Adjusted(2)
------- --------------
(unaudited)

Consolidated Balance Sheet Data:
Cash and cash equivalents.............................. $ 5,792
Working capital........................................ 9,284
Total assets........................................... 27,352
Long-term debt and capital lease obligations due after
one year.............................................. 2,719
Total stockholders' equity............................. 11,740

- -------
(1) Based on shares outstanding as of December 31, 1998. Excludes 3,710,328
shares of common stock issuable upon the exercise of options outstanding
under our Amended 1996 Stock Option Plan at a weighted average exercise
price of $2.55 per share and 337,398 shares of common stock issuable upon
exercise of outstanding warrants at a weighted average exercise price of
$1.00 per share, and assumes no exercise of the underwriters' over-
allotment option. See "Management--Amended 1996 Stock Option Plan,"
"Description of Capital Stock" and Note 6 of Notes to Consolidated
Financial Statements.

(2) Adjusted to reflect the issuance and sale of shares of our common stock
at an assumed initial public offering price of $ per share, and the
application of the net proceeds therefrom, after deducting estimated
underwriting discounts and commissions and estimated offering expenses
payable by us, as set forth under "Use of Proceeds."

RISK FACTORS

You should carefully consider the risks described below before making an
investment decision. The risks and uncertainties described below are not the
only ones facing our company. Additional risks and uncertainties not presently
known to us or that we currently deem immaterial may also impair our business
operations.

If any of the following risks actually occurs, our business, financial
condition or operating results could be materially adversely affected. In such
case, the trading price of our common stock could decline, and you may lose
all or part of your investment.

This prospectus contains forward-looking statements that involve risks and
uncertainties. These statements relate to future events or our future
financial performance. In many cases, you can identify forward-looking
statements by terminology such as "may," "will," "should," "expects," "plans,"
"anticipates," "believes," "estimates," "predicts," "potential," or
"continue," or the negative of such terms and other comparable terminology.
These statements are only predictions. Our actual results could differ
materially from those anticipated in these forward-looking statements as a
result of certain factors, including the risks faced by us described below and
elsewhere in this prospectus.

Extreme Has a Limited Operating History and Is Subject to Risks Frequently
Encountered by Early Stage Companies

Extreme was founded in May 1996 and has a limited operating history. An
investor in our common stock must consider the risks and difficulties
frequently encountered by early stage companies in new and rapidly evolving
markets. These risks include:

. a history of losses and the expectation of future losses;

. significant fluctuations in quarterly operating results;

. the intensely competitive market for enterprise LAN switches;

. the challenges encountered in expanding our sales, support and
distribution organizations;

. the risks relating to the timely introduction of new products and
product enhancements; and

. the risks associated with the expansion of our operational
infrastructure.

We discuss these and other risks in more detail below. We cannot be certain
that our business strategy will be successful or that we will successfully
address these risks.

Extreme Has a History of Losses and Expects Future Losses

Extreme has incurred net losses of $7.9 million from inception through June
30, 1997, $13.9 million for fiscal year 1998 and $4.8 million for the six-
months ended December 31, 1998. As of December 31, 1998, we had an accumulated
deficit of $26.6 million. We have not achieved profitability and expect to
continue to incur net losses. We anticipate continuing to incur significant
sales and marketing, product development and general and administrative
expenses and, as a result, we will need to generate significantly higher
revenues to achieve and sustain profitability. Although our revenues have
grown in recent quarters, we cannot be certain that we will realize sufficient
revenues to achieve profitability.

Extreme's Quarterly Financial Results May Fluctuate Significantly

Extreme's quarterly revenues and operating results have varied
significantly in the past and may vary significantly in the future due to a
number of factors, including:

. fluctuations in demand for our products and services, including
seasonality, particularly in Asia;

. the timing and amount of orders for our products and services,
particularly large orders from our key resellers, OEMs and other
significant customers;

. unexpected product returns or the cancellation or rescheduling of
significant orders;

. our ability to develop, introduce, ship and support new products and
product enhancements and manage product transitions;

. announcements and new product introductions by our competitors;

. the expected rapid erosion of the average selling prices of our
products;

. our ability to achieve required cost reductions;

. our ability to obtain sufficient supplies of sole or limited sourced
components for our products;

. unfavorable changes in the prices of the components we purchase;

. our ability to attain and maintain production volumes and quality levels
for our products;

. the mix of products sold and the mix of distribution channels through
which they are sold;

. costs relating to possible acquisitions and integration of technologies
or businesses; and

. enterprise LAN market conditions and economic conditions generally.

We plan to significantly increase our operating expenses to expand our
sales and marketing activities, broaden our customer support capabilities,
develop new distribution channels, fund increased levels of research and
development and build our operational infrastructure. We base our operating
expenses on anticipated revenue trends and a high percentage of our expenses
are fixed in the short term. As a result, any delay in generating or
recognizing revenue could cause significant variations in our quarterly
operating results and could result in substantial operating losses. Orders at
the beginning of each quarter typically do not equal expected revenue for that
quarter and are generally cancelable at any time. Accordingly, we are
dependent upon obtaining orders in a quarter for shipment in that quarter to
achieve our revenue objectives. In addition, the timing of product releases,
purchase orders and product availability could result in significant product
shipments at the end of a fiscal quarter. Failure to ship such products by the
end of a quarter may adversely affect our operating results. Furthermore, our
customer agreements typically provide that the customer may delay scheduled
delivery dates and cancel orders within specified time frames without
significant penalty.

Due to the foregoing factors, we believe that period-to-period comparisons
of our operating results cannot be relied upon as an indicator of our future
performance. It is likely that in some future quarter, our operating results
may be below the expectations of public market analysts or investors. If this
occurs, the price of our common stock would likely decrease.

Extreme May Not Be Able to Successfully Compete in the Intensely Competitive
Market for Enterprise LAN Equipment

The market for enterprise LAN switches is part of the broader market for
enterprise LAN equipment, which is dominated by a few large companies,
particularly Bay Networks, Cabletron Systems, Cisco Systems and 3Com. Each of
these companies has introduced, or has announced its intention to develop,
enterprise LAN switches that are or may be competitive with our products. For
example, in January 1999, Cisco announced its Catalyst 6000 family of chassis-
based switches. In addition, there are a number of large telecommunications
equipment providers, including Alcatel, Ericsson, Lucent Technologies, Nokia,
Nortel Networks and Siemens, which have entered the market for enterprise LAN
equipment, particularly through acquisitions of public and privately held
companies. For example, in January 1998, Lucent acquired Prominet, a private
switching company, and in August 1998, Northern Telecom acquired Bay Networks.
We expect to face increased competition, particularly price competition, from
these and other telecommunications equipment providers. We also expect to
compete with other public companies that offer enterprise LAN switching
products, such as FORE Systems and Xylan, and with private companies. These
vendors may develop products with functionality similar to our products or
provide alternative network solutions. Our OEMs may compete with us with their
current products or products they may develop, and with the products they
purchase from us. Current and potential competitors have established or may
establish cooperative relationships among themselves or with third parties to
develop and offer competitive products. Furthermore, we compete with numerous
companies that offer routers and other technologies and devices that
traditionally have managed the flow of traffic on the enterprise LAN.

Many of our current and potential competitors have longer operating
histories and substantially greater financial, technical, sales, marketing and
other resources, as well as greater name recognition and a larger installed
customer base, than we do. As a result, these competitors are able to devote
greater resources to the development, promotion, sale and support of their
products. In addition, competitors with a large installed customer base may
have a significant competitive advantage over us. We have encountered, and
expect to continue to encounter, many potential customers who are extremely
confident in and committed to the product offerings of our principal
competitors, including Cisco Systems, Nortel Networks and 3Com. Accordingly,
such potential customers may not consider or evaluate our products. When such
potential customers have considered or evaluated our products, we have in the
past lost, and expect in the future to lose, sales to some of these customers
as certain large competitors have offered significant price discounts to
secure such sales.

Because of the intense competition within the enterprise LAN equipment
industry, the market is subject to frequent product introductions with
improved price/performance characteristics, significant price reductions,
rapid technological change and continued emergence of new industry standards.
In order to remain competitive, we believe we must, among other things, invest
significant resources in developing new products and enhancing our current
products and maintaining customer satisfaction. If we fail to do so, our
products may not compete favorably with those of our competitors and our
business could be materially adversely affected. It is also common in the
networking industry for competitors to acquire other companies as a means of
introducing new products or emerging technologies. If a new technology or
product emerges that may displace our product lines, our competitors that have
large market capitalizations or cash reserves would be better positioned than
we would be to acquire such new technology or product. Any failure by us to
effectively introduce new products and enhancements on a timely basis would
materially adversely affect our business, operating results and financial
condition.

Extreme Expects the Average Selling Prices of Its Products to Rapidly Erode
Which May Negatively Impact Gross Margins

The enterprise LAN equipment industry has experienced rapid erosion of
average selling prices due to a number of factors, including competitive
pricing pressures and rapid technological change. We may experience
substantial period-to-period fluctuations in future operating results due to
the erosion of our average selling prices. We anticipate that the average
selling prices of our products will decrease in the future in response to
competitive pricing pressures, increased sales discounts, new product
introductions by us or our competitors or other factors. Therefore, to
maintain our gross margins, we must develop and introduce on a timely basis
new products and product enhancements and continually reduce our product
costs. Our failure to do so would cause our revenue and gross margins to
decline, which would materially adversely affect our business, operating
results and financial condition.

Extreme's Market is Subject to Rapid Technological Change and It Needs to
Introduce New Products that Achieve Broad Market Acceptance

The enterprise LAN equipment market is characterized by rapid technological
change, frequent new product introductions, changes in customer requirements
and evolving industry standards. The introduction of new products, market
acceptance of products based on new or alternative technologies, or the
emergence of new industry standards, could render our existing products
obsolete. Developments in routers and routing software could also
significantly reduce demand for our product. Alternative technologies,
including asynchronous transfer mode, or ATM, could achieve widespread market
acceptance and displace Ethernet technology on which our product lines and
architecture are based. We cannot assure you that our technological approach
will achieve broad market acceptance or that other technologies or devices
will not supplant our approach. Our future success will depend upon our
ability to continuously develop and introduce a variety of new products and
product enhancements to address the increasingly sophisticated and changing
requirements of enterprise LANs.

When we announce new products or product enhancements that have the
potential to replace or shorten the life cycle of our existing products,
customers may defer purchasing our existing products. These actions could

materially adversely affect our operating results by unexpectedly decreasing
sales, increasing our inventory levels of older products and exposing us to
greater risk of product obsolescence. The market for enterprise LAN switching
products is evolving and we believe our ability to compete successfully in
this market is dependent upon the continued compatibility and interoperability
of our products with products and architectures offered by other vendors. In
particular, the networking industry has been characterized by the successive
introduction of new technologies or standards that have dramatically reduced
the price and increased the performance of enterprise LAN equipment. To remain
competitive we need to introduce products in a timely manner that incorporate
or are compatible with these new technologies as they emerge. We have
experienced delays in releasing new products and product enhancements and may
experience similar delays in the future.

Continued Rapid Growth May Strain Extreme's Operations

Since the introduction of our product line, we have experienced a period of
rapid growth and expansion which has placed, and continues to place, a
significant strain on all of our resources. Our net revenue increased
significantly during the last year, and from December 31, 1997 to December 31,
1998, the number of our employees increased from 80 to 159. We expect our
anticipated growth and expansion to strain our management, operational and
financial resources. Our management team has had limited experience managing
such rapidly growing companies on a public or private basis. In January 1999,
we hired a new Chief Financial Officer. To accommodate this anticipated
growth, we will be required to:

. improve existing and implement new operational and financial systems,
procedures and controls;

. hire, train and manage additional qualified personnel, including in the
near future sales and marketing personnel; and

. effectively manage multiple relationships with our customers, suppliers
and other third parties.

We may not be able to install adequate control systems in an efficient and
timely manner, and our current or planned personnel systems, procedures and
controls may not be adequate to support our future operations. For example, in
the quarter ended June 30, 1998, our operating results were adversely impacted
due to a provision of approximately $900,000 that we recorded for purchase
order commitments for certain components that exceeded our estimated
requirements at the end of that quarter. This was due primarily to an
engineering change in certain of our Summit family of products and a reduced
demand forecast from one of our customers.In August 1998, we installed a new
management information system, but we have not fully implemented its
functionality. The difficulties associated with installing and implementing
these new systems, procedures and controls may place a significant burden on
our management and our internal resources. In addition, if we grow
internationally, we will have to expand our worldwide operations and enhance
our communications infrastructure. Any delay in the implementation of such new
or enhanced systems, procedures or controls, or any disruption in the
transition to such new or enhanced systems, procedures or controls, could
adversely affect our ability to accurately forecast sales demand, manage our
supply chain and record and report financial and management information on a
timely and accurate basis. Our inability to manage growth effectively could
have a material adverse effect on our business, operating results and
financial condition.

As a result of our rapid growth, we expect to move our entire operations in
March 1999 to an approximately 77,000 square foot facility located in Santa
Clara, California. This move may disrupt our business and materially adversely
affect our operating results.

Extreme Depends on Its Indirect Distribution Channels

Our distribution strategy focuses primarily on developing and expanding
indirect distribution channels through resellers and, to a lesser extent,
OEMs, as well as expanding our field sales organization. Our success will
depend on our ability to develop and cultivate relationships with significant
resellers, as well as on the sales efforts and success of those resellers.
Many of our resellers also sell products that compete with our products. We
are developing a two-tier distribution structure which would require us to
enter into agreements with a small number of stocking distributors. We cannot
assure you that we will be able to enter into such agreements or successfully
develop a two-tier distribution structure. Our failure to do so may materially
adversely affect our business. In addition, our operating results will likely
fluctuate significantly depending on the timing and amount

of orders from our resellers. We cannot assure you that our resellers will
market our products effectively or continue to devote the resources necessary
to provide us with effective sales, marketing and technical support.

In order to support and develop leads for our indirect distribution
channels, we plan to expand our field sales and support staff significantly.
We cannot assure you that this internal expansion will be successfully
completed, that the cost of this expansion will not exceed the revenues
generated or that our expanded sales and support staff will be able to compete
successfully against the significantly more extensive and well-funded sales
and marketing operations of many of our current or potential competitors. Our
inability to effectively establish our distribution channels or manage the
expansion of our sales and support staff would materially adversely affect our
business, operating results and financial condition.

Extreme Has a Limited Number of Products and Is Dependent on Widespread Market
Acceptance of Its Products

Extreme currently derives substantially all of its revenue from sales of
its Summit and BlackDiamond product families. We expect that revenue from
these product families will account for a substantial portion of our revenue
for the foreseeable future. Widespread market acceptance of our product
families is critical to our future success. Factors that may affect the market
acceptance of our products include market acceptance of enterprise LAN
switching products, and Gigabit Ethernet and Layer 3 switching technologies in
particular, the performance, price and total cost of ownership of our
products, the availability and price of competing products and technologies,
and the success and development of our resellers, OEMs and field sales
channels. Many of these factors are beyond our control. Our future performance
will also depend on the successful development, introduction and market
acceptance of new and enhanced products that address customer requirements in
a cost-effective manner. The introduction of new and enhanced products may
cause certain customers to defer or cancel orders for existing products. We
have in the past experienced delays in product development and such delays may
occur in the future. Failure of our existing or future products to maintain
and achieve widespread levels of market acceptance would materially adversely
affect our business, operating results and financial condition.

Extreme Depends on a Few Key Resellers, OEMs and Other Significant Customers

To date, a limited number of resellers, OEMs and other customers have
accounted for a significant portion of our revenue. For example, for fiscal
1998, 3Com and Compaq accounted for 25% and 21% of our net revenue,
respectively, and for the six-month period ended December 31, 1998, Compaq and
Hitachi Cable accounted for 17% and 11% of our net revenue, respectively.
Compaq is both an OEM and an end-user customer. Although our largest customers
may vary from period-to-period, we anticipate that our operating results for
any given period will continue to depend to a significant extent on large
orders from a small number of customers, particularly in light of the high
sales price per unit of our products and the length of our sales cycles. Our
customers can stop purchasing and our resellers and OEMs can stop marketing
our products at any time. Our reseller agreements generally are not exclusive
and are for one year terms, with no obligation of the resellers to renew the
agreements. These agreements provide for discounts based on expected or actual
volumes of products purchased or resold by the reseller in a given period and
do not require minimum purchases. In addition, we have established a program
which, under specified conditions, enables third party resellers to return
products to us. The amount of potential product returns is estimated and
provided for in the period of the sale. Our reseller and OEM agreements do not
require minimum purchases. Certain of our OEM agreements also provide
manufacturing rights and access to our source code upon the occurrence of
specified conditions of default. In some cases we work with our OEMs to
develop and certify products. Because our expense levels are based on our
expectations as to future revenue and to a large extent are fixed in the short
term, any significant reduction or delay in sales of our products to any
significant reseller, OEM or other customer or unexpected returns from
resellers could materially adversely affect our business, operating results
and financial condition. We cannot assure you that we will retain these
customers or that we will be able to obtain additional or replacement
customers. The loss of one or more of our key resellers, OEMs or other
significant customers or the failure to obtain and ship a number of large
orders each quarter could materially adversely affect our business, operating
results and financial condition.

Our Products Have a Lengthy Sales Cycle

The timing of our sales revenue is difficult to predict because of our
reliance on indirect sales channels and the length and variability of our
sales cycle. Our products have a relatively high sales price per unit, and
often represent a significant and strategic decision by an enterprise
regarding its communications infrastructure. Accordingly, the purchase of our
products typically involves significant internal procedures associated with
the evaluation, testing, implementation and acceptance of new technologies.
This evaluation process frequently results in a lengthy sales process,
typically ranging from three months to longer than a year, and subjects the
sales cycle associated with the purchase of our products to a number of
significant risks, including budgetary constraints and internal acceptance
reviews. The length of our sales cycle also may vary substantially from
customer to customer. While our customers are evaluating our products and
before they may place an order with us, we may incur substantial sales and
marketing expenses and expend significant management effort. Consequently, if
sales forecasted from a specific customer for a particular quarter are not
realized in that quarter, we may be unable to compensate for the shortfall.
The loss or delay of significant contracts with our resellers, OEMs or other
key customers could materially adversely affect our operating results.

Extreme Currently Purchases Several Key Components Used in the Manufacture of
Its LAN Switching Products Only from Single or Limited Sources

Extreme currently purchases several key components used in the manufacture
of its products from single or limited sources. Our principal sole sourced
components include ASICs, microprocessors, programmable integrated circuits,
selected other integrated circuits, cables and custom-tooled sheet metal. Our
principal limited sourced components include flash memories, dynamic and
static random access memories, commonly known as DRAMs and SRAMs,
respectively, and printed circuit boards. Generally, purchase commitments with
our single or limited source suppliers are on a purchase order basis. LSI
Logic manufactures all of our ASICs which are used in all of our switches. Any
interruption or delay in the supply of any of these components, or the
inability to procure these components from alternate sources at acceptable
prices and within a reasonable time, would materially adversely affect our
business, operating results and financial condition. In addition, qualifying
additional suppliers can be time-consuming and expensive and may increase the
likelihood of errors.

We use a rolling six-month forecast based on anticipated product orders to
determine our material requirements. Lead times for materials and components
we order vary significantly, and depend on factors such as the specific
supplier, contract terms and demand for a component at a given time. If orders
do not match forecasts, we may have excess or inadequate inventory of certain
materials and components, which could materially adversely affect our
operating results and financial condition. From time to time we have
experienced shortages and allocations of certain components, resulting in
delays in filling orders. In addition, during the development of our products
we have experienced delays in the prototyping of our ASICs, which in turn has
led to delays in product introductions. We are likely to encounter shortages
and delays in obtaining components in the future which could materially
adversely affect our business, operating results and financial condition.

Extreme Needs To Expand Its Manufacturing Operations and Is Dependent on
Contract Manufacturers

If the demand for our products grows, we will need to increase our material
purchases, contract manufacturing capacity and internal test and quality
functions. Any disruptions in product flow may limit our revenue, could
adversely affect our competitive position and could result in additional costs
or cancellation of orders under agreements with our customers.

We rely on third party manufacturing vendors to manufacture our products.
We currently subcontract substantially all of our manufacturing to two
companies--Flextronics, located in San Jose, California, which manufactures
our Summit1, Summit2 and Summit4 and BlackDiamond products, and MCMS, located
in Boise, Idaho, which manufactures our Summit24 and Summit48 products. We
have experienced a delay in product shipments from a contract manufacturer in
the past, which in turn delayed product shipments to our customers. We may in
the future experience similar or other problems, such as inferior quality and
insufficient quantity of

product, any of which could materially adversely affect our business and
operating results. There can be no assurance that we will effectively manage
our contract manufacturers or that these manufacturers will meet our future
requirements for timely delivery of products of sufficient quality and
quantity. We intend to regularly introduce new products and product
enhancements, which will require that we rapidly achieve volume production by
coordinating our efforts with those of our suppliers and contract
manufacturers. The inability of our contract manufacturers to provide us with
adequate supplies of high-quality products or the loss of either of our
contract manufacturers would cause a delay in our ability to fulfill orders
while we obtain a replacement manufacturer and would have a material adverse
effect on our business, operating results and financial condition.

As part of our cost-reduction efforts, we expect to realize lower per unit
product costs from our contract manufacturers as a result of volume
efficiencies. However, we cannot be certain when or if such price reductions
will occur. The failure to obtain such price reductions would adversely affect
our gross margins and operating results.

We outsource the majority of our manufacturing and supply chain management
operations. Where cost-effective, we may begin to perform certain of our non-
manufacturing out-sourced operations in-house. If we are unable to adequately
perform such functions, our business, operating results and financial
condition may be materially adversely affected.

Extreme Is Dependent on Certain Key Personnel and on Its Ability to Hire
Additional Qualified Personnel

Our success depends to a significant degree upon the continued
contributions of our key management, engineering, sales and marketing and
manufacturing personnel, many of whom would be difficult to replace. In
particular, we believe that our future success is highly dependent on Gordon
Stitt, Chairman, President and Chief Executive Officer, Steve Haddock, Vice
President and Chief Technical Officer, and Herb Schneider, Vice President of
Engineering. We neither have employment contracts with nor key person life
insurance on any of our key personnel.

We believe our future success will also depend in large part upon our
ability to attract and retain highly skilled managerial, engineering, sales
and marketing, finance and manufacturing personnel. Competition for such
personnel is intense, especially in the San Francisco Bay Area, and there can
be no assurance that we will be successful in attracting and retaining such
personnel. The loss of the services of any of our key personnel, the inability
to attract or retain qualified personnel in the future or delays in hiring
required personnel, particularly engineers and sales personnel, could
materially adversely affect our business, operating results and financial
condition. In addition, companies in the networking industry whose employees
accept positions with competitors frequently claim that such competitors have
engaged in unfair hiring practices. We have, from time to time, received such
claims from other companies and, although to date they have not resulted in
material litigation, we cannot assure you that we will not receive additional
claims in the future as we seek to hire qualified personnel or that such
claims will not result in material litigation. We could incur substantial
costs in defending ourselves against any such claims, regardless of the merits
of such claims.

Our Products Must Comply with Evolving Industry Standards and Government
Regulations

The market for enterprise LAN equipment products is characterized by the
need to support industry standards as different standards emerge, evolve and
achieve acceptance. To remain competitive we must continue to introduce new
products and product enhancements that meet these emerging standards. In the
past, we have introduced new products that were not compatible with certain
technological changes, and in the future we may not be able to effectively
address the compatibility and interoperability issues that arise as a result
of technological changes and evolving industry standards. In addition, in the
United States, our products must comply with various regulations and standards
defined by the Federal Communications Commission and Underwriters
Laboratories. Internationally, products that we develop may be required to
comply with standards established by telecommunications authorities in various
countries as well as with recommendations of the

International Telecommunication Union. Failure to comply with existing or
evolving industry standards or to obtain timely domestic or foreign regulatory
approvals or certificates could materially adversely affect our business,
operating results and financial condition.

Extreme Needs to Expand Its Sales and Support Organizations to Increase Market
Acceptance of Its Products

Our products and services require a sophisticated sales effort targeted at
several levels within a prospective customer's organization. We have recently
expanded our sales force and plan to hire additional sales personnel.
Competition for qualified sales personnel is intense, and we might not be able
to hire the kind and number of sales personnel we are targeting. Our inability
to hire qualified sales personnel may materially adversely affect our
business, operating results and financial condition.

We currently have a small customer service and support organization and
will need to increase our staff to support new customers and the expanding
needs of existing customers. The design and installation of networking
products can be complex; accordingly, we need highly-trained customer service
and support personnel. Hiring customer service and support personnel is very
competitive in our industry due to the limited number of people available with
the necessary technical skills and understanding of our products.

Extreme Is Dependent on the Success of Its International Operations

Sales to customers outside of North America accounted for approximately 59%
and 50% of our net revenue in fiscal 1998 and the six-months ended December
31, 1998, respectively. Our ability to grow will depend in part on the
expansion of international sales and operations. Our international sales
primarily depend on our resellers and OEMs. The failure of our resellers and
OEMs to sell our products internationally would materially adversely affect
our business, operating results and financial condition. In addition, our
international business is subject to certain customary risks, including:

. longer accounts receivable collection cycles;

. difficulties in managing operations across disparate geographic areas;

. difficulties associated with enforcing agreements through foreign legal
systems;

. changes in a specific country's or region's political or economic
conditions;

. trade protection measures;

. import or export licensing requirements;

. potential adverse tax consequences;

. unexpected changes in regulatory requirements; and

. reduced or limited protection of our intellectual property rights in
some countries.

Our international sales currently are U.S. dollar-denominated. As a result,
an increase in the value of the U.S. dollar relative to foreign currencies
could make our products less competitive in international markets. In the
future, we may elect to invoice some of our international customers in local
currency. Doing so will subject us to fluctuations in exchange rates between
the U.S. dollar and the particular local currency.

We May Engage in Future Acquisitions That Dilute Our Stockholders, Cause Us to
Incur Debt and Assume Contingent Liabilities

As part of our business strategy, we expect to review acquisition prospects
that would complement our current product offerings, augment our market
coverage or enhance our technical capabilities, or that may otherwise offer
growth opportunities. While we have no current agreements or negotiations
underway with respect to any such acquisitions, we may acquire businesses,
products or technologies in the future. In the event of such future
acquisitions, we could:

. issue equity securities which would dilute current stockholders'
percentage ownership;

. incur substantial debt; or

. assume contingent liabilities.

Such actions by us could materially adversely affect our operating results
and/or the price of our common stock. Acquisitions also entail numerous risks,
including:

. difficulties in the assimilation of acquired operations, technologies or
products;

. unanticipated costs associated with the acquisition;

. diversion of management's attention from other business concerns;

. adverse effects on existing business relationships with suppliers and
customers;

. risks associated with entering markets in which we have no or limited
prior experience; and

. potential loss of key employees of acquired organizations.

We cannot assure you that we will be able to successfully integrate any
businesses, products, technologies or personnel that we might acquire in the
future, and our failure to do so could materially adversely affect our
business, operating results and financial condition.

Extreme May Need Additional Capital Which May Not Be Available

At December 31, 1998, we had approximately $12.6 million in cash, cash
equivalents and short-term investments. We believe that these amounts,
proceeds from this offering and cash available from credit facilities and
future operations will enable us to meet our working capital requirements for
at least the next 12 months. We do not currently anticipate the need for
additional capital but if cash from future operations is insufficient, or if
cash is used for acquisitions or other currently unanticipated uses, we may
need additional capital. The development and marketing of new products and the
expansion of reseller channels and associated support personnel is expected to
require a significant commitment of resources. In addition, if the market for
enterprise Layer 3 LAN switches were to develop more slowly than anticipated
or if we fail to establish significant market share and achieve a meaningful
level of revenues, we may continue to incur significant operating losses and
utilize significant amounts of capital. As a result, we could be required to
raise substantial additional capital. To the extent that we raise additional
capital through the sale of equity or convertible debt securities, the
issuance of such securities could result in dilution to existing stockholders.
If additional funds are raised through the issuance of debt securities, such
securities would have certain rights, preferences and privileges senior to
holders of common stock and the term of such debt could impose restrictions on
our operations. We cannot assure you that such additional capital, if
required, will be available on acceptable terms, or at all. If we are unable
to obtain such additional capital, we may be required to reduce the scope of
our planned product development and marketing efforts, which would materially
adversely affect our business, financial condition and operating results.

Undetected Software or Hardware Errors Could Have a Material Adverse Effect on
Us

Network products frequently contain undetected software or hardware errors
when first introduced or as new versions are released. We have experienced
such errors in the past in connection with new products and product upgrades.
We expect that such errors will be found from time to time in new or enhanced
products after commencement of commercial shipments. These problems may cause
us to incur significant warranty and repair costs, divert the attention of our
engineering personnel from our product development efforts and cause
significant customer relations problems.

Our products must successfully interoperate with products from other
vendors. As a result, when problems occur in a network, it may be difficult to
identify the source of the problem. The occurrence of hardware and software
errors, whether caused by our products or another vendor's products, could
result in the delay or loss of market acceptance of our products and any
necessary revisions may result in the incurrence of significant expenses. The
occurrence of any such problems would likely have a material adverse effect on
our business, operating results and financial condition.

We May Not Adequately Protect Our Intellectual Property and Our Products May
Infringe on the Intellectual Property Rights of Third Parties

We rely on a combination of patent, copyright, trademark and trade secret
laws and restrictions on disclosure to protect our intellectual property
rights. We have filed eight U.S. patent applications relating to the
architecture of our network switches and quality of service features. There
can be no assurance that these applications will be approved, that any issued
patents will protect our intellectual property or that they will not be
challenged by third parties. Furthermore, there can be no assurance that
others will not independently develop similar or competing technology or
design around any patents that we may be issued.

We also enter into confidentiality or license agreements with our
employees, consultants and corporate partners, and control access to and
distribution of our software, documentation and other proprietary information.
Despite our efforts to protect our proprietary rights, unauthorized parties
may attempt to copy or otherwise obtain and use our products or technology.
Monitoring unauthorized use of our products is difficult, and we cannot be
certain that the steps we have taken will prevent misappropriation of our
technology, particularly in foreign countries where the laws may not protect
our proprietary rights as fully as in the United States.

The networking industry is characterized by the existence of a large number
of patents and frequent claims and related litigation regarding patent and
other intellectual property rights. From time to time, third parties may
assert exclusive patent, copyright, trademark and other intellectual property
rights to technologies that are important to us. Although we have not been
party to any claims alleging infringement of intellectual property rights, we
cannot assure you that we will not be subject to such claims in the future. In
addition, there can be no assurance that third parties will not assert claims
or initiate litigation against us or our manufacturers, suppliers or customers
with respect to existing or future products. We may in the future initiate
claims or litigation against third parties for infringement of our proprietary
rights to determine the scope and validity of our proprietary rights of the
rights of competitors. Any such claims, with or without merit, could be time-
consuming, result in costly litigation and diversion of technical and
management personnel or require us to develop non-infringing technology or
enter into royalty or licensing agreements. Such royalty or licensing
agreements, if required, may not be available on acceptable terms, if at all.
In the event of a successful claim of infringement and our failure or
inability to develop non-infringing technology or license the infringed or
similar technology on a timely basis, our business, operating results and
financial condition could be materially adversely affected.

Our Failure and the Failure of Our Key Suppliers and Customers To Be Year 2000
Compliant Could Negatively Impact Our Business

As is true for most companies, the Year 2000 computer issue creates a risk
for us. If systems do not correctly recognize date information when the year
changes to 2000, there could be an adverse impact on our operations. The risk
exists in four areas:

. potential warranty or other claims from our customers;

. systems we used to run our business;

. systems used by our suppliers; and

. the potential reduced spending by other companies on networking
solutions as a result of significant information systems spending on
Year 2000 remediation.

We are currently evaluating our exposure in all of these areas.

We are in the process of conducting a comprehensive inventory and
evaluation of the information systems used to run our business. Systems which
are identified as non-compliant will be upgraded or replaced. For the Year
2000 non-compliance issues identified to date, the cost of remediation is not
expected to be material to our operating results. However, if implementation
of replacement systems is delayed, or if significant new non-compliance issues
are identified, our operating results or financial condition could be
materially adversely affected.

We intend to contact our critical suppliers to determine that the
suppliers' operations and the products and services they provide are Year 2000
compliant. Where practicable, we will attempt to mitigate our risks with
respect to the failure of suppliers to be Year 2000 ready. However, such
failures remain a possibility and could have an adverse impact on our
operating results or financial condition.

Although we believe our products are Year 2000 compliant, since all
customer situations cannot be anticipated, we may see an increase in warranty
and other claims as a result of the Year 2000 transition. In addition,
litigation regarding Year 2000 compliance issues is expected to escalate. For
these reasons, the impact of customer claims could have a material adverse
impact on our operating results or financial condition.

Virtually all businesses face Year 2000 compliance issues and may require
significant hardware and software upgrades or modifications to their computer
systems and applications. Companies owning and operating such systems may plan
to devote a substantial portion of their information systems' spending to fund
such upgrades and modifications and divert spending away from networking
solutions. Such changes in customers' spending patterns could materially
adversely impact our business, operating results or financial condition.

Our Management Has Broad Discretion Over the Proceeds of this Offering

Our management can spend the net proceeds from this offering in ways with
which the stockholders may not agree. We cannot assure you that our investment
of the net proceeds of this offering will yield a favorable return.

Executive Officers and Directors of Extreme Will Control [ ]% of Its Common
Stock

Executive officers, directors and entities affiliated with them will, in
the aggregate, beneficially own approximately [ ]% of our outstanding common
stock following the completion of this offering. These stockholders, if acting
together, would be able to significantly influence all matters requiring
approval by our stockholders, including the election of directors and the
approval of mergers or other business combination transactions.

Provisions in Our Charter or Agreements May Delay or Prevent a Change of
Control

Provisions in our certificate of incorporation and bylaws may have the
effect of delaying or preventing a change of control or changes in our
management. These provisions include:

. the division of the board of directors into three separate classes;

. the right of the board of directors to elect a director to fill a
vacancy created by the expansion of the board of directors;

. the ability of the board of directors to alter our bylaws without
getting stockholder approval; and

. the requirement that at least 10% of the outstanding shares are needed
to call a special meeting of stockholders.

Furthermore, we are subject to the provisions of section 203 of the Delaware
General Corporation Law. These provisions prohibit certain large stockholders,
in particular those owning 15% or more of the outstanding voting stock, from
consummating a merger or combination with a corporation unless this
stockholder receives board approval for the transaction or 66 2/3% of the
shares of voting stock not owned by the stockholder approve the merger or
combination. Further, we have investor agreements with Compaq, Siemens and
3Com which require us to give these companies notice if we receive an
acquisition offer or if we intend to pursue one.

Substantial Future Sales of Our Common Stock in the Public Market Could Cause
Our Stock Price To Fall

Sales of our common stock in the public market after this offering could
adversely affect the market price of our common stock. Upon completion of this
offering, we will have approximately shares of common

stock outstanding, of which approximately shares (approximately if the
underwriters' over-allotment option is exercised in full) will be freely
transferable without restriction or registration under the Securities Act of
1933 (the "Securities Act"), unless such shares are held by our affiliates, as
that term is defined in Rule 144 under the Securities Act. The officers and
directors and all of our existing stockholders have agreed with Morgan Stanley
& Co. Incorporated or have otherwise agreed with Extreme not to sell or
otherwise dispose of any of their shares for 180 days after the date of this
prospectus. However, Morgan Stanley & Co. Incorporated may, in its sole
discretion, at any time without notice, release all or any portion of the
shares subject to lock-up agreements. All of our other stockholders have
agreed with us not to sell or otherwise dispose of any of their shares for 180
days after the date of this prospectus. Holders of 33,786,315 shares of common
stock will have certain rights with respect to registration of such shares for
sale to the public. Sales of common stock by existing stockholders in the
public market, or the availability of such shares for sale, could adversely
affect the market price of the common stock. In addition, approximately
shares are issuable upon exercise of outstanding options granted under stock
option plans as of the date of this prospectus. We intend to file a
registration statement promptly after the closing of this offering to allow
resale of such option shares. See "Shares Eligible for Future Sale."

The Shares To Be Sold in the Offering Will Immediately and Substantially
Dilute Our Current Stockholders

The initial public offering price is substantially higher than the net
tangible book value per share of the outstanding common stock immediately
after the offering. Accordingly, purchasers of shares will experience
immediate and substantial dilution of approximately $ in net tangible book
value per share, or approximately % of the offering price of $ per share. In
contrast, existing stockholders paid an average price of $ per share. Some
existing stockholders acquired their shares from Extreme or its officers
between and at prices ranging from $ to $ per share.

Our Stock Price May Be Extremely Volatile and You May Not Be Able To Resell
Shares At or Above the Offering Price

There was no public market for Extreme shares prior to this offering. The
offering price for the shares will be determined through negotiations between
the representatives of the underwriters and us. You may not be able to resell
your shares at or above the initial public offering price due to a number of
factors, including:

. actual or anticipated fluctuations in our operating results;

. changes in expectations as to our future financial performance or
changes in financial estimates of securities analysts;

. announcements of technological innovations; and

. the operating and stock price performance of other comparable companies.

In addition, the stock market in general has experienced extreme volatility
that often has been unrelated to the operating performance of particular
companies. These broad market and industry fluctuations may adversely affect
the trading price of our common stock, regardless of our actual operating
performance.

You should read the "Underwriters" section for a more complete discussion
of the factors to be considered in determining the initial public offering
price.

THE COMPANY

Extreme Networks is a leading provider of next generation LAN switching
solutions that meet the increasing needs of enterprise LANs. Through the use
of our custom ASICs and a common hardware, software and management
architecture, we offer our customers LAN solutions with increased performance,
scalability, Policy-Based Quality of Service, ease of use and lower cost of
ownership. Our products incorporate non-blocking Layer 3 switching
functionality in ASICs, resulting in products that are less expensive than
software-based routers, yet offer improved performance throughout the
enterprise LAN from the network core to the desktop. The Dell'Oro Group
estimates that the market for Layer 3 switching totaled $577 million in 1998
and is expected to increase to approximately $3.4 billion in 2001.

The increased use of data-intensive, mission-critical applications, the
widespread implementation of intranets and extranets, and the ubiquity of
Internet technologies have burdened the LAN infrastructure with unpredictable
traffic patterns and unpredictable traffic loads. To address the need to
improve LAN performance, new and faster technologies employing multiple
hardware and software protocols were developed. These multiple protocols
caused enterprise LANs to become more complex, expensive and difficult to
manage in part because of the need for multiple-protocol routers that are
based on software and expensive CPUs. With the wide acceptance of Ethernet and
the Internet Protocol, the need to support a multi-protocol environment has
diminished. Extreme has developed Layer 3 switches based on our custom ASICs
which function as less expensive and significantly faster routers. Our Layer 3
switches operate at Gigabit speed, can support large networks, can support
advanced traffic prioritization and, unlike most Layer 3 switches, do not
block traffic in high utilization scenarios.

Our Summit stackable and BlackDiamond modular product families provide end-
to-end LAN solutions that meet the requirements of today's enterprise LANs.
Our products offer the following benefits:

. High Performance: Our products provide Gigabit Ethernet and Fast
Ethernet together with the non-blocking, wire-speed routing of Layer 3
switching.

. Ease of Use and Implementation: Our products offer a common architecture
and are compatible with existing LAN devices, making them easy to
install and manage.

. Scalability: Our solutions offer customers the speed and bandwidth they
need with the capability to scale their LANs to support demanding
applications in the future.

. Quality of Service: Our Policy-Based Quality of Service enables
customers to prioritize mission-critical applications by providing
industry-leading tools for allocating resources to specific
applications.

. Lower Cost of Ownership: Our products are less expensive than software-
based routers, yet offer higher routing performance throughout the
enterprise LAN.

We sell our products through domestic and international resellers, OEMs and
field sales. We have entered into agreements with more than 100 resellers in
39 countries, and we have established four key OEM relationships with leaders
in the telecommunications, personal computer and computer networking
industries. Our field sales organization supports and develops leads for our
resellers and establishes and maintains a limited number of key accounts and
strategic customers, such as Barnes and Noble, Compaq, Lockheed Martin, MSNBC
and Pennzoil. Our products have been deployed in a broad range of
organizations, ranging from companies in the telecommunications,
manufacturing, medical, computer services, media and finance industries to
educational industries and federal agencies.

We are incorporated in California and will reincorporate in Delaware prior
to the consummation of the offering. Our executive offices are located at
10460 Bandley Drive, Cupertino, California 95014-1972 and our telephone number
is (408) 342-0999.

USE OF PROCEEDS

The net proceeds to be received by Extreme from the sale of shares of
common stock in this offering are estimated to be $ ($ if the underwriters
exercise their over-allotment option on full), at an assumed initial public
offering price of $ and after deducting underwriting discounts and
commissions and estimated offering expenses of $ payable by Extreme.

Extreme will use the net proceeds for general corporate purposes, including
capital expenditures and working capital. We may use some of the net proceeds
to pay down outstanding equipment balances under our capital equipment line of
credit and subordinated loan agreements, although we have no specific plans to
do so. A portion of the net proceeds may also be used to acquire or invest in
complementary businesses, technologies, product lines or products. We have no
current plans, agreements or commitments with respect to any such acquisition,
and we are not currently engaged in any negotiations with respect to any such
transaction. Our management will have broad discretion concerning the
allocation and use of all the net proceeds of the offering to be received by
us. Pending such uses, the net proceeds of the offering will be invested in
investment grade, interest-bearing securities.

DIVIDEND POLICY

We have never paid cash dividends. We do not anticipate paying cash
dividends in the near future. Under the terms of our line of credit
facilities, we may not declare or pay any cash dividends without the prior
consent of the lenders under each of the credit facilities.

CAPITALIZATION

The following table sets forth our capitalization as of December 31, 1998:

. on an actual basis;

. on a pro forma basis to reflect the conversion upon the closing of the
offering of all outstanding shares of preferred stock into 29,061,573
shares of common stock; and

. on a pro forma basis as adjusted to reflect the sale of the common stock
offered hereby at an assumed initial public offering price of $ per
share and the receipt of the net proceeds therefrom, after deducting the
estimated expenses and underwriting discounts and commissions payable by
Extreme.

This information should be read in conjunction with the consolidated
financial statements and related notes thereto included elsewhere in this
prospectus.

December 31, 1998
--------------------------------
Pro Forma
Actual Pro Forma As Adjusted
-------- --------- -----------
(in thousands except share
data)
(unaudited)

Long-term debt, less current portion(1)........ $ 2,719 $ 2,719 $ 2,719
======== ======== ========
Stockholders' equity:
Convertible preferred stock, $.001 par value,
issuable in series: 24,000,000 shares
authorized at June 30, 1997; 29,900,000
shares authorized at actual, (2,000,000
shares pro forma); 29,061,573 shares issued
and outstanding actual, (none pro forma);
aggregate liquidation preference of $38,046
actual, (none pro forma).................... 29 -- --
Common stock, $.001 par value; 50,000,000
shares authorized (150,000,000 pro forma);
11,791,195 shares outstanding actual;
40,852,768 issued and outstanding, pro forma
and as adjusted(2)....................... 12 41
Additional paid-in capital................... 38,333 38,333
Accumulated deficit.......................... (26,634) (26,634) (26,634)
-------- -------- --------
Total stockholders' equity................. 11,740 11,740
-------- -------- --------
Total capitalization..................... $ 14,459 $ 14,459 $
======== ======== ========

- --------
(1) See Notes 4 and 5 of Notes to Consolidated Financial Statements.
(2) Excludes 3,710,328 shares of common stock issuable upon exercise of
outstanding options at December 31, 1998 at a weighted average exercise
price of $2.55 per share and 337,398 shares of common stock issuable upon
exercise of outstanding warrants at a weighted average exercise price of
$1.00 per share. See "Management--Amended 1996 Stock Option Plan."

DILUTION

Our pro forma net tangible book value as of December 31, 1998 was
approximately $ or $.29 per share of common stock. Pro forma net tangible
book value per share represents the amount of our total tangible assets
reduced by the amount of our total liabilities divided by the total number of
shares of common stock outstanding (assuming the conversion of all outstanding
shares of preferred stock into shares of common stock). After giving effect to
the sale by Extreme of the shares of common stock offered hereby (at an
assumed initial public offering price of $ per share) and receipt of the
estimated net proceeds therefrom, our adjusted net tangible book value as of
December 31, 1998 would have been approximately $ or $ per share. This
represents an immediate increase in such net tangible book value of $ per
share to existing stockholders and an immediate dilution of $ per share to
new investors. If the initial public offering price is higher or lower, the
dilution to new investors will be, respectively, greater or less. The
following table illustrates this per share dilution.

Assumed initial public offering price per share...................... $
----
Pro forma net tangible book value per share as of December 31,
1998.............................................................. $.29
Increase in pro forma net tangible book value per share
attributable to new investors.....................................
----
Pro forma net tangible book value per share after this offering......
----
Dilution per share to new investors(1)............................... $
====

- --------
(1) Dilution is determined by subtracting pro forma net tangible book value
per share after the offering from the assumed initial public offering
price per share.

The following table sets forth, on a pro forma basis, as of December 31,
1998, the number of shares of common stock purchased from Extreme, the total
consideration paid (or to be paid), and the average price per share paid (or
to be paid) by existing stockholders and by new investors at the assumed
initial public offering price of $ per share, before deducting estimated
underwriting discounts and commissions and offering expenses payable by
Extreme:

Shares Purchased Total Consideration Average
------------------ -------------------- Price Per
Number Percent Amount Percent Share
---------- ------- ---------- ------- ---------

Existing stockholders..... 40,852,768 % $ % $
New investors.............
---------- ---- --------- -----
Total.................... 100% $ 100%
========== ==== ========= =====

The foregoing table assumes no exercise of the underwriters' over-allotment
option. See "Underwriters." The foregoing table also assumes that no options
have been or are exercised after December 31, 1998. As of December 31, 1998,
there were outstanding options to purchase an aggregate of 3,710,328 shares of
common stock at a weighted average exercise price of $2.55 per share and
warrants to purchase an aggregate of 337,398 shares of common stock at a
weighted average exercise price of $1.00 per share. If all such options and
warrants had been exercised on December 31, 1998, our net tangible book value
of Extreme on such date would have been $ or $ per share, the increase in
net tangible book value attributable to new investors would have been $ per
share and the dilution in net tangible book value to new investors would have
been $ per share. See "Management--Amended 1996 Stock Option Plan" and Note 6
of Notes to Consolidated Financial Statements.

SELECTED CONSOLIDATED FINANCIAL DATA

The following selected consolidated financial data should be read in
conjunction with Management's Discussion and Analysis of Financial Condition
and Operating Results and Extreme's Consolidated Financial Statements and the
Notes thereto included elsewhere in this prospectus. The table below sets
forth selected consolidated financial data for Extreme for, and as of the end
of, each of the years in the two year period ended June 30, 1998 and the six-
month periods ended December 31, 1997 and 1998. The selected consolidated
financial data for fiscal 1997 and 1998, are derived from the consolidated
financial statements of Extreme which were audited by Ernst & Young LLP. The
financial data for the six-month periods ended December 31, 1997 and 1998 are
derived from unaudited financial statements included elsewhere in this
prospectus. In the opinion of management, such unaudited financial statements
have been prepared on the same basis as the audited financial statements
referred to above and include all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of Extreme's
operating results for the indicated periods. Operating results for the six
months ended December 31, 1998 are not necessarily indicative of the results
that may be expected for the full fiscal year.

Six Months
Year Ended June 30, Ended December 31,
--------------------- --------------------
1997 1998 1997 1998
--------- ---------- --------- ---------
(in thousands, except per share data)

Consolidated Statement of
Operations Data:
Net revenue...................... $ 256 $ 23,579 $ 6,104 $ 30,851
Cost of revenue.................. 388 14,897 3,557 15,605
--------- ---------- --------- ---------
Gross profit (loss).............. (132) 8,682 2,547 15,246
Operating expenses:
Research and development....... 5,351 10,668 4,548 6,580
Selling and marketing.......... 1,554 9,601 3,450 10,203
General and administrative..... 1,023 2,372 1,040 2,700
--------- ---------- --------- ---------
Total operating expenses......... 7,928 22,641 9,038 19,483
--------- ---------- --------- ---------
Operating loss................... (8,060) (13,959) (6,491) (4,237)
Interest expense................. (79) (326) (83) (201)
Interest and other income........ 216 417 109 295
--------- ---------- --------- ---------
Loss before income taxes......... (7,923) (13,868) (6,465) (4,143)
Provision for income taxes....... -- -- -- (700)
--------- ---------- --------- ---------
Net loss......................... $ (7,923) $ (13,868) $ (6,465) $ (4,843)
========= ========== ========= =========
Basic and diluted net loss per
common share.................... $ (4.51) $ (3.17) $ (1.84) $ (.71)
========= ========== ========= =========
Shares used in per share
calculation(1).................. 1,758 4,379 3,510 6,867
========= ========== ========= =========
Pro forma net loss per share--
basic and diluted(1)............ -- $ (.44) -- $ (.14)
========= ========== ========= =========
Shares used in pro forma per
share calculation(1)............ -- 31,701 -- 35,929
========= ========== ========= =========

As of June 30, As of
--------------- December 31,
1997 1998 1998
------- ------- ------------
(in thousands)

Consolidated Balance Sheet Data:
Cash and cash equivalents........................ $10,047 $ 9,510 $5,792
Working capital.................................. 8,251 13,796 9,284
Total assets..................................... 11,942 33,731 27,352
Long-term debt and capital lease obligations due
after one year.................................. 502 2,634 2,719
Total stockholders' equity....................... 9,305 15,869 11,740

- --------
(1) See Note 1 of Notes to Consolidated Financial Statements for an
explanation of the determination of the number of shares used to compute
net loss per share.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND OPERATING RESULTS

The following commentary should be read in conjunction with the
Consolidated Financial Statements and the related Notes contained elsewhere in
this prospectus. This discussion contains forward-looking statements that
involve risks and uncertainties. These statements relate to future events or
our future financial performance. In many cases, you can identify forward-
looking statements by terminology such as "may," "will," "should," "expects,"
"plans," "anticipates," "believes," "estimates," "predicts," "potential," or
"continue," or the negative of such terms and other comparable terminology.
These statements are only predictions. Our actual results may differ
materially from those anticipated in these forward-looking statements as a
result of certain factors, including, but not limited to, those set forth
under "Risk Factors" and elsewhere in this prospectus.

Overview

From our inception in May 1996 through September 1997, our operating
activities related primarily to developing a research and development
organization, testing prototype designs, building an ASIC design
infrastructure, commencing the staffing of our marketing, sales and field
service and technical support organizations, and establishing relationships
with resellers and OEMs. We commenced volume shipments of our Summit1 and
Summit2, the initial products in our Summit stackable product family, in
October 1997, and we began shipping our BlackDiamond modular product family in
September 1998. Since inception, we have incurred significant losses and as of
December 31, 1998, we had an accumulated deficit of $26.6 million. See "Risk
Factors--Extreme Has a History of Losses and Expects Future Losses."

Our revenue is derived primarily from sales of our Summit and BlackDiamond
product families and fees for services relating to our products, including
maintenance and training. In fiscal 1998, sales to 3Com and Compaq accounted
for 25% and 21% of our net revenue, respectively, and in the six-month period
ended December 31, 1998, Compaq and Hitachi Cable accounted for 17% and 11% of
our net revenue, respectively. Compaq is an OEM and an end-user customer. The
level of sales to any customer may vary from period to period; however, we
expect that significant customer concentration will continue for the
foreseeable future. See "Risk Factors--Extreme Depends on a Few Key Resellers,
OEMs and Other Significant Customers."

We market and sell our products primarily through resellers and, to a
lesser extent, OEMs and our field sales organization. We sell our products
through more than 100 resellers in 39 countries. In the six-month period ended
December 31, 1998, sales to customers outside of North America accounted for
approximately 50% of our net revenue. Currently, all of our international
sales are denominated in U.S. dollars. We generally recognize product revenue
at the time of shipment, unless we have future obligations for installation or
have to obtain customer acceptance, in which case revenue is deferred until
such obligations have been satisfied. We have established a program which,
under specified conditions, enables third party resellers to return products
to us. The amount of potential product returns is estimated and provided for
in the period of the sale. Service revenue is recognized ratably over the term
of the contract period, which is typically 12 months.

We expect to experience rapid erosion of average selling prices of our
products due to a number of factors, including competitive pricing pressures
and rapid technological change. Our gross margins will be affected by such
declines and by fluctuations in manufacturing volumes, component costs and the
mix of product configurations sold. In addition, our gross margins may
fluctuate due to the mix of distribution channels through which our products
are sold, including the potential effects of our development of a two-tier
distribution channel. We generally realize higher gross margins on sales to
resellers than on sales through our OEMs. Any significant decline in sales to
our OEMs or resellers, or the loss of any of our OEMs or resellers could
materially adversely affect our business, operating results and financial
condition. In addition, the introduction of new products can cause product
transitions and result in excess or obsolete inventories. Any excess or
obsolete inventories may also reduce our gross margins.

We outsource the majority of our manufacturing and supply chain management
operations, and we conduct quality assurance, manufacturing engineering,
documentation control and repairs at our facility in Cupertino,

California. Accordingly, a significant portion of our cost of revenue consists
of payments to our contract manufacturers, Flextronics and MCMS. We expect to
realize lower per unit product costs as a result of volume efficiencies.
However, we cannot assure you when or if such price reductions will occur. The
failure to obtain such price reductions could materially adversely affect our
gross margins and operating results.

Research and development expenses consist principally of salaries and
related personnel expenses, consultant fees and prototype expenses related to
the design, development, testing and enhancement of our ASICs and software. We
expense all research and development expenses as incurred. We believe that
continued investment in research and development is critical to attaining our
strategic product and cost-reduction objectives and, as a result, we expect
these expenses to increase in absolute dollars in the future.

Selling and marketing expenses consist of salaries, commissions and related
expenses for personnel engaged in marketing, sales and field service support
functions, as well as trade shows and promotional expenses. We intend to
pursue selling and marketing campaigns aggressively and therefore expect these
expenses to increase significantly in absolute dollars in the future. In
addition, we expect to substantially expand our field sales operations to
support and develop leads for our resellers, which would also result in an
increase in selling and marketing expenses.

General and administrative expenses consist primarily of salaries and
related expenses for executive, finance and administrative personnel,
recruiting expenses, professional fees and other general corporate expenses.
We expect general and administrative expenses to increase in absolute dollars
as we add personnel and incur additional costs related to the growth of our
business and operation as a public company.

Despite growing revenues, we have not been profitable and expect to
continue to incur net losses. Our net losses have not decreased
proportionately with the increase in our revenue primarily because of
increased expenses relating to our growth in operations. Because of the
lengthy sales cycle of our products, there is often a significant delay
between the time we incur expenses and the time we realize the related
revenue. See "Risk Factors--Our Products Have a Lengthy Sales Cycle." In
addition, we expect to move to a 77,000 square foot facility located in Santa
Clara, California in March 1999. The rent for this new facility will be
significantly greater than our rent obligations for our current facility. To
the extent that future revenues do not increase significantly in the same
periods in which operating expenses increase, our operating results would be
adversely affected. See "Risk Factors--Extreme's Quarterly Financial Results
May Fluctuate Significantly."

Quarterly Operating Results

The following tables present unaudited quarterly results, in dollars and as
a percentage of net revenue, for the six quarters ended December 31, 1998. We
believe this information reflects all adjustments (consisting only of normal
recurring adjustments) that we consider necessary for a fair presentation of
such information in accordance with generally accepted accounting principles.
The results for any quarter are not necessarily indicative of results for any
future period.

Quarter ended
---------------------------------------------------------------
Sept. 30, Dec. 31, Mar. 31, June 30, Sept. 30, Dec. 31,
1997 1997 1998 1998 1998 1998
--------- -------- -------- -------- --------- --------
(in thousands)

Net revenue............. $ 593 $ 5,511 $ 7,335 $10,140 $12,892 $17,959
Cost of revenue......... 545 3,012 5,490 5,850 6,536 9,069
------- ------- ------- ------- ------- -------
Gross profit............ 48 2,499 1,845 4,290 6,356 8,890
Operating expenses:
Research and develop-
ment................. 2,877 1,671 2,752 3,368 3,537 3,043
Selling and market-
ing.................. 1,475 1,975 2,457 3,694 4,762 5,441
General and adminis-
trative.............. 465 575 655 677 1,166 1,534
------- ------- ------- ------- ------- -------
Total operating ex-
penses................. 4,817 4,221 5,864 7,739 9,465 10,018
------- ------- ------- ------- ------- -------
Operating loss.......... (4,769) (1,722) (4,019) (3,449) (3,109) (1,128)
Interest expense........ (32) (51) (111) (132) (105) (96)
Interest and other in-
come................... 77 32 136 176 280 15
------- ------- ------- ------- ------- -------
Loss before income tax-
es..................... (4,724) (1,741) (3,994) (3,405) (2,934) (1,209)
Provision for income
taxes.................. -- -- -- -- -- (700)
------- ------- ------- ------- ------- -------
Net loss................ $(4,724) $(1,741) $(3,994) $(3,405) $(2,934) $(1,909)
======= ======= ======= ======= ======= =======

As a Percentage of Net Revenue
---------------------------------------------------------------
Sept. 30, Dec. 31, Mar. 31, June 30, Sept. 30, Dec. 31,
1997 1997 1998 1998 1998 1998
--------- -------- -------- -------- --------- --------

Net revenue............. 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenue......... 91.9 54.7 74.8 57.7 50.7 50.5
------- ------- ------- ------- ------- -------
Gross profit............ 8.1 45.3 25.2 42.3 49.3 49.5
Operating expenses:
Research and develop-
ment................. 485.2 30.3 37.5 33.2 27.4 16.9
Selling and market-
ing.................. 248.7 35.8 33.5 36.4 36.9 30.3
General and adminis-
trative.............. 78.4 10.4 8.9 6.7 9.0 8.5
------- ------- ------- ------- ------- -------
Total operating ex-
penses................. 812.3 76.6 79.9 76.3 73.4 55.8
------- ------- ------- ------- ------- -------
Operating loss.......... (804.2) (31.3) (54.8) (34.0) (24.1) (6.3)
Interest expense........ (5.4) (0.9) (1.5) (1.3) (0.8) (0.5)
Interest and other in-
come................... (13.0) 0.6 1.9 1.7 2.2 0.1
Income taxes............ -- -- -- -- -- (3.9)
------- ------- ------- ------- ------- -------
Net loss................ (796.6)% (31.6)% (54.5)% (33.6)% (22.8)% (10.6)%
======= ======= ======= ======= ======= =======

Six Quarters Ended December 31, 1998

Net Revenue. Our net revenue increased in each of the six quarters ended
December 31, 1998. The increase in net revenue in these periods reflected the
introduction of our Summit stackable product family in October 1997, our
introduction of additions to that product family, the introduction of our
BlackDiamond modular product family in September 1998, significant growth of
the enterprise LAN switching market, and the benefits of increased investment
in our sales and marketing operations.

Gross Profit. Our gross profit increased in each of the six quarters ended
December 31, 1998, except in the quarter ended March 31, 1998. The increases
were primarily due to decreased unit manufacturing costs resulting from higher
volumes, offset in part by mix fluctuations and competitive market pricing.
The decrease in the March 31, 1998 quarter was primarily due to an increase in
our warranty reserve in connection with the repair and replacement of certain
products. In addition, the gross profit and gross margins were adversely
impacted in the June 30, 1998 quarter due to a provision of approximately
$900,000 that we recorded for purchase order commitments for certain
components that exceeded our estimated requirements at the end of that
quarter. This was due primarily to an engineering change in certain of our
Summit family of products and a reduced demand forecast from one of our
customers.

Research and Development Expenses. Our research and development expenses
increased in absolute dollars in each of the six quarters ended December 31,
1998, except for the quarters ended December 31, 1997 and 1998. Personnel
costs increased in each of the six quarters; however, prototype material
expenses fluctuated from quarter to quarter primarily due to the timing of
product and technology development and on the reimbursement by OEMs of non-
recurring engineering costs, which was used to offset the related OEM product
development costs. We believe that fluctuations due to changes in prototyping
and materials costs will not be as significant as we introduce future products
and product enhancements. Research and development expenses as a percentage of
net revenue declined in each of our last three fiscal quarters due to
substantial increases in our net revenue in each such quarter.

Selling and Marketing Expenses. Selling and marketing expenses increased in
each of the six quarters ended December 31, 1998. The increases were primarily
due to expenses related to our product launches, the addition of sales
personnel and increased commission expenses resulting from higher sales.

General and Administrative Expenses. General and administrative expenses
increased in each of the six quarters ended December 31, 1998, except for the
quarter ended June 30, 1998 for which expenses remained flat compared to the
preceding quarter. The increases primarily reflected the addition of finance,
information technology, legal and administrative personnel.

We recorded a tax provision of $700,000 for the period ending December 31,
1998. The provision for income taxes consists primarily of foreign taxes,
state income taxes and federal alternative minimum taxes. FASB Statement No.
109 provides for the recognition of deferred tax assets if realization of such
assets is more likely than not. Based upon the weight of available evidence,
which includes our historical operating performance and the reported
cumulative net losses in all prior years, we have provided a full valuation
allowance against our net deferred tax assets. We intend to evaluate the
realizability of the deferred tax assets on a quarterly basis.

Our Quarterly Financial Results May Fluctuate Significantly

Our quarterly revenue and operating results have varied significantly in
the past and may vary significantly in the future due to a number of factors,
including:

. fluctuations in demand for our products and services, including
seasonality, particularly in Asia;

. the timing and amount of orders for our products and services,
particularly large orders from our key resellers, OEMs and other
significant customers;

. unexpected product returns or the cancellation or rescheduling of
significant orders;

. our ability to develop, introduce, ship and support new products and
product enhancements and manage product transitions;

. announcements and new product introductions by our competitors;

. the expected rapid erosion of the average selling prices of our
products;

. our ability to achieve required cost reductions;

. our ability to obtain sufficient supplies of sole or limited sourced
components for our products;

. unfavorable changes in the prices of the components we purchase;

. our ability to attain and maintain production volumes and quality levels
for our products;

. the mix of products sold and the mix of distribution channels through
which they are sold;

. costs relating to possible acquisitions and integration of technologies
or businesses; and

. enterprise LAN market conditions and economic conditions generally.

and development and build our operational infrastructure. We base our
operating expenses on anticipated revenue trends and a high percentage of our
expenses are fixed in the short term. As a result, any delay in generating or
recognizing revenue could cause significant variations in our quarterly
operating results from and could result in substantial operating losses.
Orders at the beginning of each quarter typically do not equal expected
revenue for that quarter and are generally cancelable at any time.
Accordingly, we are dependent upon obtaining orders in a quarter for shipment
in that quarter to achieve our revenue objectives. In addition, the timing of
product releases, purchase orders and product could result in significant
product shipments at the end of a fiscal quarter. Failure to ship such
products by the end of a quarter may adversely affect our operating results.
Furthermore, our customer agreements typically provide that the customer may
delay scheduled delivery dates and cancel orders within specified time frames
without significant penalty.

Due to the foregoing factors, we believe that period-to-period comparisons
of our operating results cannot be relied upon as an indicator of our future
performance.

Results of Operations

The following table sets forth, for the periods indicated, the percentage
of net revenue represented by certain items reflected in our Consolidated
Financial Statements:

Six Months
Ended
Year Ended June 30, December 31,
---------------------- --------------
1997 1998 1997 1998
---------- --------- ------ -----

Net revenue............... 100.0 % 100.0 % 100.0 % 100.0 %
Cost of revenue........... 151.6 63.2 58.3 50.6
---------- -------- ------ -----
Gross profit (loss)....... (51.6) 36.8 41.7 49.4
Operating expenses:
Research and develop-
ment................... 2090.2 45.2 74.5 21.3
Selling and marketing... 607.0 40.7 56.5 33.1
General and administra-
tive................... 399.6 10.1 17.0 8.8
---------- -------- ------ -----
Total operating expenses.. 3096.8 96.0 148.1 63.2
---------- -------- ------ -----
Operating loss............ (3148.4) (59.2) (106.3) (13.7)
Interest expense.......... (30.9) (1.4) (1.4) (0.7)
Interest and other in-
come..................... 84.4 1.8 1.8 1.0
Income taxes.............. -- -- -- (2.3)
---------- -------- ------ -----
Net loss.................. (3094.9)% (58.8)% (105.9)% (15.7)%
========== ======== ====== =====

Six Months Ended December 31, 1997 and 1998

Net Revenue. Net revenue increased from $6.1 million for the six-month
period ended December 31, 1997 to $30.9 million for the six-month period ended
December 31, 1998, an increase of $24.8 million. This increase resulted
primarily from increased sales of our Summit stackable products and the
introduction of our BlackDiamond modular product family in September 1998.

North America sales increased from $1.2 million for the six-month period
ended December 31, 1997 to $15.9 million for the six-month period ended
December 31, 1998, an increase of $14.7 million. Sales outside North America
increased from $4.9 million for the six-month period ended December 31, 1997
to $15.0 million for the six-month period ended December 31, 1998, an increase
of $10.1 million. The overall increase in sales outside North America
reflected the growth in demand for our Summit and BlackDiamond products and an
increase in the number of resellers, offset in part by a decrease in OEM
sales.

Gross Profit. Gross profit increased from $2.5 million for the six-month
period ended December 31, 1997 to $15.2 million for the six-month period ended
December 31, 1998, an increase of $12.7 million. Gross margins

increased from 41.7% for the six-month period ended December 31, 1997 to 49.4%
for the six-month period ended December 31, 1998. The increase in gross
margins resulted primarily from a shift in our channel mix from OEMs to
resellers, reductions in component costs and improved manufacturing
efficiencies, which were offset in part by lower average selling prices due to
increased competition.

Research and Development Expenses. Research and development expenses
increased from $4.5 million for the six-month period ended December 31, 1997
to $6.6 million for the six-month period ended December 31, 1998, an increase
of $2.1 million. The increase was primarily due to the hiring of additional
engineers and an increase in depreciation charges due to increases in capital
spending on design and simulation software and test equipment. For the six-
month periods ended December 31, 1997 and 1998, research and development costs
decreased as a percentage of net revenue from 74.5% to 21.3%. This percentage
decrease was primarily the result of an increase in our net revenue.

Selling and Marketing Expenses. Selling and marketing expenses increased
from $3.5 million for the six-month period ended December 31, 1997 to $10.2
million for the six-month period ended December 31, 1998, an increase of $6.7
million. This increase was primarily due to the hiring of additional sales and
customer support personnel, the establishment of new sales offices,
advertising and promotional campaigns in support of the introduction of our
BlackDiamond modular product family in September 1998, and increased
commission expense on higher revenues. For the six-month periods ended
December 31, 1997 and 1998, selling and marketing expenses decreased as a
percentage of net revenue from 56.5% to 33.1%. This percentage decrease was
primarily the result of an increase in our net revenue.

General and Administrative Expenses. General and administrative expenses
increased from $1.0 million for the six-month period ended December 31, 1997
to $2.7 million for the six-month period ended December 31, 1998, an increase
of $1.7 million. This increase was due primarily to the hiring of additional
finance, information technology and legal and administrative personnel, as
well as increases in professional fees, and increased spending on information
systems. For the six-month periods ended December 31, 1997 and 1998, general
and administrative expenses decreased as a percentage of net revenue from
17.0% to 8.8%. This percentage decrease was primarily the result of an
increase in our net revenue.

Income Taxes. We incurred significant operating losses for all periods from
inception through December 31, 1998. We have recorded a valuation allowance
for the full amount of our net deferred tax assets as the future realization
of the tax benefit is not sufficiently assured.

Fiscal 1997 Compared with Fiscal 1998

Net Revenue. Net revenue increased from $256,000 for fiscal 1997 to $23.6
million for fiscal 1998, an increase of $23.3 million. The increase in net
revenue for fiscal 1998 reflected the commencement of shipments by our OEMs in
the quarter ending September 30, 1997 and the introduction of our Summit
stackable product family in the quarter ending December 31, 1997. Net revenue
for fiscal 1997 was negligible as we were in the start-up stage of
development.

Gross Profit (Loss). Gross profit increased from a loss of ($132,000) for
fiscal 1997 to a profit of $8.7 million for fiscal 1998, an increase of $8.6
million. Gross margins increased from (51.6%) for fiscal 1997 to 36.8% for
fiscal 1998. The increase resulted from a shift from primarily research and
development activities to production and sales of our products.

Research and Development Expenses. Research and development expenses
increased from $5.4 million for fiscal 1997 to $10.7 million for fiscal 1998,
an increase of $5.3 million. The increase resulted primarily from the hiring
of additional engineers and an increase in prototype material expenses for new
product development. For fiscal 1997 and 1998, research and development
expenses decreased as a percentage of net revenue from 2090.2% to 45.2%. This
percentage decrease was primarily the result of an increase in our net
revenue.

Selling and Marketing Expenses. Selling and marketing expenses increased
from $1.6 million for fiscal 1997 to $9.6 million for fiscal 1998, an increase
of $8.0 million. This increase was primarily due to the hiring of additional
sales and customer support personnel, the establishment of new sales offices,
advertising and promotional campaigns in support of the introduction of our
Summit stackable product family, and increased commission expenses resulting
from higher sales. For fiscal 1997 and 1998, selling and marketing expenses
decreased as a percentage of net revenue from 607.0% to 40.7%. This percentage
decrease was primarily the result of an increase in our net revenue.

General and Administrative Expenses. General and administrative expenses
increased from $1.0 million for fiscal 1997 to $2.4 million for fiscal 1998,
an increase of $1.4 million. This increase reflected primarily additional
finance, information technology and legal and administrative personnel,
increases in amounts paid for professional fees, and increased spending on our
information systems. For fiscal 1997 and 1998, general and administrative
expenses decreased as a percentage of net revenue from 399.6% to 10.1%. This
percentage decrease was primarily the result of an increase in our net
revenue.

Liquidity and Capital Resources

Since inception, we have financed our operations and capital expenditures
primarily through the sale of preferred stock and capital lease and other debt
financing. Cash used in operations for the six-month periods ended December
31, 1997 and 1998 were $8.6 million and $6.5 million, respectively. As of
December 31, 1998, we had $12.6 million in cash, cash equivalents and short-
term investments. We expect that accounts receivable will continue to increase
to the extent our revenues continue to rise. Any such increase can be expected
to reduce cash, cash equivalents and short-term investments.

We have a revolving line of credit for $5.0 million with Silicon Valley
Bank. Borrowings under this line of credit bear interest at the bank's prime
rate. As of December 31, 1998, there were no outstanding borrowings under this
line of credit. We also have a capital equipment line with Silicon Valley Bank
for $4.0 million. Borrowings under this capital equipment line bear interest
at the bank's prime rate. This agreement requires that we maintain certain
financial ratios and levels of tangible net worth, profitability and
liquidity. As of December 31, 1998, borrowings under this capital equipment
line were approximately $783,000. In addition, we have a $5.0 million
subordinated loan and security agreement with Comdisco, Inc. Borrowings under
this loan bear interest at a rate of 9.75% per annum and are secured by all of
our tangible assets. As of December 31, 1998, borrowings under this loan were
$2.0 million.

Capital expenditures were $2.5 million for the six months ended December
31, 1998 and $922,000 for the six months ended December 31, 1997. We expect
capital expenditures to increase in the second half of fiscal 1999 primarily
due to costs of moving to a new facility and capital expenditures for
information systems and manufacturing test fixtures.

In February 1999, we agreed to lease a 77,000 square foot facility in Santa
Clara, California. The related cost of this lease is expected to be
approximately $120,000 per month. The lease has a term of 44 months.

We require substantial capital to fund our business, particularly to
finance inventories and accounts receivable and for capital expenditures. Our
future capital requirements will depend on many factors, including the rate of
revenue growth, the timing and extent of spending to support product
development efforts and expansion of sales and marketing, the timing of
introductions of new products and enhancements to existing products, and
market acceptance of our products. As a result, we could be required to raise
substantial additional capital. To the extent that we raise additional capital
through the sale of equity or convertible debt securities, the issuance of
such securities could result in dilution to existing stockholders. If
additional funds are raised through the issuance of debt securities, such
securities would have certain rights, preferences and privileges senior to
holders of common stock and the term of such debt could impose restrictions on
our operations. We cannot assure you that such additional capital, if
required, will be available on acceptable terms, or at all. If we are unable
to obtain such additional capital, we may be required to reduce the scope of
our planned product

development and marketing efforts, which would materially adversely affect our
business, financial condition and operating results.

We believe that the proceeds from this offering, our cash balances, and
cash available from credit facilities and future operations will enable us to
meet our working capital requirements for at least the next 12 months.

Year 2000 Readiness Disclosure

Some computers, software, and other equipment include computer code in
which calendar year data is abbreviated to only two digits. As a result of
this design decision, some of these systems could fail to operate or fail to
produce correct results if "00" is interpreted to mean 1900, rather than 2000.
These problems are widely expected to increase in frequency and severity as
the year 2000 approaches, and are commonly referred to as the "Year 2000
Problem."

Assessment. The Year 2000 Problem affects the computers, software and other
equipment that we use, operate or maintain for our operations. Accordingly, we
have organized a program team responsible for monitoring the assessment and
remediation status of our Year 2000 projects and reporting such status to our
Board of Directors. This project team is currently assessing the potential
effect and costs of remediating the Year 2000 Problem for our internal
systems. To date, we have not obtained verification or validation from any
independent third parties of our processes to assess and correct any of our
Year 2000 Problems or the costs associated with these activities.

Internal Infrastructure. We believe that we have identified most of the
major computers, software applications, and related equipment used in
connection with our internal operations that will need to be evaluated to
determine if they must be modified, upgraded or replaced to minimize the
possibility of a material disruption to our business. Upon completion of such
evaluation, which we expect to occur by the end of March 1999, we expect to
commence the process of modifying, upgrading, and replacing major systems that
have been assessed as adversely affected, and expect to complete this process
before the occurrence of any material disruption of our business.

Systems Other than Information Technology Systems. In addition to computers
and related systems, the operation of office and facilities equipment, such as
fax machines, telephone switches, security systems, and other common devices
may be affected by the Year 2000 Problem. We are currently assessing the
potential effect and costs of remediating the Year 2000 Problem on our office,
equipment and our new facilities in Santa Clara, California.

We estimate the total cost to us of completing any required modifications,
upgrades or replacements of our internal systems will not exceed $200,000,
almost all of which we believe will be incurred during calendar 1999. This
estimate is being monitored and we will revise it as additional information
becomes available.

Based on the activities described above, we do not believe that the Year
2000 Problem will have a material adverse effect on our business or operating
results. In addition, we have not deferred any material information technology
projects as a result of our Year 2000 Problem activities.

Suppliers. We are in the process of contacting third-party suppliers of
components used in the manufacture of our products to identify and, to the
extent possible, resolve issues involving the Year 2000 Problem. However, we
have limited or no control over the actions of these third-party suppliers.
Thus, while we expect that we will be able to resolve any significant Year
2000 Problems with these third parties, there can be no assurance that these
suppliers will resolve any or all Year 2000 Problems before the occurrence of
a material disruption to the operation of our business. Any failure of these
third parties to timely resolve Year 2000 Problems with their systems could
have a material adverse effect on our business, operating results and
financial condition.

Most Likely Consequences of Year 2000 Problems. We expect to identify and
resolve all Year 2000 Problems that could materially adversely affect our
business operations. However, we believe that it is not

possible to determine with complete certainty that all Year 2000 Problems
affecting us have been identified or corrected. The number of devices that
could be affected and the interactions among these devices are simply too
numerous. In addition, no one can accurately predict how many Year 2000
Problem-related failures will occur or the severity, duration, or financial
consequences of these perhaps inevitable failures. As a result, we believe
that the following consequences are possible:

. a significant number of operational inconveniences and inefficiencies
for us, our contract manufacturers and our customers that will divert
management's time and attention and financial and human resources from
ordinary business activities;

. several business disputes and claims for pricing adjustments or
penalties due to Year 2000 Problems by our customers, which we believe
will be resolved in the ordinary course of business; and

. a few serious business disputes alleging that we failed to comply with
the terms of contracts or industry standards of performance, some of
which could result in litigation or contract termination.

Contingency Plans. We are currently developing contingency plans to be
implemented if our efforts to identify and correct Year 2000 Problems
affecting our internal systems are not effective. We expect to complete our
contingency plans by the end of June 1999. Depending on the systems affected,
these plans could include:

. accelerated replacement of affected equipment or software;

. short to medium-term use of backup equipment and software;

. increased work hours for our personnel; and

. use of contract personnel to correct on an accelerated schedule any Year
2000 Problems that arise or to provide manual workarounds for
information systems.

Our implementation of any of these contingency plans could have a material
adverse effect on our business, operating results and financial condition.

Disclaimer. The discussion of our efforts and expectations relating to Year
2000 compliance are forward-looking statements. Our ability to achieve Year
2000 compliance and the level of incremental costs associated therewith, could
be adversely affected by, among other things, the availability and cost of
programming and testing resources, third party suppliers' ability to modify
proprietary software, and unanticipated problems identified in the ongoing
compliance review.

BUSINESS

Overview

Extreme Networks is a leading provider of next generation local area
network, or LAN, switching solutions that meet the increasing needs of
enterprise LANs. Through the use of our custom ASICs and a common hardware,
software and management architecture, we offer our customer LAN solutions with
increased performance, scalability, Policy-Based Quality of Service, ease of
use and lower cost of ownership. Our products incorporate non-blocking Layer 3
switching functionality in ASICs, resulting in products that are less
expensive than software-based routers, yet offer improved performance
throughout the enterprise LAN from the network core to the desktop. The
Dell'Oro Group estimates that the market for Layer 3 switching totaled $577
million in 1998 and is expected to increase to approximately $3.4 billion in
2001.

Industry Background

Businesses and other organizations have become increasingly dependent on
LANs as their central communications infrastructure to provide connectivity
for internal and external communications. New mission-critical computing
applications, such as enterprise resource planning, data warehousing and
supply chain management, as well as the increased use of traditional
applications, such as e-mail, require significant information technology
resources. The emergence of the desktop browser as a user interface has
enabled bandwidth-intensive applications that contain voice, video and
graphics to be used extensively through intranets and externally through
extranets. These new applications, combined with the growth in business-to-
business e-commerce and other on-line transactions are further burdening the
enterprise LAN infrastructure.

LANs have traditionally been designed for client/server applications, where
network traffic patterns were predictable and traffic loads are relatively
stable. In this environment, the majority of traffic remained within a given
workgroup, with only a small percentage traveling across the enterprise LAN
backbone. The increased use of data-intensive, mission-critical applications,
the widespread implementations of intranets and extranets, and the ubiquity of
Internet technologies have created unpredictable traffic patterns, and
unpredictable traffic loads within the LAN. In addition, as users utilize the
desktop browser and Internet technologies to access significant amounts of
information from servers located inside and outside of the organization, a
much higher percentage of traffic crosses the enterprise LAN backbone. For
example, an employee can make a simple request that may require data to be
downloaded and analyzed from multiple data warehouses outside his or her local
workgroup, resulting in increased traffic across the LAN. Similarly, multiple
users could request a multimedia presentation from a company intranet or from
the Internet consuming tremendous amounts of network capacity. Either of these
situations could result in users overwhelming a company's enterprise LAN
unknowingly. As a result, the increased traffic, bandwidth-intensive
applications and unpredictable traffic patterns are straining traditional LAN
environments and reducing the performance of mission-critical applications.

Today's LAN Environment

Early LANs supported limited numbers of users and were based on Ethernet,
Token Ring or AppleTalk technologies. As the number of users and the amount of
traffic on a network grew, network performance began to decline. In this
shared environment, each desktop received and was burdened by the
communication of every other desktop. The need to improve network performance
was initially addressed by adding network devices known as bridges or hubs
that separated the entire LAN into smaller workgroups. This arrangement was
effective in supporting the traditional client/server environment where the
majority of traffic remained within the workgroup. As applications became more
bandwidth-intensive and users increasingly communicated outside of their
workgroup, bridges and hubs were unable to process this traffic effectively.
To mitigate this problem, Layer 2 switches were developed to provide a
dedicated link for each desktop and eliminate the unnecessary flow of
information to every desktop. In addition to the evolution of new devices, the
need for increased backbone speeds led to the development of new and faster
technologies such as FDDI, Fast Ethernet and ATM. However, each of these
technologies employs different protocols, further complicating the LAN by
requiring software-based routers that use expensive CPUs and software tables
to route this multi-protocol traffic. Today, it is not uncommon to find
multiple protocols and devices across the four basic areas of the network:

. the desktop, which connects end users;

. the segment, which interconnects networking devices;

. the server, which connects servers to the network; and

. the network core, which consists of the enterprise backbone that
interconnects LAN segments.

The following diagram illustrates an example of the architecture of today's
LAN:

[graph of a typical enterprise LAN
architecture with hubs and routers]

As the diagram illustrates, today's enterprise LAN architecture consists of
a complex patchwork of solutions based on different technologies and devices.
Incorporating devices with different hardware, software and management
architectures that utilize multiple technologies can limit performance and
scalability. Such complex networks cannot effectively scale with traffic
growth and require frequent upgrades which are cumbersome and expensive to
implement. All of these factors require significant IT resources and personnel
to keep enterprise networks functioning properly. To be effective in this
demanding environment, today's LANs must be scalable in order to handle
increases in traffic, new bandwidth-intensive applications and overall growth
of networks without major changes or deterioration of performance. An
enterprise LAN must be scalable in the following four dimensions:

Speed. Speed refers to the number of bits per second that can be
transmitted across the network. Today's LAN applications increasingly require
speeds of up to 100 Mbps to the desktop. Hence, the backbone and server
connections that aggregate traffic from desktops require speeds well in excess
of 100 Mbps. Wire speed refers to the ability of a network device to process
an incoming data stream at the highest possible rate without loss of packets.
Wire speed routing refers to the ability to perform Layer 3 routing at the
maximum possible rate.

Bandwidth. Bandwidth refers to the volume of traffic that a network or a
network device can handle before traffic is "blocked," or unable to get
through without interruption. When traffic was more predictable, the amount of
traffic across a network link or through a network device grew basically in
line with the number of users on the LAN. With today's data-intensive
applications accessed in random patterns from within and outside of the LAN,
users can spike traffic unpredictably, consuming significant bandwidth to the
detriment of other users.

Network Size. Network size refers to the number of users and servers that
are connected to a LAN. Today's enterprise LANs must be capable of connecting
and supporting up to thousands, and even tens of thousands, of users and
servers while providing performance and reliable connectivity.

Quality of Service. Quality of service refers to the ability to control the
delivery of traffic based upon its level of importance. Mission-critical
enterprise and delay-sensitive multimedia applications require certain
performance minimums, while traffic such as general e-mail and Internet
surfing may not be as critical. In addition to basic standards-based
prioritization of traffic according to importance, true end-to-end quality of
service would allocate bandwidth to certain applications.

Opportunity for Next Generation Switching Solutions

The emergence of several technology trends is enabling a new generation of
networking equipment that can meet the four scalability dimensions of today's
enterprise LANs by accommodating new unpredictable traffic patterns and
bandwidth-intensive, mission-critical applications. First, while many new and
different technologies have been deployed in existing LANs, Ethernet has
become the predominant LAN technology, with over 95% of the market in 1998 and
total shipments of over 350 million ports from 1991 to 1998, according to the
Dell'Oro Group. Ethernet has evolved from the original 10 Mbps Ethernet to 100
Mbps Fast Ethernet and, in 1998, to 1,000 Mbps Gigabit Ethernet. Gigabit
Ethernet represents a viable enterprise LAN backbone protocol, enabling
100 Mbps Fast Ethernet connections to the desktop to be aggregated for LAN
backbone transport across the network core. Second, growth of the Internet and
the subsequent development of applications based on Internet technologies have
increased the use of the Internet Protocol. Dataquest forecasts that the
Internet Protocol will be the dominant protocol in 83% of enterprise LANs in
1999.

With the wide acceptance of Ethernet and Internet Protocol-based
technologies, the need to support a multi-protocol environment is diminished.
As a result, the simplified routing functionality can be embedded in
application specific integrated circuits, or ASICs, instead of in the software
and CPUs used in multi-protocol software-based routers. The resulting device,
called a Layer 3 switch, functions as a less expensive and significantly
faster hardware-based router. The Dell'Oro Group estimates that the market for
Layer 3 switching totaled $577 million in 1998 and is expected to increase to
approximately $3.4 billion in 2001. Layer 3 switches can operate at gigabit
speeds and, as hardware routers, can support large networks. However, most
Layer 3 switches still block traffic in high utilization scenarios and can
only support standards-based traffic prioritization quality of service. While
Layer 3 switching dramatically increases LAN performance, many of today's
offerings fail to realize the potential of this technology because of the use
of inconsistent hardware, software and management architectures.

To effectively address the needs of today's enterprise LANs, enterprises
need a solution that is easy to use and implement and can scale in terms of
speed, bandwidth, network size and quality of service. Layer 3 switching
represents the next critical step in addressing these requirements. However,
enterprises need a Layer 3 solution that provides sufficient bandwidth to
support unpredictable traffic spikes without impacting all other users
connected to the LAN. In addition, enterprises require a quality of service
solution that supports industry-standard prioritization and enables network
administrators to offer quality of service that maps business processes

and network policies. Finally, to simplify their LANs, enterprises need a
family of interoperable devices that utilize a consistent hardware, software
and management architecture. Through an integrated family of products, network
managers can effectively deploy the solution at any point in the network and
follow a migration path to a network implemented with a consistent
architecture from end-to-end.

The Extreme Networks Solution

Extreme provides end-to-end LAN switching solutions that meet the
requirements of enterprise LANs by providing increased performance,
scalability, policy-based quality of service, ease of use and lower cost of
ownership. Our products share a common ASIC, software and network management
architecture that enables both Layer 2 switching and Layer 3 routing at wire
speed in each of the desktop, segment, server and core areas of the LAN.
Because our products are based on industry standard routing and network
management protocols, they are interoperable with existing LAN
infrastructures. We offer Policy-Based quality of service that controls the
delivery of network traffic according to pre-set policies that specify
priority and bandwidth limits. All of our switches include integrated web
server software that allows the switch to be managed from any browser-equipped
desktop. In addition, our Java-based enterprise management software utilizes
integrated web server software that allows simplified management from any
locally connected computer, or remotely over the Internet.

The key benefits of Extreme's solutions are:

High Performance. Our products provide 1,000 Mbps Gigabit Ethernet to the
network core and Fast Ethernet to the desktops, segments and servers, together
with the non-blocking, wire-speed routing of our ASIC-based Layer 3 switching.
Using our products, customers can achieve forwarding rates that are up to 100
times faster than with software-based routers.

Ease of Use and Implementation. Our products share a common ASIC, software
and network management architecture and offer consistent features for each of
the key areas of the LAN. Our standard-based products can be integrated into
and installed within existing networks. Customers can upgrade any area of
their LANs with Extreme products without needing additional training.
ExtremeWare software simplifies the management of LANs by enabling customers
to manage any of our products remotely through a browser interface.

Scalability. Our solutions offer customers the speed and bandwidth they
need today with the capability to scale their LANs to support demanding
applications in the future without the burden of additional training or
software or system complexity. Customers who purchase our products for Layer 2
applications can upgrade them at any time to Layer 3 because Layer 3
capability is built into our ASICs. ExtremeWare Enterprise Manager software
simplifies software upgrades by allowing the network manager to upgrade all
Extreme switches simultaneously.

Quality of Service. Extreme's Policy-Based Quality of Service enables
customers to prioritize mission-critical applications by providing industry-
leading tools for allocating network resources to specific applications. With
Extreme's Policy-Based Quality of Service, customers can use a web-based
interface to identify and control the delivery of traffic from specific
applications in accordance with specific policies that are set by the
customer. The Quality of Service functionality of our ASICs allows our Policy-
Based Quality of Service to be performed at wire speed. In addition to
providing priority, customers can allocate specified amounts of bandwidth to
specific applications or users.

Lower Cost of Ownership. Extreme's products are less expensive than
software-based routers, yet offer higher routing performance throughout the
enterprise LAN. Because they share a common hardware, software and management
architecture--whether deployed at the desktop, segment, server or core areas
of the LAN--we believe our products can substantially reduce the cost and
complexity of network management and administration. This uniform architecture
creates a simpler LAN infrastructure which leverages the knowledge and
resources businesses have invested in Ethernet and the Internet Protocol,
thereby requiring fewer resources and less time to maintain.

The Extreme Networks Strategy

Extreme's objective is to be the leading supplier of end-to-end enterprise
LAN solutions. The key elements of our strategy include:

Provide Easy to Use, High-Performance, Cost-Effective LAN Solutions. We
offer customers easy to use, powerful, cost-effective LAN solutions that meet
the specific demands of desktop, segment, server and core switching
environments. Our products provide customers with 1,000 Mbps Gigabit Ethernet
and the wire speed, non-blocking routing capabilities of ASIC-based Layer 3
switching. We intend to leverage our expertise in Ethernet, IP and switching
technologies to develop new products based on our common architecture that
meet the future requirements of the enterprise LAN. These products will offer
higher performance with more advanced functionality and features while
continuing to reduce total cost of ownership for our customers.

Expand Penetration of Enterprise LANs. We are focused on product sales to
new customers and on extending our product penetration within existing
customers' LANs. We have designed our products to be the best-of-breed in each
of desktop, segment, server and core areas of the enterprise LAN. Once a
customer buys products for one area of the LAN, our strategy is to leverage
that sale by offering products for other areas. As additional products are
purchased, a customer obtains the increased benefits of our end-to-end
solution by simplifying their networks, extending Policy-Based QoS and
reducing costs of ownership while increasing performance.

Extend Switching Technology Leadership. To date, our products have won over
24 awards from trade magazines and industry organizations, including the "Best
of Show" award from LANTimes and Data Communications at Interop in 1997 and
1998 and the "Hot Product of 1997 and 1998" award from Data Communications
Magazine. Our technological leadership is based on our custom ASICs and
software and includes our wire-speed, Layer 3 switching, Policy-Based Quality
of Service, routing protocols and ExtremeWare software. We intend to invest
our engineering resources in ASIC and software development and provide leading
edge technologies to increase the performance and functionality of our
products. We also intend to maintain our active role in industry standards
committees such as IEEE and IETF.

Leverage and Expand Multiple Distribution Channels. We distribute our
products primarily through resellers and selected OEMs and through our field
sales team. To quickly reach a broad, worldwide audience, we have more than
100 resellers in 39 countries, including regional networking system resellers,
network integrators and wholesale distributors, and have established
relationships with select OEMs. We maintain a field sales force primarily to
support our resellers and to focus on select strategic and large accounts such
as Compaq, NTT and MSNBC. We intend to increase the size of our reseller
programs and are developing two tier distribution channels in some regions. To
complement and support our domestic and international reseller and OEM
channels, we expect to increase our worldwide field sales force.

Provide High-Quality Customer Service and Support. We seek to enhance
customer satisfaction and build customer loyalty through the quality of our
service and support. We offer a wide range of standard support programs that
include 24x7 emergency telephone support and advanced replacement of products.
In addition, we have designed our products to allow easy service and
administration. For example, we can access all of our switches remotely
through a standard web browser to configure, troubleshoot and help maintain
our products. We intend to continue to enhance the ease of use of our products
and invest in additional support services by increasing staffing and adding
new programs for our OEMs and resellers. In addition, we also are committed to
providing customer-driven product functionality through feedback from key
prospects, consultants, channel and OEM partners and customer surveys.

Products

Extreme provides end-to-end LAN switching solutions that meet the
requirements of enterprise LANs by providing increased performance,
scalability, Policy-Based QoS, ease of use and lower cost of ownership. Our
Summit and BlackDiamond switches share a common ASIC, software and management
architecture that

facilitates a relatively short product design and development cycle, thereby
reducing the time-to-market for new products and features. This common
architecture enables customers to build an end-to-end enterprise LAN switching
solution that has consistent functionality, performance and management to each
of the desktop, segment, server and core areas of the LAN. The common
architecture and end-to-end functionality of our products also reduces the
cost and complexity of network administration and management.

Our products include two browser-based software application suites,
ExtremeWare and ExtremeWare Enterprise Manager, that enable simple and
efficient switch management and configuration. ExtremeWare is a standards-
based software suite that delivers Policy-Based QoS and enables
interoperability with legacy switches and routers. ExtremeWare Enterprise
Manager is an application suite that enables remote configuration and
management of multiple switches from a single network station.

Our product families address switching in the desktop, segment, server and
core areas of the LAN. The following table identifies our principal hardware
products:

Product Name
and Date of Area of the Forwarding Speed Per Port
First Shipment Enterprise LAN Configuration (packets per second) List price range
- -------------------------------------------------------------------------------------------------
The Summit Stackable Product Family
- -------------------------------------------------------------------------------------------------

Summit1 Core 8 Gigabit Ethernet ports 11.9 million $2,250 to $3,750
October 1997
- -------------------------------------------------------------------------------------------------

Summit4 Server 16 10/100 Mbps 11.3 million Ethernet:
March 1998 Ethernet ports $625
Gigabit Ethernet:
6 Gigabit Ethernet ports $2,500

- -------------------------------------------------------------------------------------------------

Summit48 Desktop 48 10/100 Mbps 10.1 million Ethernet:
April 1998 Ethernet ports $115 to $146
Gigabit Ethernet:
2 Gigabit Ethernet ports $1,250 to $2,500
- -------------------------------------------------------------------------------------------------

Summit24 Desktop 24 10/100 Mbps 5.1 million Ethernet:
November 1998 Ethernet ports $177 to $292
Gigabit Ethernet:
1 Gigabit Ethernet port $1,250 to $2,500
- -------------------------------------------------------------------------------------------------

Summit Virtual Core Up to 64 Gbps of up to 48.0 million $1,125
Chassis bandwidth
November 1997
8 SummitLink Channels
- -------------------------------------------------------------------------------------------------

The BlackDiamond Modular Chassis
- -------------------------------------------------------------------------------------------------

BlackDiamond Core Up to 256 10/100 Mbps 48.0 million Ethernet:
Chassis Segment Ethernet ports or 48 $402 to
September Server Gigabit Ethernet ports in $1,333
1998 Desktop one chassis Gigabit Ethernet:
$2,475 to
10 slots to accommodate $11,245
a variety of connectivity
and up to 2 management
modules

Desktop Switches

The enterprise desktop is the portion of the network where individual end-
user workstations are connected to a hub or switch. Traditionally, a discrete
group of desktop users, or a workgroup, shared a single hub, which connected
their workgroup to the rest of the network. In this shared environment, each
desktop in the workgroup receives and is burdened by the communication of
every other desktop in the workgroup. This topology is effective so long as
the majority of traffic remains within the workgroup. As applications have
become more bandwidth intensive and as user traffic has migrated outside the
workgroup via the Internet or an intranet or extranet, however, the hubs are
unable to effectively process this traffic, resulting in diminished desktop
performance. Replacing the hub with a Layer 3 switch alleviates this problem
by providing a dedicated link for each desktop and eliminating unnecessary
broadcasts of information to every desktop in the workgroup. Enterprise
desktop switching provides the desktop with features typically found only at
the network core, such as redundancy, greater speed and the ability to
aggregate multiple switch ports into a single high-bandwidth connection.

We became an industry leader in Layer 3 switching for the desktop with the
introduction of our Summit48 and Summit24 desktop switching products. The
Summit48 addresses high-density enterprise desktop connections. This switch
features a non-blocking architecture to avoid the loss of data packets. The
Summit24, with half the number of ports of the Summit48, is targeted at local
wiring closets with moderately dense desktop connections.

Segment Switches

Enterprise segment switching involves the switching among workgroups of
multiple network desktops. While enterprise segment switching faces the same
challenges as desktop switching, it must also address increased congestion
from traffic generated by hubs and other devices that enterprises use to
connect multiple desktop computers. Our primary product for enterprise segment
switching is the chassis-based BlackDiamond. The BlackDiamond chassis
addresses the needs of enterprises that interconnect high-density 10/100 Mbps
segments. It can also be equipped with switched Gigabit Ethernet connectivity
modules to provide high-speed uplinks to servers and switches in the network
core.

Server Switches

Servers run the applications and store the data needed by all network end-
users. In a traditional LAN, most of the network resources needed by any given
desktop user, such as printer servers, file servers or database servers, are
on the same workgroup segment as the desktop user. The traditional network
architecture has been shifting toward more centralized server clusters, or
server farms, which require the physical deployment of multiple servers in a
single central data center. This new architecture is easier to manage and can
be configured in a redundant fashion, thereby reducing the risk of system
failure. Additionally, remote offices and telecommuters can access the same
server-based data as desktop users, increasing the flexibility of the network
to support users wherever they may be located.

As more people access the network and as server requests increasingly
involve more bandwidth-intensive applications, network traffic to and from
servers has increased dramatically, causing bandwidth to be consumed by
traffic. Servers also communicate with each other, creating a high volume of
server-to-server traffic within the server farm. Recent technology
developments allow enterprises to install network interface cards that enable
connections using Gigabit Ethernet or the aggregation of multiple 100 Mbps
ports on a single card. This development increases the communication speed of
the servers. In turn, these servers have created the need for switches that
can support their higher server-to-server and server-to-end-user
communications speeds. Our Summit4 product addresses server switching
constraints by providing switched Gigabit Ethernet and multiple 100 Mbps links
to the servers, thereby delivering sufficient bandwidth between servers and to
clients on attached segments. The BlackDiamond may also be configured to
address the needs of a server switching environment that requires higher port
density and modular configuration flexibility.

Core Switches

The network core is the most critical point in the network, as it is where
the majority of network traffic, including desktop, segment and server
traffic, converges. Network core switching involves switching traffic from the
desktops, segments and servers within the network. Because of the high-traffic
nature of the network core, wire-speed Layer 3 switching, scalability, a non-
blocking hardware architecture, fault-tolerant mission-critical features,
redundancy, link aggregation, the ability to support a variety of high-density
"speeds and feeds" and the ability to accommodate an increasing number of
high-capacity backbone connections are critical in core switching. Our network
core products satisfy these criteria and include the BlackDiamond, the Summit1
and the Summit Virtual Chassis.

The BlackDiamond switch includes the fault-tolerant features associated
with mission-critical enterprise-class Layer 3 switching, including redundant
system management and switch fabric modules, hot-swappable modules and chassis
components, load-sharing power supplies and management modules, up to four 10
Mbps, 100 Mbps, or 1,000 Mbps aggregated links, dual software images and
system configurations, spanning tree and multipath routing, and redundant
router protocols for enhanced system reliability. In addition, our Summit1
switch, which interconnects multiple Gigabit Ethernet backbones from various
parts of the enterprise LAN, is well-suited for network core applications that
require lower density backbone connections. The Summit Virtual Chassis is a
high-speed external backplane that interconnects multiple Summit or
BlackDiamond switches. The Summit Virtual Chassis enables network flexibility
by interconnecting geographically dispersed or co-located Summit and
BlackDiamond switches, thereby creating a distributed core.

ExtremeWare

Our ExtremeWare software suite is pre-installed on every Summit and
BlackDiamond switch. For Extreme switches that are Layer 3 enabled,
ExtremeWare delivers Policy-Based Quality of Service capabilities and supports
a range of routing protocols that enable interoperability with legacy switches
and routers. Our Policy-Based Quality of Service also enables network managers
to define numerous levels of control, or policies, that determine the amount
of bandwidth available to a group of users or network devices at a given time.
The policies can describe traffic based on port number, protocol type, VLAN,
or Layer 2, Layer 3 or Layer 4 information. Using 802.1p and 802.1Q for VLAN
tagging, Policy-Based Quality of Service is passively signaled across the
network to enable standards-based interoperability. For Extreme switches that
are Layer 2 enabled, ExtremeWare provides Policy-Based Quality of Service and
supports a range of standards-based management and Layer 2 protocols. In
addition, the Layer 2 version of ExtremeWare can be upgraded to Layer 3 via
software that may be downloaded from the web.

ExtremeWare Enterprise Manager

ExtremeWare Enterprise Manager simplifies the task of managing and
configuring groups of our switches. With ExtremeWare Enterprise Manager, an
entire network of our switches can be managed from a single management console
using a standard web browser. This enterprise-wide management enables VLANs
and Policy-Based Quality of Service to be established and managed for the
entire enterprise LAN. ExtremeWare Enterprise Manager can also manage
centralized and distributed stacks of Summit switches and the Summit Virtual
Chassis as aggregated entities. ExtremeWare Enterprise Manager can be accessed
using any Java-enabled browser. The ExtremeWare Enterprise Manager application
and database support both Microsoft Windows NT and Sun Microsystems' Solaris.
The ExtremeWare Enterprise Manager client can be launched from within the HP
OpenView network Node Manager application.

Customers

The following table lists certain of our end user customers that purchased
in excess of $100,000 of our products:

Advanta Mortgage Honeywell Osaka Prefecture University
Amoco Houston NW Medical Center Pennzoil
AT&T Imperial College Playboy
Barnes and Noble Institute of Nuclear Power Raytheon
British Telecom Interwest Bank Real Networks
Cable & Wireless (UK) IXNet Reuters
Chiba Kougyou University Juno Online Saudi Aramco Oil Company
Compaq Leo Burnett Advertising Schlumberger
Danish Post Lockheed Martin Shell Oil
Dell Computer Los Alamos Labs Sun Microsystems
Digital Domain MAN (Denmark) Swedish Library Service
Enron Corporation Microsoft Tandem Computers
First Technology Credit MIT Lincoln Labs UC Riverside
Union MSNBC University of Stuttgart
Harbor-UCLA Medical Center Navistar U.S. Air Force
Hewlett-Packard Company NVIDIA Worldvision

In fiscal 1998, 3Com and Compaq accounted for 25% and 21%, respectively, of
our net revenue, and for the six-month period ended December 31, 1998, Compaq
and Hitachi Cable accounted for 17% and 11% of our net revenue, respectively.
Compaq is both an OEM and an end-user customer. In fiscal 1998, approximately
72% of our net revenue was derived from ten customers. End-user sales to
Compaq include sales to its subsidiaries, Tandem and Digital. In the six-month
period ended December 31, 1998, approximately 58% of our net revenue was
derived from ten customers.

Representative examples of the manner in which Extreme's products have been
used by our customers are set forth below:

Heavy Equipment Manufacturer. This Japan-based customer is one of the
world's largest manufacturers of marine vessels, construction machinery and
environmental systems. The customer was attempting to run numerous office
automation and bandwidth-intensive engineering applications on its expanding
3,000-node computer network. As the organization took on additional nodes and
applications, it needed a more scalable LAN infrastructure to keep up with
increased speed and bandwidth demands, while providing quality of service for
traffic prioritization and bandwidth control. When the customer relocated its
headquarters to a larger facility, it considered ATM and Gigabit Ethernet as
alternative LAN solutions. The customer ultimately chose Extreme's Gigabit
Ethernet solution due to its lower total cost of ownership and ability to
scale speed, bandwidth, network size and quality of service. The customer
installed Extreme's Summit1 LAN switches in the network core with high-speed
Gigabit Ethernet uplinks to several Summit2 LAN switches that perform segment
switching. This new all-Gigabit Ethernet LAN infrastructure provides enough
bandwidth for present and future applications that this global manufacturer
may adopt, is easy to manage and offers the customer a high degree of
efficiency.

Computer Manufacturer. This leading global personal computer manufacturer
had a 30,000-node enterprise network consisting of an FDDI-based core with
Ethernet to segments, servers and desktops. The network relied on software-
based multi-protocol routers to handle mission-critical enterprise resource
planning systems and emerging electronic commerce applications that support
web-based purchasing of their computer equipment. The network infrastructure
did not scale well and as the computer manufacturer increased users and
applications, the cost of efficiently running and managing the network
increased significantly. As a result, the customer looked for a new reliable,
efficient and scalable LAN infrastructure. Extreme enabled the computer
manufacturer to cost-effectively migrate its existing network core, composed
of 5 FDDI rings and over 100

software-based routers, to an all-Ethernet infrastructure with Layer 3 IP
switching from core to desktop. BlackDiamond chassis switches and stackable
Summit switches were deployed to simplify management, significantly reduce
network ownership costs, and accommodate future growth of customers and
applications.

On-line Interactive News Service. A leading provider of on-line interactive
news needed to reduce bottlenecks and increase control on its 400-node
mission-critical production network. An existing FDDI backbone was unable to
scale in capacity to handle increased flow of bandwidth-intensive content such
as video, audio, graphics and text. After considering many alternative
solutions including those offered by leading network companies, the customer
decided to replace its FDDI backbone with a Gigabit Ethernet LAN
infrastructure using Layer 3 switches from Extreme. Compared to ATM and other
Gigabit Ethernet solutions, the Extreme solution offered more scalable
capacity and similar quality of service features but with far less complexity
and cost. The ability of Extreme's solution to reduce network ownership costs
also played a key role in the customer's decision. Today, the network uses a
mix of Summit1 switches in the core, Summit2 switches in the segment and
Summit48 switches to the desktop. The customer's satisfaction with our
solution has led to follow-up sales.

Sales and Marketing

Extreme's sales and marketing strategy is focused on domestic and
international resellers, OEMs and field sales.

Resellers. We have entered into agreements to sell our products through
more than 100 resellers in 39 countries. Our resellers include regional
networking system resellers, resellers who focus on specific vertical markets,
network integrators and wholesale distributors. We provide training and
support to our resellers and our resellers generally provide the first level
of support to end users of our products. We intend to increase the number of
our reseller relationships, to target certain vertical markets and support a
two-tier distribution channel. Resellers accounted for approximately 57% and
67% of our net revenue for fiscal 1998 and the six-months ended December 31,
1998, respectively.

OEMs. We have established four key OEM relationships with leaders in the
telecommunications, personal computer and computer networking industries. For
fiscal 1998 and the six-months ended December 31, 1998, sales to our OEMs
accounted for 43% and 33% of our net revenue, respectively. Compaq, which is
both an OEM and a large end-user customer, accounted for 21% and 17% of our
net revenue in fiscal 1998 and the six-months ended December 31, 1998,
respectively. We intend to maintain a limited number of relationships with key
strategic OEMs who may offer products or distribution channels that compliment
ours. Each of our OEMs resells our products under its own name. We believe
that our OEM relationships enhance our ability to sell and provide support to
large organizations because certain end-user organizations may prefer to do
business with very large suppliers. We anticipate that OEM sales will decline
as a percentage of net revenue as we expand our reseller and fields sales
efforts.

Field Sales. We have designed and established our field sales organization
to support and develop leads for our resellers and to establish and maintain a
limited number of key accounts and strategic customers. To support these
objectives, our field sales force:

. assists end-user customers in finding solutions to complex network
system and architecture problems;

. differentiates the features and capabilities of our products from
competitive offerings;

. continually monitors and understands the evolving networking needs of
enterprise customers;

. promotes our products and ensures direct contact with current and
potential customers; and

. monitors the changing requirements of our customers.

As of December 31, 1998, Extreme's worldwide sales and marketing
organization included 67 individuals, including managers, sales
representatives, and technical and administrative support personnel. We have
domestic sales offices located in major metropolitan areas, including Atlanta,
Boston, Chicago, Dallas, Houston, Los

Angeles, New York, San Jose, Seattle and Washington DC. In addition, we have
international sales offices located in the United Kingdom, France, Germany,
Hong Kong, Italy, Japan, Mexico, the Netherlands and Sweden.

International Sales

We believe that there is a strong international market for our switching
products. Our international sales are conducted primarily through our overseas
offices and foreign resellers. Sales to customers outside of North America
accounted for approximately 59% and 50% of our net revenue in fiscal 1998 and
the six-month period ended December 31, 1998, respectively.

Marketing

We have a number of marketing programs to support the sale and distribution
of our products and to inform existing and potential enterprise customers and
our resellers and OEMs about the capabilities and benefits of our products.
Our marketing efforts include participation in industry tradeshows, technical
conferences and technology seminars, preparation of competitive analyses,
sales training, publication of technical and educational articles in industry
journals, maintenance of our web site, advertising and public relations. In
addition, we have begun to develop an e-commerce business directed at
resellers. We also participate in third-party, independent product tests.

Customer Service and Support

Our customer service and support organization maintains and supports
products sold by our field sales force to end users, and provides technical
support to our resellers and OEMs. Generally, our resellers and OEMs provide
installation, maintenance and support services to their customers and we
assist our resellers and OEMs in providing such support.

In addition to designing custom maintenance programs to satisfy specific
customer requirements, we also offer several standard maintenance programs to
our resellers and customers, including ExtremeAssist1 and ExtremeAssist2.

ExtremeAssist1. This program is designed for customers which have strong
technical networking skills and are interested in keeping service and support
costs to a minimum. With ExtremeAssist1, the customers' information technology
organizations provide first-level support for configuration, hardware and
trouble shooting, while our technical assistance center provides advanced
second-level support on an essential need basis. The ExtremeAssist1 program
includes 2 hour telephone response time, 10 e-mail inquiries per month and
responses within 24 hours, rapid-response emergency telephone support on a
24x7 basis and 72-hour advanced replacement of hardware.

ExtremeAssist2. This program is designed for mission-critical environments
that require the highest degree of network availability, data integrity and
end-user productivity. The ExtremeAssist2 program includes 1 hour telephone
response time, unlimited e-mail inquiries and next business-day responses,
rapid-response emergency/ network down telephone support on a 24x7 basis and
next business-day advance replacement of hardware.

With the ExtremeAssist1 and ExtremeAssist2 programs, our customers are able
to access our web-based database to immediately obtain software updates, bug
lists, technical support alerts and on-line documentation. We typically
provide end users with a one-year hardware and 90-day software warranty. We
also offer various training courses for their third-party resellers or end-
user customers.

Manufacturing

California. This approach enables us to reduce fixed costs and to provide
flexibility in meeting market demand. Where cost-effective, we may begin to
perform certain of our non-manufacturing outsourced operations in-house.

Currently, we use two contract manufacturers--Flextronics, located in San
Jose, California, to manufacture our Summit1, Summit2 and Summit4 and
BlackDiamond products and MCMS, located in Boise, Idaho, to manufacture our
Summit24 and Summit48 products. Each of these manufacturing processes and
procedures is ISO 9002 certified. We design and develop the key components of
our products, including ASICs, printed circuit boards and software. In
addition, we determine the components that are incorporated in our products
and select the appropriate suppliers of such components. Product testing and
burn-in is performed by our contract manufacturers using tests we specify and
automated testing equipment. We also use comprehensive inspection testing and
statistical process controls to assure the quality and reliability of our
products. We intend to regularly introduce new products and product
enhancements, which will require that we rapidly achieve volume production by
coordinating our efforts with those of our suppliers and contract
manufacturers. See "Risk Factors--Extreme Needs to Expand its Manufacturing
Operations and is Dependent on Contract Manufacturers."

Although we use standard parts and components for our products where
possible, we currently purchase several key components used in the manufacture
of our products from single or limited sources. Our principal single-sourced
components include:

. ASICs;
. microprocessors;
. programmable integrated circuits;
. selected other integrated circuits;
. cables; and
. custom-tooled sheet metal.

Our principal limited-source components include:
. flash memories;
. DRAMs;
. SRAMs; and
. printed circuit boards.

Generally, purchase commitments with our single or limited source suppliers
are on a purchase order basis. LSI Logic manufacturers all of our ASICs which
are used in all of our switches. Any interruption or delay in the supply of
any of these components, or the inability to procure these components from
alternate sources at acceptable prices and within a reasonable time, would
materially adversely affect our business, operating results and financial
condition. In addition, qualifying additional suppliers can be time-consuming
and expensive and may increase the likelihood of errors.

Research and Development

We believe that our future success depends on our ability to continue to
enhance our existing products and to develop new products that maintain
technological competitiveness. We focus our product development activities on
solving the needs of users of enterprise LANs. We monitor changing customer
needs and work closely with users of enterprise LANs, value-added resellers
and distributors, and market research organizations to monitor changes in the
marketplace. We design our products around current industry standards and will
continue to support emerging standards that are consistent with our product
strategy.

Our products have been designed to incorporate the same core ASICs and
software and system architecture, facilitating a relatively short product
design and development cycle and reducing the time to market for new products
and features. We have utilized this architectural design to develop and
introduce other product models and enhancements since the introduction of our
first products in 1997. We intend to continue to utilize this architectural
design to develop and introduce additional products and enhancements in the
future.

We are currently undertaking development efforts for our family of products
with emphasis on increasing reliability, performance and scalability and
reducing the overall LAN operating costs to end users. We are also focusing on
cost reduction engineering to reduce the cost of our products. There can be no
assurance that our product development efforts will result in commercially
successful products, or that our products will not be rendered obsolete by
changing technology or new product announcements by other companies. See "Risk
Factors--Our Market Is Subject to Rapid Technological Change and We Need to
Introduce New Products That Achieve Broad Market Acceptance."

Competition

We believe the principal competitive factors in the LAN switching market
are:

. expertise and familiarity with LAN protocols, LAN switching and network
management;

. product performance, features, functionality and reliability;

. price/performance characteristics;

. timeliness of new product introductions;

. adoption of emerging industry standards;

. customer service and support;

. size and scope of distribution network;

. brand name;

. access to customers; and

. size of installed customer base.

We believe we compete favorably with our competitors with respect to each
of the foregoing factors. However, because many of our existing and potential
competitors have longer operating histories, greater name recognition, larger
customer bases and substantially greater financial, technical, sales,
marketing and other resources, they may have larger distribution channels,
stronger brand names, access to more customers and a larger installed customer
base than we do. Such competitors may, among other things, be able to
undertake more extensive marketing campaigns, adopt more aggressive pricing
policies and make more attractive offers to distribution partners than we can.
To remain competitive, we believe we must, among other things, invest
significant resources in developing new products and enhancing our current
products and maintain customer satisfaction worldwide. If we fail to do so,
our products will not compete favorably with those of our competitors which
will materially adversely affect our business. See "Risk Factors--Extreme May
Not Be Able to Successfully Compete in the Intensely Competitive Market for
Enterprise LAN Equipment."

Intellectual Property

We also enter into confidentiality or license agreements with our
employees, consultants and corporate partners, and control access to and
distribution of our software, documentation and other proprietary information.
Despite our efforts to protect our proprietary rights, unauthorized parties
may attempt to copy or otherwise obtain and use our products or technology.
There can be no assurance that these precautions will prevent misappropriation
or infringement of our intellectual property. Monitoring unauthorized use of
our products is difficult, and we cannot be certain that the steps we have
taken will prevent misappropriation of our technology, particularly in foreign
countries where the laws may not protect our proprietary rights as fully as in
the United States.

Employees

As of December 31, 1998, we employed 159 persons, including 67 in sales and
marketing, 52 in research and development, 20 in operations and 20 in finance
and administration. We have never had a work stoppage and no personnel are
represented under collective bargaining agreements. We consider our employee
relations to be good.

We believe that our future success will depend on our continued ability to
attract, integrate, retain, train and motivate highly qualified personnel, and
upon the continued service of our senior management and key personnel. None of
our personnel is bound by an employment agreement. Competition for qualified
personnel is intense, particularly in the San Francisco Bay Area, where our
headquarters is located. At times we have experienced difficulties in
attracting new personnel. There can be no assurance that we will successfully
attract, integrate, retain and motivate a sufficient number of qualified
personnel to conduct our business in the future. See "Risk Factors--Extreme Is
Dependent on Certain Key Personnel and on Its Ability to Hire Additional
Qualified Personnel."

Facilities

Our principal administrative, sales, marketing and research development
facilities are located in approximately 28,400 square feet of office space in
Cupertino, California. Our lease expires in April 1999. We expect to be moving
to a new 77,000 square feet facility located in Santa Clara, California in
March 1999. Assuming we complete this move, we believe that our facilities
will be adequate to meet our needs for the foreseeable future. We also lease
office space in Connecticut, Georgia, Illinois, Texas, Maryland,
Massachusetts, New Jersey, Washington and Wisconsin and in Hong Kong and the
Netherlands.

Legal Proceedings

We are not aware of any pending legal proceedings against us that,
individually or in the aggregate, would have a material adverse effect on our
business, operating results or financial condition. We may in the future be
party to litigation arising in the course of our business, including claims
that we allegedly infringe third-party trademarks and other intellectual
property rights. Such claims, even if not meritorious, could result in the
expenditure of significant financial and managerial resources.

MANAGEMENT

Directors and Executive Officers

The following table sets forth certain information regarding the executive
officers and directors of Extreme as of January 31, 1999:

Name Age Position
- ---- --- --------

Gordon L. Stitt...... 42 President, Chief Executive Officer and Chairman
Stephen Haddock...... 40 Vice President and Chief Technical Officer
Herb Schneider....... 39 Vice President of Engineering
William Kelly........ 47 Vice President of Corporate Development
Vito E. Palermo...... 35 Vice President, Chief Financial Officer and Secretary
George Prodan........ 46 Vice President of Marketing
Paul Romeo........... 49 Vice President of Operations
Harry Silverglide.... 52 Vice President of Sales
Charles
Carinalli(1)........ 50 Director
Promod Haque(2)...... 50 Director
Lawrence K. Orr(2)... 42 Director
Peter Wolken(1)...... 64 Director

- --------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.

Gordon L. Stitt. Mr. Stitt co-founded Extreme in May 1996 and has served as
President, Chief Executive Officer and a director of Extreme since its
inception. From 1989 to 1996, Mr. Stitt worked at another company he co-
founded, Network Peripherals, a designer and manufacturer of high-speed
networking technology. He served first as its Vice President of Marketing,
then as Vice President and General Manager of the OEM Business Unit. Mr. Stitt
holds an MBA from the Haas School of Business of the University of California,
Berkeley and a BSEE/CS from Santa Clara University.

Stephen Haddock. Mr. Haddock co-founded Extreme in May 1996 and has served
as Vice President and Chief Technical Officer of Extreme since its inception.
From 1989 to 1996, Mr. Haddock worked as Chief Engineer at Network
Peripherals. Mr. Haddock is a member of IEEE, an editor of the Gigabit
Ethernet Standard and Chairman of the IEEE 802.3ad link aggregation committee.
Mr. Haddock holds an MSEE and a BSME from Stanford University.

Herb Schneider. Mr. Schneider co-founded Extreme in May 1996 and has served
as Vice President of Engineering of Extreme since its inception. From 1990 to
1996, Mr. Schneider worked as Engineering Manager at Network Peripherals and
was responsible for the development of LAN switches. From 1981 to 1990,
Mr. Schneider held various positions at National Semiconductor, a developer
and manufacturer of semiconductor products, where he was involved in the
development of early Ethernet chipsets and FDDI chipsets. Mr. Schneider holds
a BSEE from the University of California, Davis.

William Kelly. Mr. Kelly has served as Vice President of Corporate
Development of Extreme since January 1999. From October 1996 to January 1999,
he served as Vice President of Finance and Chief Financial Officer of Extreme.
From August 1995 to October 1996, he served as Vice President of Worldwide
Finance and Chief Financial Officer at SCM Microsystems, a manufacturer of
personal computer smart-card technology. From March 1991 to June 1995, Mr.
Kelly served in various positions at Network Peripherals, most recently as
Vice President, Controller and Treasurer. Mr. Kelly holds a BBA in accounting
from Loyola University, Chicago and is a Certified Public Accountant.

Vito E. Palermo. Mr. Palermo has served as Vice President, Chief Financial
Officer and Secretary of Extreme since January 1999. From January 1997 to
January 1999, he served as Senior Vice President, Chief Financial Officer and
Secretary of Metawave Communications, a wireless communications company. From
1992

to 1996, Mr. Palermo served in various financial management positions at Bay
Networks, a networking communications company, most recently serving as Vice
President and Corporate Controller and previously serving as Director of
Technology Finance, Corporate Financial and Planning Manager, and
Manufacturing and Customer Service Controller. Mr. Palermo holds an MBA from
St. Mary's College and a BS in Business Administration from California State
University.

George Prodan. Mr. Prodan has served as Vice President of Marketing of
Extreme since February 1997. From January 1994 to January 1997, he served as
Director of Marketing and Senior Director of Worldwide Channels at FORE
Systems, a networking equipment company. From April 1991 to December 1993, he
served as a product line manager for a division of 3Com, a networking company.
He holds an MS in Instructional Communications from Shippensburg State
University and a BS in Industrial Arts Education from California State
University.

Paul Romeo. Mr. Romeo has served as Vice President of Operations of Extreme
since April 1997. From 1989 to 1997, he served as Vice President of Operations
at Compression Labs, a videoconferencing company. Mr. Romeo holds an MBA from
Santa Clara University and a BS in Engineering/Production Management from the
University of Illinois.

Harry Silverglide. Mr. Silverglide has served as Vice President of Sales of
Extreme since January 1997. From May 1995 to January 1997, he served as Vice
President of Western Region Sales for Bay Networks. From July 1994 to May
1995, he served as Vice President of Sales for Centillion Networks, a provider
of LAN switching products which was acquired by Bay Networks in 1995. From
April 1984 to July 1994, he worked in sales and senior sales management
positions at Ungermann Bass, a network communications company.

Charles Carinalli. Mr. Carinalli has served as a director of Extreme since
October 1996. Since December 1996, Mr. Carinalli has been President, Chief
Executive Officer and a director of Wavespan, a developer of wireless
broadband access systems. From 1970 to 1996, Mr. Carinalli served in various
positions and most recently served as Senior Vice President and Chief
Technical Officer for National Semiconductor. Mr. Carinalli holds an MSEE from
Santa Clara University and a BSEE from the University of California, Berkeley.

Promod Haque. Mr. Haque has served as a director of Extreme since May 1996.
Mr. Haque joined Norwest Venture Partners in November 1990 and is currently
Managing General Partner of Norwest Venture Partners VII, General Partner of
Norwest Venture Partners VI and General Partner of Norwest Equity Partners V
and IV. Mr. Haque currently serves as a director of Information Advantage,
Prism Solutions, Raster Graphics, Connect, Transaction Systems Architects and
several privately held companies. Mr. Haque holds a PhDEE and a MSEE from
Northwestern University, an MM from the J.L. Kellogg Graduate School of
Management, Northwestern University and a BSEE from the University of Delhi,
India.

Lawrence K. Orr. Mr. Orr has served as a director of Extreme since May
1996. Since January 1991, he has been General Partner of Trinity Ventures, the
general partner of a privately held group of venture capital partnerships, and
he was an employee of Trinity Ventures from 1989 to 1991. Mr. Orr currently
serves as a director of several privately held companies. Mr. Orr holds an MBA
from Stanford University and a BA in Mathematics from Harvard University.

Peter Wolken. Mr. Wolken has served as a director of Extreme since May
1996. He currently serves as General Partner of AVI Management Partners, which
manages various private venture capital limited partnerships. He co-founded
AVI Management Partners in 1981. He serves as a director of Full Time Software
and several privately held technology companies in Silicon Valley. Mr. Wolken
holds a BFT in International Marketing from the American Graduate School for
International Management and a BS in Mechanical Engineering from the
University of California, Berkeley.

Board Committees

The Audit Committee is primarily responsible for reviewing audited
financial statements and accounting practices of Extreme, and for considering
and recommending the employment of, and approving the fee arrangements with,
independent accountants for both audit functions and for advisory and other
consulting services. The Audit Committee is currently comprised of Messrs. Orr
and Haque. The Compensation Committee is primarily responsible for reviewing
and approving the compensation and benefits for our key executive officers,
administering our employee benefit plans and making recommendations to the
Board regarding such matters. The Compensation Committee is currently
comprised of Messrs. Wolken and Carinalli.

Director Compensation

Directors are entitled to reimbursement of all reasonable out-of-pocket
expenses incurred in connection with their attendance at Board and Board
committee meetings.

Compensation Committee Interlocks and Insider Participation

The Compensation Committee is composed of Messrs. Wolken and Carinalli. No
interlocking relationship exists between the Board or Compensation Committee
and the board of directors or compensation committee of any other company, nor
has any such interlocking relationship existed in the past. The Compensation
Committee reviews and approves the compensation and benefits for our key
executive officers, administers our employee benefit plans and makes
recommendations to the Board regarding such matters.

Change of Control Arrangements

Shares subject to options granted under our Amended 1996 Stock Option Plan
will generally vest over four years, with 25% of the shares vesting after one
year and the remaining shares vesting in equal monthly increments over the
following 36 months. The options and stock purchase agreements granted to our
executive officers and our outside director provide for accelerated vesting of
the shares in the event of a "transfer of control," as defined in the option
or stock purchase agreement, of Extreme.

This form of agreement provides that if, as of the date of the transfer of
control, less than 75% of the total option shares are vested, the number of
vested shares will be increased, as of the date of the transfer of control, to
the lesser of 75% of the total option shares, or the sum of the number of
vested shares (determined under the standard vesting schedule) plus 50% of the
unvested shares (determined under the standard vesting schedule). After the
transfer of control, the remaining unvested shares will vest in equal monthly
increments over the longer of the following periods: (a) 50% of the period
beginning on the date of the transfer of control and ending on the date four
years after the option grant date, or (b) 12 months.

Executive Compensation

The following table sets forth information concerning the compensation paid
to Extreme's Chief Executive Officer and each of Extreme's five other most
highly compensated executive officers (collectively, the "Named Executive
Officers") during fiscal 1998:

Summary Compensation Table

All Other
Name and Principal Position Salary ($) Bonus ($) Compensation ($)
- --------------------------- ---------- --------- ----------------

Gordon L. Stitt.......................... $129,167 $ -- $ --
President and Chief Executive Officer
Steve Haddock............................ 117,500 -- --
Vice President and Chief Technical
Officer
George Prodan............................ 125,000 -- --
Vice President of Marketing
Paul Romeo............................... 135,000 -- --
Vice President of Operations
Herb Schneider........................... 117,500 -- --
Vice President of Engineering
Harry Silverglide(1)..................... 100,000 20,000 72,600
Vice President of Sales

- --------
(1) Other annual compensation amount relates to commissions paid.

Option Grants

No stock options were granted during fiscal 1998 to the Named Executive
Officers. In October 1998, we granted options to purchase 200,000, 135,000,
90,000, 50,000, 135,000 and 80,000 shares of common stock at an exercise price
of $5.75 per share to Messrs. Stitt, Haddock, Prodan, Romeo, Schneider and
Silverglide, respectively, under the Amended 1996 Stock Option Plan. See "--
Amended 1996 Stock Option Plan."

Option Exercises and Holdings

No options were exercised during fiscal 1998 by the Named Executive
Officers. The following table provides certain information with respect to
unexercised options held as of June 30, 1998 by the Named Executive Officers:

Fiscal Year-End Options(1)

Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options at June 30, 1998 Options at June 30, 1998(2)
-------------------------- ---------------------------
Name Vested Unvested Vested Unvested
- ---- ------------ ------------- ------------ --------------

Gordon L. Stitt........... -- -- -- --
Steve Haddock............. -- -- -- --
George Prodan............. 210,000 420,000 $ 783,300 $ 1,566,600
Paul Romeo................ -- -- -- --
Herb Schneider............ -- -- -- --
Harry Silverglide......... -- -- -- --

- --------
(1) The options were granted under Extreme's Amended 1996 Stock Option Plan.
Options granted under this plan are immediately exercisable but vest over
a four-year period with 25% vesting at the first anniversary date of the
vesting date and 6.25% each quarter thereafter. In addition, the options
are subject to a repurchase right in favor of Extreme which lapses ratably
over four years and entitles Extreme to repurchase unvested shares at
their original issuance price.

(2) Calculated on the basis of the fair market value of the underlying
securities as of June 30, 1998 of $3.75 per share, minus the per share
exercise price, multiplied by the number of shares underlying the option.

Amended 1996 Stock Option Plan

Our Amended 1996 Stock Option Plan (the "1996 Plan") was adopted by the
Board of Directors in September 1996 and subsequently approved by the
stockholders. The 1996 Plan provides for the grant of incentive stock options
(within the meaning of Section 422 of the Code) to employees and for the grant
of nonstatutory stock options to employees, non-employee directors and
consultants.

As of December 31, 1998, 12,014,309 shares are reserved for issuance under
the 1996 Plan, of which 6,391,195 shares have been issued upon the exercise of
options, options to purchase a total of 3,710,328 shares at a weighted average
exercise price of $2.55 per share were outstanding, and 1,912,786 shares were
available for future option grants.

The 1996 Plan is administered by the Board of Directors or a committee
thereof. Subject to the provisions of the 1996 Plan, the Board (or committee)
has the authority to select the persons to whom options are granted and
determine the terms of each option, including (i) the number of shares of
common stock covered by the option, (ii) when the option becomes exercisable,
(iii) the per share option exercise price, which, in the case of incentive
stock options, must be at least 100% of the fair market value of a share of
common stock as of the date of grant, in the case of options granted to
persons who own 10% or more of the total combined voting power of Extreme (or
any parent or subsidiary of Extreme) (a "10% Shareholder"), must be at least
110% of the fair market value of a share of common stock as of the date of
grant, and, in the case of nonstatutory stock options, must be at least 85% of
the fair market value of a share of common stock as of the date of grant, and
(iv) the duration of the option (which may not exceed ten years, or 5 years
for incentive stock options granted to 10% Shareholders). Generally, options
granted under the 1996 Plan vest over four years, and are non-transferable
other than by will or the laws of descent and distribution. In the event of
certain changes in control of Extreme, the acquiring or successor corporation
may assume or substitute for options outstanding under the 1996 Plan, or such
options shall terminate. Certain options granted to officers of Extreme
provide for partial acceleration upon a change in control of Extreme.

1999 Employee Stock Purchase Plan

A total of 1,000,000 shares of common stock have been reserved for issuance
under our 1999 Employee Stock Purchase Plan (the "Purchase Plan"), none of
which have been issued as of the effective date of this offering. The Purchase
Plan, which is intended to qualify under Section 423 of the Code, is
administered by the Board or by a committee thereof. Employees (including
officers and directors of Extreme who are also employees) of Extreme or any
subsidiary designated by the Board for participation in the Purchase Plan are
eligible to participate in the Purchase Plan if such persons are customarily
employed for more than 20 hours per week and more than five months per year.
The Purchase Plan will be implemented by consecutive offering periods
generally 12 months in duration. However, the first offering period under the
Purchase Plan will commence on the effective date of this offering and
terminate on April 30, 2000. Each offering period under the Purchase Plan will
generally be comprised of four three-month purchase periods, with shares
purchased on the last day of each purchase period (a "Purchase Date"). The
Board may change the dates or duration of one or more offering periods, but no
offering period may exceed 27 months.

The Purchase Plan permits eligible employees to purchase shares of common
stock through payroll deductions at a price no less than 85% of the lower of
the fair market value of the common stock on the first day of the offering
period or the Purchase Date. Participants generally may not purchase more than
625 shares on any Purchase Date or stock having a value (measured at the
beginning of the offering period) greater than $25,000 in any calendar year.
In addition, no more than 100,000 shares may be purchased by all participants
on any Purchase Date. In the event of a change in control of Extreme, the
Board may accelerate the Purchase Date of the then current purchase period to
a date prior to the change in control, or the acquiring corporation may assume
or replace the outstanding purchase rights under the Purchase Plan.

401(k) Plan

Extreme provides a tax-qualified employee savings and retirement plan (the
"401(k) Plan") which covers our eligible employees. Pursuant to the 401(k)
Plan, employees may elect to reduce their current annual compensation up to
the lesser of 20% or the statutorily prescribed limit ($10,000 in calendar
year 1999) and have the amount of such reduction ("elective deferrals")
contributed to the 401(k) Plan. The 401(k) Plan is intended to qualify under
Sections 401(a) and 401(k) of the Code, so that contributions by Extreme or
our employees to the 401(k) Plan, and income earned on plan contributions, are
not taxable to employees until withdrawn from the 401(k) Plan, and so that
contributions will be deductible by Extreme when made. The trustee of the
401(k) Plan invests the assets of the 401(k) Plan in the various investment
options as directed by the participants.

Limitation of Liability and Indemnification

Pursuant to the provisions of the Delaware General Corporation Law, Extreme
has adopted provisions in its certificate of incorporation which eliminate the
personal liability of its directors for a breach of fiduciary duty as a
director, except for liability

. for any breach of the director's duty of loyalty to Extreme or its
stockholders;

. for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law;

. under section 174 of the Delaware General Corporation Law regarding
unlawful stock repurchase and dividend payment; or

. for any transaction from which the director derived an improper personal
benefit.

Extreme's certificate of incorporation also allows Extreme to indemnify its
officers, directors and other agents to the full extent permitted by Delaware
law. Extreme intends to enter into indemnification agreements with each of its
directors and officers which will give them additional contractual
reassurances regarding the scope of indemnification and which may provide
additional procedural protection. The indemnification agreements may require
actions such as:

. indemnifying officers and directors against certain liabilities that may
arise because of their status as officers or directors;

. advancing expenses, as incurred, to officers and directors in connection
with a legal proceeding, subject to certain very limited exceptions; or

. obtaining directors' and officers' insurance.

At present, there is no pending litigation or proceeding involving any of
Extreme's directors, officers or employees regarding which indemnification is
sought, nor is Extreme aware of any threatened litigation that may result in
claims for indemnification.

CERTAIN TRANSACTIONS

On May 17, 1996, we issued for cash the following shares of common stock at
a price of $.00333 per share to Extreme's founders:

Purchaser Shares of Common Stock
- --------- ----------------------

Gordon L. Stitt.......................................... 2,025,000
Stephen R. Haddock....................................... 1,350,000
Herb Schneider........................................... 1,350,000

On May 28, 1996, we sold 14,580,000 shares of Series A Preferred Stock at a
price of $.333 per share. On May 7, 1997 and June 17, 1997, we sold an
aggregate of 8,886,485 shares of Series B Preferred Stock at a price of $1.38
per share. On January 12, 1998, March 24, 1998 and March 31, 1998, we sold an
aggregate of 5,595,088 shares of Series C Preferred Stock at a price of $3.67
per share. Upon the consummation of this offering, all outstanding shares of
Series A Preferred Stock, Series B Preferred Stock and Series C Preferred
Stock will automatically convert into shares of common stock on a one-for-one
basis. The following directors, executive officers, holders of more than 5% of
a class of voting securities and members of such person's immediate families
purchased shares of Series A Preferred Stock, Series B Preferred Stock and
Series C Preferred Stock:

Shares of Series Shares of Series Shares of Series
A Preferred B Preferred C Preferred
Purchaser(1) Stock Stock Stock
- ------------ ---------------- ---------------- ----------------
Named Executive Officers
and Directors

Gordon L. Stitt............ 240,000 8,250 3,000
Stephen R. Haddock......... 75,000 8,250 --
William Kelly.............. 75,000 7,245 --
George Prodan.............. -- 8,250 --
Herb Schneider............. 63,000 8,250 --
Harry Silverglide.......... -- 8,250 --
Charles Carinalli.......... 75,000 48,300 13,623
5% Stockholders
Entities Affiliated with
AVI Capital Manage-
ment(2)................... 4,500,000 1,268,116 272,478
Entities Affiliated with
Norwest Venture Part-
ners(3)................... 4,500,000 2,717,392 544,959
Entities Affiliated with
Trinity Ventures(4)....... 4,499,999 1,268,116 272,480
Entities Affiliated with
Kleiner Perkins Caufield &
Byers..................... -- 2,355,073 136,238

- --------
(1) See notes to table of beneficial ownership in "Principal Stockholders" for
information relating to the beneficial ownership of such shares.
(2) Peter Wolken is a director of Extreme and a partner of AVI Management
Partners.
(3) Promod Haque is a director of Extreme and a partner of Norwest Venture
Partners.
(4) Lawrence K. Orr is a director of Extreme and a partner of Trinity
Ventures.

In January 1999, the Board of Directors approved a loan to Vito E. Palermo,
our Chief Financial Officer, of $75,000 at an interest rate of 4.51% per
annum. The loan is due in January 2003 but we may forgive this loan upon our
attainment of certain specified objectives. In addition, in connection with
Mr. Palermo's employment, we have agreed to pay him nine months of severance
if we terminate him without cause within the first twelve months of his
employment.

We intend to enter into indemnification agreements with each of our
directors and officers. Such indemnification agreements will require Extreme
to indemnify such individuals to the fullest extent permitted by Delaware law.

PRINCIPAL STOCKHOLDERS

The following table sets forth the beneficial ownership of Extreme's common
stock as of December 31, 1998 and as adjusted to reflect the sale of the
shares of common stock offered hereby by (i) each person who is known by
Extreme to beneficially own more than 5% of Extreme's common stock; (ii) the
Named Executive Officers; (iii) each of Extreme's directors; and (iv) all
officers and directors as a group.

Prior to Offering After Offering(3)
------------------ -----------------
Name and Address of Beneficial Owner Number Percent Percent
- ------------------------------------ ---------- ------- -----------------

Named Executive Officers and Directors(1)
Gordon L. Stitt(4)........................ 2,476,250 6.0%
Steve Haddock(5).......................... 1,568,250 3.8
George Prodan(6).......................... 728,250 1.8
Paul Romeo(7)............................. 410,000 1.0
Herb Schneider(8)......................... 1,556,250 3.8
Harry Silverglide(9)...................... 650,750 1.6
Charles Carinalli(10)..................... 286,923 *
Wavespan Corporation
500 N. Bernardo Avenue
Mountain View, CA 94043
Promod Haque(11).......................... 7,762,351 19.0
245 Lytton Avenue, Suite 250
Palo Alto, CA 94025
Lawrence K. Orr(12)....................... 6,040,595 14.8
3000 Sand Hill Road
Building 1, Suite 240
Menlo Park, CA 94025
Peter Wolken(13).......................... 6,040,594 14.8
One First Street, #12
Los Altos, CA 94022
5% Stockholders
AVI Capital Management(13)................ 6,040,594 14.8
One First Street, #12
Los Altos, CA 94022
Kleiner Perkins Caufield & Byers(14)...... 2,491,311 6.1
2750 Sand Hill Road
Menlo Park, CA 94025
Norwest Venture Partners(11).............. 7,762,351 19.0
245 Lytton Avenue, Suite 250
Palo Alto, CA 94025
Trinity Ventures(12)...................... 6,040,595 14.8
3000 Sand Hill Road
Building 1, Suite 240
Menlo Park, CA 94025

All executive officers and directors
as a group (11 persons)................ 28,262,458 66.7

- --------
* Less than 1%

(1) Unless otherwise indicated, the address of each of the named individuals
is: c/o Extreme Networks, 10460 Bandley Drive, Cupertino, CA 95014-1972.

(2) Percentage of ownership is based on 40,852,768 shares outstanding on
December 31, 1998 and shares outstanding after the offering. The
number and percentage of shares beneficially owned are determined in
accordance with SEC rules and regulations. Shares of common stock subject
to options currently exercisable or exercisable within 60 days after
December 31, 1998 are deemed outstanding for the purpose of computing the
number of shares beneficially owned and the percentage ownership of the
person holding such options but are not deemed outstanding for computing
the percentage ownership of any other person. Unless otherwise indicated
below, each stockholder named in the table has sole voting and investment
power with respect to all shares shown as beneficially owned by them,
subject to community property laws where applicable.

(3) Assumes no exercise of the underwriters' over-allotment option.

(4) Includes 506,256 shares subject to a right of repurchase in favor of
Extreme which lapses over time. Includes 240,000 shares held by Gordon and
Valori Stitt. Also includes 200,000 shares issuable upon exercise of
options, of which 183,334 shares are subject to a right of repurchase in
favor of Extreme which lapses over time.

(5) Includes 337,500 shares subject to a right of repurchase in favor of
Extreme which lapses over time. Also includes 135,000 shares issuable upon
exercise of options, of which 123,750 shares are subject to a right of
repurchase in favor of Extreme which lapses over time.

(6) Includes 720,000 shares issuable upon exercise of options, of which 397,500
shares are subject to a right of repurchase in favor of Extreme which
lapses over time.

(7) Includes 195,000 shares subject to a right of repurchase in favor of
Extreme which lapses over time. Also includes 50,000 shares issuable upon
exercise of options, of which 45,834 shares are subject to a right of
repurchase in favor of Extreme which lapses over time.

(8) Includes 337,500 shares subject to a right of repurchase in favor of
Extreme which lapses over time. Also includes 135,000 shares issuable upon
exercise of options, of which 123,750 shares are subject to a right of
repurchase in favor of Extreme which lapses over time.

(9) Includes 281,250 shares subject to right of repurchase in favor of Extreme
which lapses over time. Also includes 80,000 shares issuable upon exercise
of options, of which 73,334 shares are subject to a right of repurchase in
favor of Extreme which lapses over time.

(10) Includes 136,923 shares held by Charles Peter Carinalli and/or Connie Sue
Carinalli, Trustees of the Carinalli 1996 Living Trust dated April 24,
1996. Also includes 150,000 shares issuable upon exercise of options, of
which 56,250 shares are subject to a right of repurchase in favor of
Extreme which lapses over time.

(11) Promod Haque is a partner of Norwest Venture Partners. All shares listed
are held by Norwest Equity Partners, V.

(12) Lawrence K. Orr is a partner of Trinity Ventures. The shares listed
represent 5,707,084 shares held by Trinity Ventures V, L.P. and 333,511
shares held by Trinity V Side by Side Fund, L.P.

(13) Peter Wolken is a partner of AVI Management Partners. The shares listed
represent 809,698 shares held by Associated Venture Investors III, L.P.;
55,705 shares held by AVI Silicon Valley Partners, L.P.; 5,026,642 shares
held by AVI Capital, L.P.; and 148,549 shares held by AVI Partners Growth
Fund II, L.P.

(14) The shares listed represent 2,296,139 shares held by Kleiner Perkins
Caufield & Byers VIII; 127,115 shares held by Kleiner Perkins Caufield &
Byers VIII Founders Fund; 62,281 shares held by KPCB Information Sciences
Zaibatsu Fund II; and 5,776 shares held by KPCB VIII Founders, L.P.

DESCRIPTION OF CAPITAL STOCK

Upon consummation of this offering, Extreme's authorized capital stock will
consist of 150,000,000 shares of common stock and 2,000,000 shares of
preferred stock. Upon such conversion, such preferred stock will be canceled,
retired and eliminated from the shares that Extreme is authorized to issue.
The following summary of certain provisions of the common stock and the
preferred stock does not purport to be complete and is subject to, and
qualified in its entirety by, Extreme's certificate of incorporation and
bylaws and by the provisions of applicable law.

Common Stock

As of December 31, 1998, there were 11,791,195 shares of common stock
outstanding held of record by 78 stockholders. Subject to preferences that may
be applicable to any preferred stock outstanding at the time, the holders of
outstanding shares of common stock are entitled to receive dividends out of
assets legally available therefor at such times and in such amounts as the
board of directors from time to time may determine. Holders of common stock
are entitled to one vote for each share held on all matters submitted to a
vote of stockholders. Cumulative voting for the election of directors is not
authorized by Extreme's certificate of incorporation, which means that the
holders of a majority of the shares voted can elect all of the directors then
standing for election. The common stock is not entitled to preemptive rights
and is not subject to conversion or redemption. Upon liquidation, dissolution
or winding-up of Extreme, the holders of common stock are entitled to share
ratably in all assets remaining after payment of liabilities and the
liquidation of any preferred stock. Each outstanding share of common stock is,
and all shares of common stock to be outstanding upon completion of this
offering will be, upon payment therefor, duly and validly issued, fully paid
and nonassessable.

Preferred Stock

The board of directors is authorized, without action by the stockholders,
to designate and issue preferred stock in one or more series. The board of
directors can fix the rights, preferences and privileges of the shares of each
series and any qualifications, limitations or restrictions thereon.

The board of directors may authorize the issuance of preferred stock with
voting or conversion rights that could adversely affect the voting power or
other rights of the holders of common stock. The issuance of preferred stock,
while providing flexibility in connection with possible acquisitions and other
corporate purposes could, among other things, under certain circumstances,
have the effect of delaying, deferring or preventing a change in control of
Extreme. We have no current plans to issue any shares of preferred stock.

Warrants

In November 1996, Extreme issued warrants to a lease financing company to
purchase 210,000 shares of Series A convertible preferred stock with an
exercise price of $0.33 per share, in consideration for equipment leases and a
loan. In July 1997, Extreme issued warrants to the same lease financing
company to purchase 32,231 shares of Series B convertible preferred stock with
an exercise price of $2.07 per share, in consideration for equipment leases.
Upon completion of this offering, such warrants will convert into the right to
purchase equivalent number of shares of our common stock at the same exercise
price per share. The warrants may be exercised at any time within a period of
(i) 10 years or (ii) 5 years from the effective date of an initial public
offering completed by Extreme, whichever is longer.

In November 1997, the Company issued warrants to a lease financing company
to purchase 79,051 shares of Series C convertible preferred stock with an
exercise price of $2.53, in consideration for a loan. Upon completion of this
offering, such warrants will convert into the right to purchase equivalent
number of shares of our common stock at the same exercise price per share. The
warrants may be exercised at any time within a period which expires the sooner
of (i) 10 years or (ii) 3 years from the effective date of an initial public
offering.

Registration Rights of Certain Holders

Following the sale of the shares of common stock offered hereby, the
holders of approximately 33,786,315 shares of common stock will have certain
rights to register those shares under the Securities Act of 1933 pursuant to
the Second Amended and Restated Rights Agreement. Subject to certain
limitations in this Rights Agreement, the holders of at least 50% of such
shares may require, on two occasions, that Extreme use its best efforts to
register such shares for public resale. If Extreme registers any of its common
stock for its own account or for the account of other security holders, the
holders of such shares are entitled to include their shares of common stock in
the registration, subject to the ability of the underwriters to limit the
number of shares included in the offering. The holders of at least 50% of such
shares may also require Extreme to register all or a portion of their
registrable securities on Form S-3 when Extreme is eligible to use such form,
provided, among other limitations, that the proposed aggregate price to the
public is at least $1,000,000. Extreme will bear all fees, costs and expenses
of such registration, other than underwriting discounts and commissions.

Delaware Law and Certain Provisions of Extreme's Certificate of Incorporation
and Bylaws

Certain provisions of Delaware law and our certificate of incorporation and
bylaws could make more difficult the acquisition of Extreme by means of a
tender offer, a proxy contest, or otherwise, and the removal of incumbent
officers and directors. These provisions are expected to discourage certain
types of coercive takeover practices and inadequate takeover bids and to
encourage persons seeking to acquire control of Extreme to first negotiate
with us. We believe that the benefits of increased protection of Extreme's
potential ability to negotiate with the proponent of an unfriendly or
unsolicited proposal to acquire or restructure Extreme outweighs the
disadvantages of discouraging such proposals, including proposals that are
priced above the then current market value of our common stock, because, among
other things, negotiation of such proposals could result in an improvement of
their terms.

We are subject to section 203 of the Delaware General Corporation Law. This
provision generally prohibits a Delaware corporation from engaging in any
business combination with any interested stockholder for a period of three
years following the date such stockholder became an interested stockholder,
unless:

. prior to such date the board of directors of the corporation approved
either the business combination or the transaction that resulted in the
stockholder becoming an interested stockholder;

. upon consummation of the transaction that resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of the corporation outstanding at the time
the transaction commenced, excluding for purposes of determining the number
of shares outstanding those shares owned by persons who are directors and
also officers and by employee stock plans in which employee participants do
not have the right to determine confidentially whether shares held subject
to the plan will be tendered in a tender or exchange offer; or

. on or subsequent to such date, the business combination is approved by the
board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at
least 66 2/3% of the outstanding voting stock that is not owned by the
interested stockholder.

Section 203 defines business combination to include: (a) any merger or
consolidation involving the corporation and the interested stockholder; (b)
any sale, transfer, pledge or other disposition of 10% or more of the assets
of the corporation involving the interested stockholder; (c) subject to
certain exceptions, any transaction that results in the issuance or transfer
by the corporation of any stock of the corporation to the interested
stockholder; (d) any transaction involving the corporation that has the effect
of increasing the proportionate share of the stock of any class or series of
the corporation beneficially owned by the interested stockholder; or (e) the
receipt by the interested stockholder of the benefit of any loans, advances,
guarantees, pledges or other financial benefits provided by or through the
corporation. In general, section 203 defines an interested stockholder as any
entity or person beneficially owning 15% or more of the outstanding voting
stock of the corporation and any entity or person affiliated with or
controlling or controlled by such entity or person.

Our certificate of incorporation requires that any action required or
permitted to be taken by our stockholders must be effected at a duly called
annual or special meeting of the stockholders and may not be effected by a
consent in writing. In addition, special meetings of our stockholders may be
called only by the Board of Directors or holders of not less than 10% of all
of the shares entitled to cast votes at such meetings. The certificate of
incorporation also provides that, beginning upon the closing of the offering,
the Board of Directors will be divided into three classes, with each class
serving staggered three-year terms and that certain amendments of the
certificate of incorporation, and all amendments by the stockholders of the
bylaws, require the approval of holders of at least 66 2/3% of the voting
power of all outstanding stock. These provisions may have the effect of
deferring hostile takeovers or delaying changes in control or management of
Extreme.

Transfer Agent and Registrar

The Transfer Agent and Registrar for our common stock is ChaseMellon
Shareholder Services, L.L.C. Its address is 235 Montgomery Street, 23rd Floor,
San Francisco, California 94104, and its telephone number at this location is
(415) 743-1444.

SHARES ELIGIBLE FOR FUTURE SALE

Immediately prior to this offering, there was no public market for
Extreme's common stock. Future sales of substantial amounts of common stock in
the public market could adversely affect the market price of the common stock.

Upon completion of this offering, Extreme will have outstanding shares
of common stock, assuming the issuance of shares of common stock offered
hereby and no exercise of options after . Of these shares, the shares
sold in the offering will be freely tradable without restriction or further
registration under the Securities Act, unless such shares are purchased by
"affiliates" as that term is defined in Rule 144 under the Securities Act
(whose sales would be subject to certain limitations and restrictions
described below).

The remaining shares of common stock held by existing stockholders
were issued and sold by Extreme in reliance on exemptions from the
registration requirements of the Securities Act. Of these shares, shares
will be subject to "lock-up" agreements described below on the effective date
of the offering. On the effective date of the offering, shares not
subject to the lock-up agreements described below will be eligible for sale
pursuant to Rule 144(k). Upon expiration of the lock-up agreements 180 days
after the effective date of the offering, shares will become eligible for
sale, subject in most cases to the limitations of Rule 144. In addition,
holders of stock options could exercise such options and sell certain of the
shares issued upon exercise as described below.

Days After Date of Shares Eligible
this Prospectus for Sale Comment
- ------------------ --------------- ---------------------------------------------------------

Upon Effectiveness Shares sold in the offering
Upon Effectiveness Freely tradable shares salable under Rule 144(k) that are
not subject to the Lock-up
180 days Lock-up released; shares salable under Rules 144 and 701

As of December 31, 1998, there were a total of 3,710,328 shares of common
stock subject to outstanding options under our Amended 1996 Stock Option Plan,
729,765 of which were vested. However, all of these shares are subject to
lock-up agreements. Immediately after the completion of the offering, Extreme
intends to file registration statements on Form S-8 under the Securities Act
to register all of the shares of common stock issued or reserved for future
issuance under our Amended 1996 Stock Option Plan and 1999 Employee Stock
Purchase Plan. On the date 180 days after the effective date of the offering,
a total of shares of common stock subject to outstanding options will be
vested. After the effective dates of the registration statements on Form S-8,
shares purchased upon exercise of options granted pursuant to the Amended 1996
Stock Option Plan and Employee Stock Purchase Plan generally would be
available for resale in the public market.

The officers, directors and stockholders of Extreme have agreed not to sell
or otherwise dispose of any of their shares for a period of 180 days after the
date of the offering. Morgan Stanley & Co. Incorporated, however, may in its
sole discretion, at any time without notice, release all or any portion of the
shares subject to lock-up agreements.

Rule 144

In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this prospectus, a person who has beneficially owned shares of
Extreme's common stock for at least one year would be entitled to sell, within
any three-month period, a number of shares that does not exceed the greater of

. 1% of the number of shares of common stock then outstanding, which will
equal approximately shares immediately after this offering; or

. the average weekly trading volume of the common stock on the Nasdaq
National Market during the four calendar weeks preceding the filing of a
notice on Form 144 with respect to such sale.

Sales under Rule 144 are also subject to certain other requirements
regarding the manner of sale, notice filing and the availability of current
public information about Extreme.

Rule 144(k)

Under Rule 144(k), a person who is not deemed to have been one of Extreme's
"affiliates," as defined in Rule 144, at any time during the 90 days preceding
a sale, and who has beneficially owned the shares proposed to be sold for at
least two years, including the holding period of any prior owner other than an
"affiliate," is entitled to sell such shares without complying with the manner
of sale, notice filing, volume limitation or notice provisions of Rule 144.
Therefore, unless otherwise restricted, "144(k) shares" may be sold
immediately upon the completion of this offering.

Rule 701

In general, under Rule 701, any Extreme employee, director, officer,
consultant or advisor who purchases shares from Extreme in connection with a
compensatory stock or option plan or other written agreement before the
effective date of the offering is entitled to resell such shares 90 days after
the effective date of this offering in reliance on Rule 144, without having to
comply with certain restrictions, including the holding period, contained in
Rule 144.

The SEC has indicated that Rule 701 will apply to typical stock options
granted by an issuer before it becomes subject to the reporting requirements
of the Securities Exchange Act of 1934, along with the shares acquired upon
exercise of such options (including exercises after the date of this
prospectus). Securities issued in reliance on Rule 701 are restricted
securities and, subject to the contractual restrictions described above,
beginning 90 days after the date of this prospectus, may be sold by persons
other than "affiliates" (as defined in Rule 144) subject only to the manner of
sale provisions of Rule 144 and by "affiliates" under Rule 144 without
compliance with its one year minimum holding period requirement.

UNDERWRITERS

Under the terms and subject to the conditions contained in the underwriting
agreement dated the date hereof (the "Underwriting Agreement"), the
underwriters named below, for whom Morgan Stanley & Co. Incorporated,
BancBoston Robertson Stephens Inc. and Dain Rauscher Wessels, a division of
Dain Rauscher Incorporated ("Dain Rauscher Wessels"), are acting as
representatives, have severally agreed to purchase, and Extreme has agreed to
sell to them, severally, the respective number of shares of common stock set
forth opposite the names of such underwriters below:

Number of
Name Shares
---- ---------

Morgan Stanley & Co. Incorporated..................................
BancBoston Robertson Stephens Inc..................................
Dain Rauscher Wessels..............................................

---
Total..........................................................
===

The underwriters are offering the shares subject to their acceptance of the
shares from Extreme and subject to prior sale. The Underwriting Agreement
provides that the obligations of the several underwriters to pay for and
accept delivery of the shares of common stock offered hereby are subject to
the approval of certain legal matters by their counsel and to certain other
conditions. The underwriters are obligated to take and pay for all of the
shares of common stock offered hereby (other than those covered by the
overallotment option described below) if any such shares are taken.

The underwriters initially propose to offer part of the shares of common
stock directly to the public at the public offering price set forth on the
cover page hereof and part to certain dealers at a price that represents a
concession not in excess of $ a share under the public offering price. Any
underwriter may allow, and such dealers may reallow, a concession not in
excess of $ a share to other underwriters or to certain other dealers. After
the initial offering of the shares of common stock, the offering price and
other selling terms may from time to time be varied by the representatives of
the underwriters.

Pursuant to the Underwriting Agreement, Extreme has granted to the
underwriters an option, exercisable for 30 days from the date of this
prospectus, to purchase up to an aggregate of additional shares of common
stock at the public offering price set forth on the cover page hereof, less
underwriting discounts and commissions. The underwriters may exercise such
option solely for the purpose of covering over-allotments, if any, made in
connection with the offering of the shares of common stock offered hereby. To
the extent such option is exercised, each underwriter will become obligated,
subject to certain conditions, to purchase approximately the same percentage
of such additional shares of common stock as the number set forth next to such
underwriter's name in the preceding table bears to the total number of shares
of common stock set forth next to the names of all underwriters in the
preceding table.

At the request of Extreme, the underwriters have reserved up to five
percent of the shares of common stock to be issued by Extreme and offered
hereby for sale, at the initial public offering price, to directors, officers,
employees, business associates and related persons of Extreme. The number of
shares of common stock available for sale to the general public will be
reduced to the extent such individuals purchase such reserved shares. Any
reserved shares which are not so purchased will be offered by the underwriters
to the general public on the same basis as the other shares offered hereby.

Each of Extreme and the officers, directors and stockholders of Extreme has
agreed that, without the prior written consent of Morgan Stanley & Co.
Incorporated on behalf of the underwriters, or otherwise during the

period ending 180 days after the date of this prospectus, it will not, (1)
offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right or
warrant to purchase, lend, or otherwise transfer or dispose of, directly or
indirectly, any shares of common stock or any securities convertible into or
exercisable or exchangeable for common stock, or (2) enter into any swap or
other arrangement that transfers to another, in whole or in part, any of the
economic consequences of ownership of the common stock, whether any such
transaction described in clause (1) or (2) above is to be settled by delivery
of common stock or such other securities, in cash or otherwise. The foregoing
sentence shall not apply to (a) the sale of any shares to the underwriters
pursuant to the underwriting agreement or (b) transactions relating to shares
of common stock or other securities acquired in open market transactions after
the date of this prospectus.

The underwriters have informed Extreme that they do not intend sales to
discretionary accounts to exceed five percent of the total number of shares of
common stock offered by them.

Approval of the common stock has been sought for quotation on the Nasdaq
National Market under the symbol "EXTR."

In order to facilitate the offering of the common stock, the underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
price of the common stock. Specifically, the underwriters may over-allot in
connection with the offering, creating a short position in the common stock
for their own account. In addition, to cover over-allotments or to stabilize
the price of the common stock, the underwriters may bid for, and purchase,
shares of common stock in the open market. Finally, the underwriting syndicate
may reclaim selling concessions allowed to an underwriter or a dealer for
distributing the common stock in the offering if the syndicate repurchases
previously distributed shares of common stock in transactions to cover
syndicate short positions, in stabilization transactions or otherwise. Any of
these activities may stabilize or maintain the market price of the common
stock above independent market levels. The underwriters are not required to
engage in these activities and may end any of these activities at any time.

Extreme and the underwriters have agreed to indemnify each other against
certain liabilities, including liabilities under the Securities Act.

Morgan Stanley & Co. Incorporated acted as the placement agent of a private
placement of our Series C Preferred Stock and, in connection with that
placement, received a fee for their services.

Pricing of the Offering

Prior to this offering, there has been no public market for the shares of
common stock. Consequently, the initial public offering price for the shares
of common stock will be determined by negotiations between Extreme and the
representatives of the underwriters. Among the factors to be considered in
determining the initial public offering price will be Extreme's record of
operations, Extreme's current financial position and future prospects, the
experience of its management, the economics of the networking industry in
general, the general condition of the equity securities markets, sales,
earnings and certain other financial and operating information of Extreme in
recent periods, the price-earnings ratios, price-sales ratios, market prices
of securities and certain financial and operating information of companies
engaged in activities similar to those of Extreme. The estimated initial
public offering price range set forth on the cover page of this preliminary
prospectus is subject to change as a result of market conditions and other
factors.

LEGAL MATTERS

The validity of the shares of common stock offered hereby will be passed
upon for us by Gray Cary Ware & Freidenrich LLP, Palo Alto, California. As of
December 31, 1998, an investment partnership of Gray Cary Ware & Freidenrich
owned an aggregate of 75,000 shares of Extreme's common stock. In addition, in
March 1997, a partner of Gray Cary Ware & Freidenrich was granted an option to
purchase 7,500 shares of Extreme's common stock. Certain legal matters in
connection with this offering will be passed upon for the underwriters by
Wilson Sonsini Goodrich & Rosati, Professional Corporation, Palo Alto,
California.

EXPERTS

The consolidated financial statements of Extreme at June 30, 1997 and 1998
and for the period from inception, May 8, 1996 to June 30, 1997 and for the
year ended June 30, 1998, appearing in this prospectus and the registration
statement have been audited by Ernst & Young LLP, independent auditors, as set
forth in their report thereon appearing elsewhere herein, and are included in
reliance upon such report, given upon the authority of such firm as experts in
accounting and auditing.

ADDITIONAL INFORMATION

We filed with the SEC a registration statement on Form S-1 under the
Securities Act with respect to the shares of common stock offered hereby. This
prospectus does not contain all of the information set forth in the
registration statement and the exhibits and schedule filed therewith. For
further information with respect to Extreme and the common stock offered
hereby, reference is made to the registration statement and the exhibits and
schedule filed therewith. Statements contained in this prospectus regarding
the contents of any contract or any other document that is filed as an exhibit
to the registration statement are not necessarily complete, and each such
statement is qualified in all respects by reference to the full text of such
contract or other document filed as an exhibit to the registration statement.
A copy of the registration statement and the exhibits and schedule filed
therewith may be inspected without charge at the public reference facilities
maintained by the SEC in Room 1024, 450 Fifth Street, N.W., Washington, D.C.
20549, and at the SEC's regional offices located at the Northwestern Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and Seven
World Trade Center, 13th Floor, New York, New York 10048, and copies of all or
any part of the registration statement may be obtained from such offices upon
the payment of the fees prescribed by the SEC. The SEC maintains a World Wide
Web site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the SEC. The
address of the site is http://www.sec.gov.

Upon completion of this offering, Extreme will become subject to the
information and periodic reporting requirements of the Securities Exchange Act
of 1934, and, in accordance therewith, will file periodic reports, proxy
statements and other information with the SEC. Such periodic reports, proxy
statements and other information will be available for inspection and copying
at the regional offices, public reference facilities and web site of the SEC
referred to above.

EXTREME NETWORKS, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Ernst & Young LLP, Independent Auditors........................... F-2

Consolidated Balance Sheets................................................. F-3

Consolidated Statements of Operations....................................... F-4

Consolidated Statement of Stockholders' Equity.............................. F-5

Consolidated Statements of Cash Flows....................................... F-6

Notes to Consolidated Financial Statements.................................. F-7

F-1

REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

The Board of Directors and Stockholders
Extreme Networks, Inc.

We have audited the accompanying consolidated balance sheets of Extreme
Networks, Inc. as of June 30, 1997 and 1998, and the related consolidated
statements of operations, stockholders' equity, and cash flows for the period
from inception, May 8, 1996 to June 30, 1997 and for the year ended June 30,
1998. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Extreme
Networks, Inc. at June 30, 1998 and 1997, and the consolidated results of its
operations and its cash flows for the period from inception, May 8, 1996 to
June 30, 1997 and for the year ended June 30, 1998, in conformity with
generally accepted accounting principles.

Palo Alto, California
October 22, 1998, except for Note 8, as to which the date is February , 1999

- -------------------------------------------------------------------------------

The foregoing report is in the form that we will sign upon the completion of
the restatement of capital accounts described in Note 8 to the consolidated
financial statements.

/s/ Ernst & Young LLP

Palo Alto, California
February 3, 1999

F-2

EXTREME NETWORKS, INC.

CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)

Pro forma
stockholders'
June 30, equity at
---------------- December 31, December 31,
1997 1998 1998 1998
------- ------- ------------ -------------
(Unaudited) (Unaudited)

Assets
Current assets:
Cash and cash equivalents........ $10,047 $ 9,510 $ 5,792
Short-term investments........... -- 10,995 6,821
Accounts receivable, net of
allowance for doubtful accounts
of $0, $433 and $1,162 at June
30, 1997 and 1998 and December
31, 1998, respectively.......... 262 7,808 8,148
Other current assets............. 77 711 1,416
------- ------- -------
Total current assets.............. 10,386 29,024 22,177
Property and equipment, net....... 1,355 4,469 5,172
Other assets...................... 201 238 3
------- ------- -------
$11,942 $33,731 $27,352
======= ======= =======
Liabilities and stockholders'
equity
Current liabilities:
Accounts payable................. $ 749 $ 9,993 $ 4,859
Accrued compensation............. 189 935 1,334
Accrued warranty................. -- 1,073 1,024
Accrued purchase commitments..... -- 893 893
Other accrued liabilities........ 464 984 2,504
Provision for income taxes....... -- -- 700
Due to shareholders.............. 109 -- --
Notes payable, current portion... 525 834 991
Capital lease obligations,
current portion................. 99 516 588
------- ------- -------
Total current liabilities......... 2,135 15,228 12,893
Notes payable, net of current
portion.......................... 111 1,167 1,368
Capital lease obligations, net of
current portion.................. 391 1,467 1,351
Commitments
Stockholders' equity:
Convertible preferred stock,
$.001 par value, issuable in
series: 24,000,000 shares
authorized at June 30, 1997;
29,900,000 shares authorized at
June 30, 1998 and December 31,
1998 (2,000,000 shares pro
forma); 23,466,485, 29,061,573
and 29,061,573 shares issued and
outstanding at June 30, 1997 and
1998 and December 31, 1998 (none
pro forma); aggregate
liquidation preference of
$38,046 at December 31, 1998
(none pro forma)................ 23 29 29
Common stock, $.001 par value,
50,000,000 shares authorized,
(150,000,000 pro forma),
10,809,750, 11,534,525, and
11,791,195 shares issued and
outstanding at June 30, 1997 and
1998 and December 31, 1998,
(40,852,768 pro forma).......... 11 12 12 $ 41
Additional paid-in capital....... 17,194 37,619 38,333 38,333
Accumulated deficit.............. (7,923) (21,791) (26,634) (26,634)
------- ------- ------- --------
Total stockholders' equity........ 9,305 15,869 11,740 11,740
------- ------- ------- --------
$11,942 $33,731 $27,352
======= ======= =======

See accompanying notes.

F-3

EXTREME NETWORKS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)

For the period
from May 8, Six months
1996 (Date of Year ended
Inception) ended December 31,
through June 30, ----------------
June 30, 1997 1998 1997 1998
-------------- -------- ------- -------
(unaudited)

Net revenue........................ $ 256 $ 23,579 $ 6,104 $30,851
Cost of revenue.................... 388 14,897 3,557 15,605
------- -------- ------- -------
Gross profit (loss)................ (132) 8,682 2,547 15,246
Operating expenses:
Research and development......... 5,351 10,668 4,548 6,580
Selling and marketing............ 1,554 9,601 3,450 10,203
General and administrative....... 1,023 2,372 1,040 2,700
------- -------- ------- -------
Total operating expenses....... 7,928 22,641 9,038 19,483
------- -------- ------- -------
Operating loss..................... (8,060) (13,959) (6,491) (4,237)
Interest expense................... (79) (326) (83) (201)
Interest and other income.......... 216 417 109 295
------- -------- ------- -------
Loss before income taxes........... (7,923) (13,868) (6,465) (4,143)
Provision for income taxes......... -- -- -- (700)
------- -------- ------- -------
Net loss........................... $(7,923) $(13,868) $(6,465) $(4,843)
======= ======== ======= =======
Basic and diluted net loss per
common share...................... $ (4.51) $ (3.17) $ (1.84) $ (.71)
======= ======== ======= =======
Weighted average shares outstanding
used in computing basic and
diluted net loss per common
share............................. 1,758 4,379 3,510 6,867
======= ======== ======= =======
Pro forma basic and diluted net
loss per share (unaudited)........ $ (.44) $ (.14)
======== =======
Shares used in computing pro forma
basic and diluted net loss per
common share (unaudited).......... 31,701 35,929
======== =======

See accompanying notes.

F-4

EXTREME NETWORKS, INC.

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(in thousands, except share amounts)

Convertible
Preferred
Stock Common Stock Additional Total
------------- ------------- Paid-In Accumulated Stockholders'
Shares Amount Shares Amount Capital Deficit Equity
------ ------ ------ ------ ---------- ----------- -------------

Issuance of common stock
to founders and others
for cash and assets.... -- $-- 5,400 $ 5 $ 24 $ -- $ 29
Issuance of Series A
convertible preferred
stock to investors for
cash (less issuance
costs of $5)........... 14,580 14 -- -- 4,841 -- 4,855
Issuance of Series B
convertible preferred
stock to investors for
cash (less issuance
costs of $27).......... 8,886 9 -- -- 12,227 -- 12,236
Exercise of options to
purchase common stock.. -- -- 5,410 6 102 -- 108
Net loss................ -- -- -- -- -- (7,923) (7,923)
------ --- ------ --- ------- -------- --------
Balances at June 30,
1997................... 23,466 23 10,810 11 17,194 (7,923) 9,305
Issuance of warrant for
48,347 shares of Series
B convertible preferred
stock.................. -- -- -- -- 28 -- 28
Issuance of Series C
convertible preferred
stock to investors for
cash (less issuance
costs of $416)......... 5,595 6 -- -- 20,111 -- 20,117
Issuance of warrant for
70,176 shares of Series
C convertible preferred
stock.................. -- -- -- -- 140 -- 140
Exercise of options to
purchase common stock.. -- -- 725 1 146 -- 147
Net loss................ -- -- -- -- -- (13,868) (13,868)
------ --- ------ --- ------- -------- --------
Balances at June 30,
1998................... 29,061 29 11,535 12 37,619 (21,791) 15,869
Exercise of options to
purchase common stock
(unaudited)............ -- -- 256 -- 714 -- 714
Net loss (unaudited).... -- -- -- -- -- (4,843) (4,843)
------ --- ------ --- ------- -------- --------
Balances at December 31,
1998 (unaudited)....... 29,061 $29 11,791 $12 $38,333 $(26,634) $ 11,740
====== === ====== === ======= ======== ========

See accompanying notes.

F-5

EXTREME NETWORKS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

For the period
from May 8,
1996 (Date of Six months ended
Inception) Year ended December 31,
through June 30, -----------------------
June 30, 1997 1998 1997 1998
-------------- ---------- ----------- -----------
(Unaudited) (Unaudited)

Operating activities
Net loss.................... $(7,923) $(13,868) $(6,465) $(4,843)
Adjustments to reconcile net
loss to net cash used in
operating activities:
Depreciation and
amortization............... 315 1,453 137 1,757
Changes in operating assets
and liabilities:
Accounts receivable......... (262) (7,545) (4,064) (340)
Other current and noncurrent
assets..................... (278) (671) (1,122) (470)
Accounts payable............ 749 9,244 (435) (5,134)
Accrued compensation........ 189 745 (55) 399
Accrued warranty............ -- 1,073 1,006 (49)
Accrued purchase
commitments................ -- 893 -- --
Other accrued liabilities... 464 520 2,507 1,520
Provision for income taxes.. -- -- -- 700
Due to shareholder.......... 109 (109) (109) --
------- -------- ------- -------
Net cash used in operating
activities................. (6,637) (8,265) (8,600) (6,460)
------- -------- ------- -------
Investing activities
Capital expenditures........ (1,151) (2,511) (922) (2,460)
Purchases of short-term
investments................ -- (10,996) -- --
Maturities of short-term
investments................ -- -- -- 4,174
------- -------- ------- -------
Net cash provided by (used
in) investing activities... (1,151) (13,507) (922) 1,714
------- -------- ------- -------
Financing activities
Proceeds from issuance of
convertible preferred
stock...................... 17,091 20,285 -- --
Proceeds from issuance of
common stock............... 124 147 268 714
Proceeds from notes
payable.................... 700 1,606 1,712 505
Principal payments on notes
payable.................... (64) (241) -- (147)
Principal payments of
capital lease obligations.. (16) (562) 482 (44)
------- -------- ------- -------
Net cash provided by
financing activities....... 17,835 21,235 2,462 1,028
------- -------- ------- -------
Net increase (decrease) in
cash and cash equivalents.. 10,047 (537) (7,060) (3,718)
Cash and cash equivalents at
beginning of period........ -- 10,047 10,047 9,510
------- -------- ------- -------
Cash and cash equivalents at
end of period.............. $10,047 $ 9,510 $ 2,987 $ 5,792
======= ======== ======= =======
Supplemental disclosure of
cash flow information:
Cash paid for interest...... $ 73 $ 326 $ 89 $ 201
======= ======== ======= =======
Supplemental schedule of
noncash investing and
financing activities:
Property and equipment
acquired under capital
lease obligations.......... $ 505 $ 1,588 $ 407 $ 228
======= ======== ======= =======
Common stock issued for
assets..................... $ 14 $ -- $ -- $ --
======= ======== ======= =======
Warrants issued in
connection with capital
lease...................... $ -- $ 168 $ -- $ --
======= ======== ======= =======

See accompanying notes.

F-6

EXTREME NETWORKS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Information as of December 31, 1998 and for the six months ended
December 31, 1997 and 1998 is unaudited)

1. Summary of Significant Accounting Policies

Nature of Operations

Extreme Networks, Inc. ("Extreme" or the "Company") was incorporated in the
state of California on May 8, 1996 and is engaged in the design, development,
manufacture, and sale of high performance networking products based on Gigabit
Ethernet technology. The financial operations for the period ended June 30,
1996 were insignificant and have been combined with Extreme's results for the
year ended June 30, 1997. Through June 30, 1997, Extreme was in the
development stage. Extreme has incurred operating losses to date and has an
accumulated deficit of $26.6 million at December 31, 1998. Extreme anticipates
additional debt or equity funding may be needed to finance expected future
operations. If such additional funding is not available, management believes,
based on anticipated obligations, that available resources will be sufficient
to enable Extreme to meet its obligations. If anticipated results are not
achieved, management has the intent and believes it has the ability to delay
or reduce expenditures so as not to require significant additional financial
resources if such resources were not available.

Interim Financial Information

The financial information as of December 31, 1998 and for the six months
ended December 31, 1997 and 1998 is unaudited but includes all adjustments,
consisting only of normal recurring adjustments, that Extreme considers
necessary for a fair presentation of its financial position at such date and
the operating results and cash flows for such period. Results for the six
months ended December 31, 1998 are not necessarily indicative of results in
the future periods.

Principles of Consolidation

The consolidated financial statements include the accounts of Extreme and
its wholly-owned subsidiaries. All significant inter-company balances and
transactions have been eliminated.

Accounting Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that materially affect the amounts reported in the financial
statements. Actual results could differ materially from these estimates.

Cash Equivalents and Short-Term Investments

Extreme considers all highly liquid investment securities with maturity
from date of purchase of three months or less to be cash equivalents and
investment securities with maturity from date of purchase of more than three
months but less than one year, to be short-term investments.

Management determines the appropriate classification of debt and equity
securities at the time of purchase and reevaluates such designation as of each
balance sheet date. To date, all marketable securities have been classified as
available-for-sale and are carried at fair value, with unrealized gains and
losses, when material, reported net-of-tax as a separate component of
stockholders' equity. Realized gains and losses on available-for-sale
securities are included in interest income. The cost of securities sold is
based on specific identification. Premiums and discounts are amortized over
the period from acquisition to maturity and are included in investment income,
along with interest and dividends.

F-7

EXTREME NETWORKS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(Information as of December 31, 1998 and for the six months ended
December 31, 1997 and 1998 is unaudited)

Fair Value of Financial Instruments

The fair value for marketable debt securities is based on quoted market
prices. The carrying value of those securities approximates their fair value.

The fair value of notes is estimated by discounting the future cash flows
using the current interest rates at which similar loans would be made to
borrowers with similar credit ratings and for the same remaining maturities.
The carrying values of these obligations approximate their respective fair
values.

The fair value of short-term and long-term capital lease obligations is
estimated based on current interest rates available to Extreme for debt
instruments with similar terms, degrees of risk and remaining maturities. The
carrying values of these obligations approximate their respective fair values.

Concentration of Credit Risk and Significant Customers

Financial instruments that potentially subject Extreme to concentration of
credit risk consist principally of marketable investments and accounts
receivable. Extreme places its investments with high-credit quality multiple
issuers. Extreme sells its products primarily to United States corporations in
the technology marketplace. Extreme performs ongoing credit evaluations of its
customers and generally does not require collateral. Credit losses have been
immaterial and within management's expectations. During the years ended June
30, 1997 and 1998 and the six months ended December 31, 1998, Extreme added
approximately $0, $383,000 and $546,000 to its bad debt reserves. Total write-
offs of uncollectible amounts were $0, $37,000 and $0 in these periods,
respectively. Two customers accounted for 25% and 21%, and 17% and 11% of the
Company's net revenue for the year ended June 30, 1998 and the six months
ended December 31, 1998, respectively. No other customer accounts for more
than 10% of Extreme's net revenues. Extreme operates solely within one
business segment, the development and marketing of end-to-end LAN switching
solutions.

Property and Equipment

Property and equipment are stated at cost, net of accumulated amortization
and depreciation. Property and equipment are depreciated on a straight-line
basis over the estimated useful lives of the assets of approximately three
years or the applicable lease term, if shorter. Equipment acquired under
capital lease obligations is amortized over the shorter of the lease term or
the estimated useful lives of the related assets.

Revenue Recognition

Extreme generally recognizes product revenue at the time of shipment,
unless Extreme has future obligations for installation or has to obtain
customer acceptance in which case revenue is deferred until these obligations
are met. Revenue from service obligations is deferred and recognized on a
straight-line basis over the contractual period. Amounts billed in excess of
revenue recognized are included as deferred revenue in the accompanying
consolidated balance sheets. Extreme has established a program which, under
specified conditions, enables third party resellers to return products. The
amount of estimated product returns is provided for in the period of the sale.

Upon shipment to its customers, Extreme provides for the estimated cost to
repair or replace products to be returned under warranty. Extreme's warranty
period is typically 12 months from the date of shipment to the end user.

F-8

EXTREME NETWORKS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(Information as of December 31, 1998 and for the six months ended
December 31, 1997 and 1998 is unaudited)

Foreign Operations

Extreme's foreign offices consist of sales, marketing, and support
activities through its foreign subsidiaries and an overseas reseller network.
Operating income generated by the foreign operations of Extreme and their
corresponding identifiable assets were not material in any period presented.

Extreme's export sales represented 59% and 50% of net revenue in fiscal
1998 and the six-month period ended December 31, 1998. All of the export sales
to date have been denominated in U.S. dollars and were derived from sales to
Europe and Asia.

Net Loss Per Common Share

Basic net loss per common share and diluted net loss per common share are
presented in conformity with Financial Accounting Standards Board's ("FASB")
Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings Per
Share," for all periods presented. Pursuant to the Securities and Exchange
Commission Staff Accounting Bulletin No. 98, common stock and convertible
preferred stock issued or granted for nominal consideration prior to the
anticipated effective date of the initial public offering must be included in
the calculation of basic and diluted net loss per common share as if they had
been outstanding for all periods presented. To date, Extreme has not had any
issuances or grants for nominal consideration.

In accordance with SFAS No. 128, basic net loss per common share has been
computed using the weighted-average number of shares of common stock
outstanding during the period, less shares subject to repurchase. Basic pro
forma net loss per common share, as presented in the consolidated statements
of operations, has been computed as described above and also gives effect,
under Securities and Exchange Commission guidance, to the conversion of the
convertible preferred stock (using the if-converted method) from the original
date of issuance.

F-9

EXTREME NETWORKS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(Information as of December 31, 1998 and for the six months ended
December 31, 1997 and 1998 is unaudited)

The following table presents the calculation of basic and diluted and pro
forma basic and diluted net loss per common share (in thousands, except per
share data):

Years Ended Six Months
June 30, Ended December 31,
----------------- --------------------
1997 1998 1997 1998
------- -------- --------- ---------
(unaudited)

Net loss........................... $(7,923) $(13,868) $ (6,465) $ (4,853)
======= ======== ========= =========
Basic and diluted:
Weighted-average shares of common
stock outstanding............... 6,468 11,192 10,920 11,599
Less: Weighted-average shares
subject to repurchase........... (4,710) (6,813) (7,410) (4,732)
------- -------- --------- ---------
Weighted-average share used in com-
puting basic and diluted net loss
per common share.................. 1,758 4,379 3,510 6,867
======= ======== ========= =========
Basic and diluted net loss per com-
mon share......................... $ (4.51) $ (3.17) $ (1.84) $ (.71)
======= ======== ========= =========
Pro forma:
Net loss......................... $(13,868) $ (4,843)
======== =========
Shares used above................ 4,379 6,867
Pro forma adjustment to reflect
weighted effect of assumed
conversion of convertible
preferred stock................. 27,323 29,062
-------- ---------
Shares used in computing pro
forma basic and diluted net loss
per common share (unaudited).... 31,702 35,929
======== =========
Pro forma basic and diluted net
loss per common share
(unaudited)..................... $ (.44) $ (.14)
======== =========

Extreme has excluded all convertible preferred stock, warrants for
convertible preferred stock, outstanding stock options and shares subject to
repurchase from the calculation of diluted loss per common share because all
such securities are anti-dilutive for all periods presented. The total numbers
of shares excluded from the calculations of diluted net loss per share was
30,834,912, 36,082,561, 30,818,069 and 36,514,805 for the years ended June 30,
1997 and 1998 and the six months ended December 31, 1997 and 1998. See Note 6
for further information on these securities.

Accounting for Stock-Based Compensation

Extreme's grants of stock options are for a fixed number of shares to
employees with an exercise price equal to the fair value of the shares at the
date of grant. As permitted under SFAS Statement No. 123, "Accounting for
Stock-Based Compensation" ("FAS 123"), Extreme accounts for stock option
grants to employees and directors in accordance with APB Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB 25") and, accordingly,
recognizes no compensation expense for stock option grants with an exercise
price equal to the fair value of the shares at the date of grant.

Comprehensive Loss

Extreme adopted Statement of Financial Accounting Standards (SFAS) 130,
"Reporting Comprehensive Income," at December 31, 1998. Under SFAS 130,
Extreme is required to display comprehensive income and

F-10

EXTREME NETWORKS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(Information as of December 31, 1998 and for the six months ended
December 31, 1997 and 1998 is unaudited)

its components as part of the financial statements. Other comprehensive income
includes certain changes in equity that are excluded from net income.
Specifically, SFAS 130 requires unrealized holding gains and losses on
available-for-sale securities, to be included in accumulated other
comprehensive income. Comprehensive loss for the years ended June 30, 1998 and
1997 and the six month period ended December 31, 1998 approximated net loss.

Recently Issued Accounting Standard

In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information" effective for financial statements for
periods beginning after December 15, 1997. SFAS No. 131 establishes standards
for the way that public business enterprises report financial and descriptive
information about reportable operating segments in annual financial statements
and interim financial reports issued to shareholders. SFAS No. 131 supersedes
SFAS No. 14, "Financial Reporting for Segments of a Business Enterprise," but
retains the requirement to report information about major customers. Extreme
will adopt SFAS No. 131 effective June 30, 1999. Extreme expects that the
implementation of this standard will not have a material effect on its
financial statement disclosures.

In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." Extreme is required to adopt SFAS No. 133
for the year ending June 30, 2002. SFAS No. 133 establishes methods of
accounting for derivative financial instruments and hedging activities related
to those instruments as well as other hedging activities. Because Extreme
currently holds no derivative financial instruments and does not currently
engage in hedging activities, adoption of SFAS No. 133 is expected to have no
material impact on Extreme's financial condition or results of operations.

In March 1998, the American Institute of Certified Public Accountants
issued SOP 98-1, "Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use," SOP 98-1 requires that entities capitalize certain
costs related to internal use software once certain criteria have been met.
Extreme is required to implement SOP 98-1 for the year ending June 30, 2000.
Adoption of SOP 98-1 is expected to have no material impact on Extreme's
financial condition or results of operations.

2. Investment Securities

The following is a summary of available-for-sale securities (in thousands).
As of June 30, 1998 and December 31, 1998 at cost which approximates fair
market value:

June 30, December 31,
1998 1998
-------- ------------
(Unaudited)

Money market fund...................................... $ 99 $ 78
U.S. corporate debt securities......................... 12,410 6,821
Foreign corporate debt securities...................... 6,938 --
------- ------
$19,447 $6,899
======= ======
Classified as:
Cash equivalents..................................... $ 8,452 $ 78
Short-term investments............................... 10,995 6,821
------- ------
$19,447 $6,899
======= ======

F-11

EXTREME NETWORKS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(Information as of December 31, 1998 and for the six months ended
December 31, 1997 and 1998 is unaudited)

At June 30, 1998 and December 31, 1998, all of the available-for-sale
securities are due in one year or less by contractual maturity.

3. Property and Equipment

Property and equipment consist of the following (in thousands):

June 30,
-------------- December 31,
1997 1998 1998
------ ------ ------------
(Unaudited)

Computer and other related equipment.......... $ 745 $3,465 $3,799
Office equipment, furniture, and fixtures..... 199 522 1,927
Software...................................... 638 2,106 2,692
Leasehold improvements........................ 88 145 145
------ ------ ------
1,670 6,238 8,563
Less accumulated depreciation and
amortization................................. (315) (1,769) (3,391)
------ ------ ------
Property and equipment, net................... $1,355 $4,469 $5,172
====== ====== ======

Included in property and equipment are assets acquired under capital lease
obligations with a cost and related accumulated amortization of approximately
$2,093,000 and $490,000, respectively, at June 30, 1998, and approximately
$2,731,000 and $870,000, respectively, at December 31, 1998.

4. Notes Payable

In October 1996, Extreme entered into a note payable with a bank that
allowed the Company to borrow up to $400,000. Interest is payable monthly
based on an annual rate of 11%. Principal outstanding was $49,909 at December
31, 1998. Payments of approximately $18,000 are due monthly through April 16,
1999. The note is secured by Extreme's assets.

In November 1996, Extreme entered into a $300,000 note payable agreement
with a leasing company. The note accrues interest monthly based on an annual
rate of 9%. Payments of approximately $11,000 are due monthly with a final
$30,000 payment due May 1, 1999. The note is secured by all of Extreme's fixed
assets.

In November 1997, Extreme entered into a $2,000,000 note payable with a
leasing company. The note accrues interest monthly based on an annual rate of
9.75%. Payments of approximately $56,000 are due monthly through May 1, 2001.
The note is secured by all of Extreme's fixed assets.

5. Commitments

Extreme has outstanding purchase order commitments for materials of
approximately $4,400,000 and $12,300,000 at June 30, 1998 and December 31,
1998, respectively. Extreme expects these purchase orders to be fulfilled and
the related invoices to be paid in fiscal year 1999. Of this amount, the
Company has accrued and expensed approximately $893,000 of the outstanding
purchase order commitments for materials due to obligations to suppliers as of
June 30, 1998.

The Company has entered into equipment lease lines of credit for a total of
$4,000,000, of which approximately $3.1 million remains available at December
31, 1998. These arrangements are secured by the

F-12

EXTREME NETWORKS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(Information as of December 31, 1998 and for the six months ended
December 31, 1997 and 1998 is unaudited)

property and equipment subject to the leases. Under the terms of these lines
of credit, Extreme may not declare or pay any dividends without prior consent
of the lenders.

Extreme has entered into a revolving line of credit for $5.0 million.
Borrowings under this line of credit bear interest at the bank's prime rate.
At December 31, 1998, there were no outstanding borrowings under this line of
credit.

Extreme leases its primary facilities under operating leases, all of which
expire during 1999. Rent expense was approximately $220,000 and $712,000 for
the years ended June 30, 1997 and 1998, respectively, and approximately
$385,000 for the six months ended December 31, 1998.

Future payments under all noncancelable leases at December 31, 1998 are as
follows (in thousands) (unaudited):

Capital Leases Operating Leases
-------------- ----------------

Years ending June 30:
1999....................................... $ 360 $225
2000....................................... 721 42
2001....................................... 708 25
2002....................................... 409 --
------ ----
Total minimum payments....................... 2,198 $292
====
Less amount representing interest............ (259)
------
Present value of minimum payments............ 1,939
Less current portion......................... (588)
------
Long-term portion............................ $1,351
======

See Note 8 for subsequent event regarding lease of new facility.

6. Shareholders' Equity

Convertible Preferred Stock

A summary of convertible stock is as follows (in thousands):

June 30,
---------------------------------------------------------------------
1997 1998 December 31, 1998
---------------------------------- ---------------------------------- ----------------------------------
Issued and Liquidation Issued and Liquidation Issued and Liquidation
Authorized Outstanding Preference Authorized Outstanding Preference Authorized Outstanding Preference
---------- ----------- ----------- ---------- ----------- ----------- ---------- ----------- -----------

Series A........ 15,000 14,580 $ 5,249 15,000 14,580 $ 5,249 15,000 14,580 $ 5,249
Series B........ 9,000 8,886 12,263 9,000 8,886 12,263 9,000 8,886 12,263
Series C........ -- -- -- 5,900 5,595 20,534 5,900 5,595 20,534
------ ------ ------- ------ ------ ------- ------ ------ -------
24,000 23,466 $17,512 29,900 29,061 $38,046 29,900 29,061 $38,046
====== ====== ======= ====== ====== ======= ====== ====== =======

In May 1996, under a stock purchase agreement, Extreme issued 14,580,000
Series A convertible preferred shares at a price of $.333 per share. In May
and June 1997, under a stock purchase agreement, Extreme issued 8,886,485
Series B convertible preferred shares at a price of $1.38 per share. In
January and March of 1998, under a stock purchase agreement, Extreme issued
5,595,088 Series C convertible preferred shares at a price of $3.67 per share.

F-13

EXTREME NETWORKS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(Information as of December 31, 1998 and for the six months ended
December 31, 1997 and 1998 is unaudited)

Each share of Series A, B, and C convertible preferred stock is
convertible, at the option of the holder, into one share of common stock,
subject to certain provisions. The outstanding shares of convertible preferred
stock automatically convert into common stock either upon the close of
business on the day immediately preceding the closing of an underwritten
public offering of common stock under the Securities Act of 1933 in which
Extreme receives at least $10,000,000 in gross proceeds and the price per
share is at least $5.00, or at the election of the holders of at least a
majority of each series of the outstanding shares of preferred stock.

Series A, B, and C convertible preferred stockholders are entitled to
annual noncumulative dividends of $.0267, $.1104, and $.2936, respectively,
per share if and when declared by the board of directors. No dividends have
been declared as of December 31, 1998.

The Series A, B, and C convertible preferred stockholders are entitled to
receive, upon liquidation, the sum of (i) an amount per share equal to the
issuance price; (ii) $.0267 per share of Series A preferred stock, $.1104 per
share of Series B preferred stock, and $.2936 per share of Series C preferred
stock per annum accruing annually on the anniversary date of issuance of the
Series A, B, and C preferred stock, respectively; and (iii) all declared but
unpaid dividends. Thereafter, the remaining assets and funds, if any, shall be
distributed pro rata among the common stockholders. If the assets or property
were not sufficient to allow full payment to the Series A, B, and C
stockholders, the available assets shall be distributed ratably among the
Series A, B, and C shareholders.

The Series A, B, and C convertible preferred stockholders have voting
rights equal to the common shares issuable upon conversion.

Warrants

In November 1996, Extreme issued warrants to a lease financing company to
purchase 210,000 shares of Series A convertible preferred stock with an
exercise price of $.33 per share, in consideration for equipment leases and a
loan. In July 1997, Extreme issued warrants to the same lease financing
company to purchase 32,231 shares of Series B convertible preferred stock with
an exercise price of $2.07 per share, in consideration for equipment leases.
The warrants may be exercised at any time within a period of (i) 10 years or
(ii) 5 years from the effective date of an initial public offering completed
by Extreme, whichever is longer.

In November 1997, the Company issued warrants to a lease financing company
to purchase 79,051 shares of Series C convertible preferred stock with an
exercise price of $2.53, in consideration for a loan. The warrants may be
exercised at any time within a period which expires the sooner of (i) 10 years
or (ii) 3 years from the effective date of an initial public offering.

Common Stock

In May 1996, Extreme issued 4,725,000 shares of common stock to founders
for cash. The common stock is subject to repurchase until vested; vesting with
respect to 25% occurs on the first anniversary of the issuance date, with the
balance vesting ratably over a period of three years as specified in the
purchase agreements. At June 30, 1998 and December 31, 1998, approximately
1,771,875 and 1,181,250 shares, respectively, were subject to repurchase.

Extreme has reserved 15,000,000, 9,000,000, and 5,900,000 shares of its
common stock for issuance upon conversion of its Series A, B, and C
convertible preferred stock, respectively. Extreme has also reserved
13,025,000 common shares for issuance under the 1996 Stock Option Plan, of
which 92,349 and 2,923,477 shares remain available at June 30, 1998 and
December 31, 1998, respectively.

F-14

EXTREME NETWORKS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(Information as of December 31, 1998 and for the six months ended
December 31, 1997 and 1998 is unaudited)

Stock-Based Compensation

Under the 1996 Stock Option Plan (the "Plan"), which was adopted in
September 1996, options may be granted for common stock, pursuant to actions
by the board of directors, to eligible participants. A total of 12,014,309
shares have been reserved under the Plan. Options granted are exercisable as
determined by the board of directors. Options vest over a period of time as
determined by the board of directors, generally four years. The term of the
Plan is 10 years. Options to purchase approximately 4,297,346 and 2,990,009
shares of common stock have been exercised as of June 30, 1998 and December
31, 1998, respectively, but are subject to repurchase until vested.

The Company has elected to continue to follow APB 25 and related
interpretations in accounting for its employee and director stock-based
compensation plans. Because the exercise price of Extreme's employee stock
options equals the market price of the underlying stock on the date of grant,
no compensation expense was recognized.

Pro forma information regarding net income has been determined as if
Extreme had accounted for its employee stock options under the fair value
method prescribed by FAS 123. The resulting effect on pro forma net income
disclosed is not likely to be representative of the effects on net income on a
pro forma basis in future years, due to subsequent years including additional
grants and years of vesting.

The fair value of each option granted through December 31, 1998 was
estimated on the date of grant using the minimum value method with the
following weighted-average assumptions: no dividends; an expected life of six
years in the years ended June 30, 1997 and 1998, and four years in the six
months ended December 31, 1998; and risk-free interest rate of 6.7%, 6.0% and
5.7% in the years ended June 30, 1997 and 1998, and the six months ended
December 31, 1998, respectively. The weighted average fair value of options
granted in the years ended June 30, 1997 and 1998 and the six months ended
December 31, 1998 are $.01, $.37 and $1.17, respectively. For purposes of pro
forma disclosures, the estimated fair value of options is amortized to pro
forma expense over the options' vesting period. Pro forma information follows
(in thousands, except share and per share amounts):

Years ended Six months
June 30, ended
----------------- December 31,
1997 1998 1998
------- -------- ------------
(Unaudited)

Net Loss:
As reported................................. $(7,923) $(13,868) $(4,853)
Pro forma................................... $(7,935) $(13,985) $(5,014)
Basic and diluted net loss per share:
As reported................................. $ (3.17) $ (.71)
Pro forma................................... $ (3.19) $ (.73)

F-15

EXTREME NETWORKS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(Information as of December 31, 1998 and for the six months ended
December 31, 1997 and 1998 is unaudited)

The following table summarizes stock options activity:

Weighted-
Average
Number of Exercise Price
Shares Per Share
---------- --------------

Granted........................................ 7,150,500 $ .03
Exercised...................................... (5,409,750) $ .02
Canceled....................................... (165,000) $ .03
---------- -----
Options outstanding at June 30, 1997............ 1,575,750 $ .05
Granted........................................ 1,771,460 $1.29
Exercised...................................... (724,775) $ .21
Canceled....................................... (18,500) $ .35
---------- -----
Options outstanding at June 30, 1998............ 2,603,935 $ .84
Granted (unaudited)............................ 1,399,397 $5.83
Exercised (unaudited).......................... (256,670) $1.82
Canceled (unaudited)........................... (36,334) $2.59
---------- -----
Options outstanding at December 31, 1998
(unaudited).................................... 3,710,328 $2.55
========== =====

The options outstanding at December 31, 1998 have been segregated by
exercise price as follows (unaudited):

Outstanding Options
------------------------------------------------------------------------------------------
Options Weighted-
Range of Outstanding Weighted-Average Average
Exercise and Remaining Exercise
Prices Exercisable Contractual Life Price
-------- ----------- ---------------- ---------
(In years)

$ .02 988,000 7.94 $ .02
$ .14-1.00 660,279 8.62 .46
$1.25-1.75 618,950 9.19 1.70
$3.00-5.50 342,599 9.54 4.13
$5.75 831,500 9.79 5.75
$6.50-8.50 269,000 9.91 7.04
----------
--------- ---------
$ .02-8.50 3,710,328 8.98 $2.55
========== =========

7. Income Taxes

The provision for income taxes consists of the following (in thousands):

December 31,
1998
(unaudited)
------------

Current provision:
Federal..................................................... $100
State....................................................... 100
Foreign..................................................... 500
----
Total current provision....................................... $700
====

F-16

EXTREME NETWORKS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(Information as of December 31, 1998 and for the six months ended
December 31, 1997 and 1998 is unaudited)

The difference between the provision for income taxes and the amount
computed by applying the Federal statutory income tax rate (35 percent) to
income before taxes is explained below:

June 30, June 30, December 31,
1997 1998 1998
-------- -------- ------------
(unaudited)

Tax at federal statutory rate............... $(2,773) $(4,854) $(1,450)
State income tax............................ -- -- 100
Unutilized net operating losses............. 2,773 4,854 (1,450)
Federal alternative minimum taxes........... -- -- 100
Foreign tax................................. -- -- 500
------- ------- -------
Total..................................... $ -- $ -- $ 700
======= ======= =======

Significant components of Extreme's deferred tax assets are as follows (in
thousands):

June 30, June 30, December 31,
1997 1998 1998
-------- -------- ------------
(unaudited)

Deferred tax assets:
Net operating loss carryforwards........ $ 3,120 $ 7,448 $ 6,586
Tax credit carryforwards................ 209 1,139 1,350
Accruals and reserves not currently
deductible............................. -- 984 1,700
------- ------- -------
Total deferred tax assets................. 3,329 9,571 $ 9,636
Valuation allowance....................... (3,329) (9,571) (9,636)
------- ------- -------
Net deferred tax assets................... $ -- $ -- $ --
======= ======= =======

FASB Statement No. 109 provides for the recognition of deferred tax assets
if realization of such assets is more likely than not. Based upon the weight
of available evidence, which includes Extreme's historical operating
performance and the reported cumulative net losses in all prior years, Extreme
has provided a full valuation allowance against its net deferred tax assets.

The net valuation allowance increased by $3,329,000, $6,242,000, and
$45,000 during the periods ended June 30, 1997, June 30, 1998, and December
31, 1998, respectively.

As of December 31, 1998, Extreme had federal and state net operating loss
carryforwards of approximately $16.6 million and $16.0 million, respectively.
Extreme also had federal and state research and development tax credit
carryforwards of approximately $850,000 and $750,000, respectively. The net
operating loss and tax credit carryforwards will expire at various dates
beginning in 2004 through 2019, if not utilized.

Utilization of the net operating loss and tax credit carryforwards may be
subject to a substantial annual limitation due to the ownership change
limitations provided by the Internal Revenue Code and similar state
provisions. The annual limitation may result in the expiration of the net
operating loss and credit carryforwards before utilization.

F-17

EXTREME NETWORKS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(Information as of December 31, 1998 and for the six months ended
December 31, 1997 and 1998 is unaudited)

8. Subsequent Events

1999 Employee Stock Purchase Plan

In January 1999, the Board of Directors approved the adoption of Extreme's
1999 Employee Stock Purchase Plan (the "1999 Purchase Plan"), subject to
stockholder approval. A total of 1,000,000 shares of common stock has been
reserved for issuance under the 1999 Purchase Plan. The 1999 Purchase Plan
permits eligible employees to acquire shares of Extreme's common stock through
periodic payroll deductions of up to 15% of total compensation. No more than
625 shares may be purchased on any purchase date per employee. Each offering
period will have a maximum duration of 12 months. The price at which the
common stock may be purchased is 85% of the lesser of the fair market value of
Extreme's common stock on the first day of the applicable offering period or
on the last day of the respective purchase period. The initial offering period
will commence on the effectiveness of the initial public offering and will end
on April 30, 2000.

Reincorporation, Amendment to the Articles of Incorporation

During January 1999, Extreme's Board of directors authorized the
reincorporation of the Company in the State of Delaware. This reincorporation
is to be effective prior to Extreme's initial public offering. Upon
reincorporation, Extreme will be authorized to issue 150,000,000 shares of
Common Stock, $.001 par value and 2,000,000 shares of undesignated Preferred
Stock, $.001 par value.

Facility Lease

In February, 1999 Extreme agreed to lease 77,000 square feet for the
purpose of being its primary facility in Santa Clara, California. The related
cost of this lease is approximately $120,000 per month. The lease expires in
December 2001. Extreme expects to commence occupancy by March 1999.

Amended 1996 Stock Option Plan

In January 1999, the Board of Directors approved an amendment to the 1996
Stock Option Plan to (i) increase the share reserve by 5,000,000 shares, (ii)
to remove certain provisions which are required to be in option plans
maintained by California privately-held companies and (iii) to rename the Plan
as the "Amended 1996 Stock Option Plan."

F-18

Depicted on this page are copies of some of the awards which Extreme Networks'
products have won.

To date, Extreme Networks has won over 24 awards from trade magazines and
industry organizations, including those shown above.

Extreme Networks, Inc.

Common Stock

[LOGO]

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution.

The following table sets forth all expenses to be paid by the Registrant,
other than underwriting discounts and commissions, in connection with this
offering. All amounts shown are estimates except for the registration fee and
the NASD filing fee.

Amount to be
Paid
------------

Registration fee............................................. $14,387
NASD filing fee.............................................. 5,675
Nasdaq National Market....................................... *
Blue sky qualification fees and expenses..................... *
Printing and engraving expenses.............................. *
Legal fees and expenses...................................... *
Accounting fees and expenses................................. *
Director and Officer liability insurance..................... *
Transfer agent and registrar fees............................ *
Miscellaneous expenses....................................... *
-------
$
=======

- --------
*To be supplied by amendment.

Item 14. Indemnification of Officers and Directors.

Section 145 of the Delaware General Corporation Law authorizes a court to
award, or a corporation's board of directors to grant, indemnity to officers,
directors and other corporate agents under certain circumstances and subject
to certain limitations. The Registrant's Certificate of Incorporation and
Bylaws provide that the Registrant shall indemnify its directors, officers,
employees and agents to the full extent permitted by Delaware General
Corporation Law, including in circumstances in which indemnification is
otherwise discretionary under Delaware law. In addition, the Registrant
intends to enter into separate indemnification agreements with its directors,
officers and certain employees which would require the Registrant, among other
things, to indemnify them against certain liabilities which may arise by
reason of their status as directors, officers or certain other employees. The
Registrant also intends to maintain director and officer liability insurance,
if available on reasonable terms.

These indemnification provisions and the indemnification agreement to be
entered into between the Registrant and its officers and directors may be
sufficiently broad to permit indemnification of the Registrant's officers and
directors for liabilities (including reimbursement of expenses incurred)
arising under the Securities Act.

The Underwriting Agreement filed as Exhibit 1.1 to this Registration
Statement provides for indemnification by the underwriters of the Registrant
and its officers and directors for certain liabilities arising under the
Securities Act, or otherwise.

Item 15. Recent Sales of Unregistered Securities.

Since May 1996, the Registrant has sold and issued the following
unregistered securities:

(1) On May 17, 1996, the Registrant issued and sold an aggregate of
4,725,000 shares of common stock to certain executive officers of Extreme
at a price of $0.0033 per share for a total offering price of $23,625.

II-1

(2) From June 1996 to December 31, 1998, the Registrant granted options
to purchase 10,321,357 shares of common stock pursuant to its Amended 1996
Stock Option Plan at exercise prices ranging from $0.02 per share to $8.50
per share for a total offering price of $10,266,871.

(3) On May 28, 1996, the Registrant sold 14,580,000 shares of Series A
Preferred Stock to a group of private investors at a price of $0.333 per
share for a total offering price of $4,860,000.

(4) On November 7, 1996, in connection with an equipment lease, the
Registrant issued a warrant to an equipment lessor to purchase 147,000
shares of Series A Preferred Stock at an exercise price of $0.333 per
share.

(5) On November 7, 1996, in connection with an equipment lease, the
Registrant issued a warrant to an equipment lessor to purchase 63,000
shares of Series A Preferred Stock at an exercise price of $0.333 per
share.

(6) On May 7, 1997 and June 17, 1997, the Registrant sold an aggregate
of 8,886,485 shares of Series B Preferred Stock to a group of private
investors at a price of $1.38 per share for a total offering price of
$12,263,359.

(7) On July 30, 1997, in connection with the extension of a line of
credit, the Registrant issued a warrant to a bank to purchase 48,347 shares
of Series B Preferred Stock at an exercise price of $1.38 per share.

(8) On January 12, 1998, March 23, 1998 and March 31, 1998, the
Registrant sold an aggregate of 5,595,088 shares of Series C Preferred
Stock to a group of private investors at a price of $3.67 per share for a
total offering price of $20,533,973.

(9) On November 17, 1997, in connection with the extension of a line of
credit, the Registrant issued a warrant to a bank to purchase 79,051 shares
of Series C Preferred Stock at an exercise price of $2.53 per share in the
event such extension is drawn down. As of December 31, 1998, the Registrant
had not drawn down on this extension.

For additional information concerning these equity investment transactions,
reference is made to the information contained under the caption "Certain
Transactions" in the form of prospectus included herein.

The issuances of securities describe in Items 15(a)(2) were deemed to be
exempt from registration under the Securities Act in reliance on Rule 701
promulgated thereunder as transactions pursuant to a compensatory benefit plan
or a written contract relating to compensation. The issuance of securities
describe in item 15(a)(1) and 15(a)(3) through 15(a)(9) were deemed to be
exempt from registration under the Securities Act in reliance on Section 4(2)
of the Securities Act as transactions by an issuer not involving any public
offering. The recipients of securities in each such transaction represented
their intention to acquire the securities for investment only and not with a
view to or for sale in connection with any distribution thereof and
appropriate legends were affixed to the share certificates and other
instruments issued in such transactions. All recipients either received
adequate information about Extreme or had access, through employment or other
relationships, to such information.

II-2

Item 16. Exhibits and Financial Statement Schedules.

(a) Exhibits.

Exhibit
Number Description of Document
------- -----------------------

1.1 Form of Underwriting Agreement.
2.1 Form of Agreement and Plan of Merger between Extreme Networks, a
California corporation, and Extreme Networks, Inc., a Delaware
corporation.
3.1 Certificate of Incorporation of Extreme Networks, Inc., a Delaware
corporation.
3.2 Form of Certificate of Amendment of Certificate of Incorporation of
Extreme Networks, Inc., a Delaware corporation.
3.3 Form of Amended and Restated Bylaws of Extreme Networks, Inc., a
Delaware corporation.
4.1 Second Amended and Restated Rights Agreement dated January 12, 1998
between Extreme Network and certain stockholders.
5.1* Opinion of Gray Cary Ware & Freidenrich, LLP.
10.1 Form of Indemnification Agreement for directors and officers.
10.2 Amended 1996 Stock Option Plan and forms of agreements thereunder.
10.3 1999 Employee Stock Purchase Plan.
10.4 Sublease, dated June 5, 1997, between NetManage, Inc. and Extreme
Networks, Inc., a California corporation, to Master Lease, dated
September 30, 1994, between Cupertino Industrial Associates and
NetManage, Inc.
21.1 List of subsidiaries.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2* Consent of Counsel (included in Exhibit 5.1).
24.1 Power of Attorney (see page II-4 of the Registration Statement).
27.1 Financial Data Schedule (available in EDGAR format only).

- --------
* To be filed by amendment.

(b) Financial Statement Schedules.

All schedules have been omitted because the information required to be set
forth therein is not applicable or is shown in the consolidated financial
statements or notes thereto.

Item 17. Undertakings.

The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.

Insofar as indemnification by the Registrant for liabilities arising under
the Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the provisions described in Item 14
above or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act, and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a director,
officer, or controlling person of the Registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.

II-3

The undersigned Registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at the time shall be
deemed to be the initial bona fide offering thereof.

II-4

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Cupertino, County of
Santa Clara, State of California, on the 5th day of February 1999.

Extreme Networks, Inc.

/s/ Gordon L. Stitt
By: _________________________________
Gordon L. Stitt
President, Chief Executive
Officer and Chairman
(Principal Executive Officer)

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints Gordon L. Stitt and Vito E.
Palermo, and each of them acting individually, as his true and lawful
attorneys-in-fact and agents, each with full power of substitution, for him in
any and all capacities, to sign any and all amendments to this Registration
Statement (including post-effective amendments or any abbreviated registration
statement and any amendments thereto filed pursuant to Rule 462(b) increasing
the number of securities for which registration is sought), and to file the
same, with exhibits thereto and other documents in connection therewith, with
the Securities and Exchange Commission, granting unto said attorneys-in-fact
and agents, with full power of each to act alone, full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in connection therewith, as fully for all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said attorneys-
in-fact and agents, or his or their substitute or substitutes, may lawfully do
or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:

Signature Title Date
--------- ----- ----

/s/ Gordon L. Stitt President, Chief Executive February 5, 1999
______________________________________ Officer and Chairman
Gordon L. Stitt (Principal Executive
Officer)

/s/ Vito E. Palermo Vice President and Chief February 5, 1999
______________________________________ Financial Officer
Vito E. Palermo (Principal Financial and
Accounting Officer)

/s/ Charles Carinalli Director February 5, 1999
______________________________________
Charles Carinalli

/s/ Promod Haque Director February 5, 1999
______________________________________
Promod Haque

/s/ Lawrence K. Orr Director February 5, 1999
______________________________________
Lawrence K. Orr

/s/ Peter Wolken Director February 5, 1999
______________________________________
Peter Wolken

II-5

EXHIBITS

Exhibit
Number Description of Document
------- -----------------------

- --------
* To be filed by amendment.