Network Equipment Technologies, Inc. Announces Earnings of $.06 per
Share Company Signs Deal with Microsoft IT to provide IP/PSTN
Gateways FREMONT, Calif., Oct. 13 /PRNewswire-FirstCall/ -- net.com
(NYSE:NWK) today reported its results for the second quarter of
fiscal 2005, ended September 24, 2004. New product revenue and
reduced expenses led to a return to profitability this quarter.
Total revenue was $31.6 million, compared to $29.1 million for the
first quarter of fiscal 2005, an increase of 8.6 percent, and $31.9
million for the second quarter of fiscal 2004, a decrease of 1.1
percent. Product revenue was $27.5 million for the second quarter
of fiscal 2005, compared to $24.4 million for the first quarter of
fiscal 2005, an increase of 12.6 percent, and $27.8 million for the
second quarter of last year, a decrease of 1.1 percent. New
products -- SCREAM broadband services platform, SHOUTIP for IP
telephony services, and netMS for integrated network management --
represented more than 18% of product revenue, and nearly 16% of
overall revenue in the current quarter. More detail follows under
"Quarterly Highlights." The Company reported net income of $1.4
million, or $0.06 per share for the second quarter of fiscal 2005,
compared to a net loss of $829,000, or $0.03 per share, in the
first quarter of fiscal 2005, and net income of $400,000, or $0.02
per share, for the second quarter of last year. Total revenue for
the six-month period ended September 24, 2004 was $60.7 million,
compared to $66.0 million for the same period of fiscal 2004. Net
income for the six-month period ended September 24, 2004 was
$561,000, or $0.02 per share, compared to $2.0 million, or $0.08
per diluted share, for the same period of fiscal 2004. Bert Whyte,
net.com's president and CEO noted, "Just over a year ago, while
pursuing tier-one carrier business, we recognized the imperative to
push into additional markets with our new products. Today, as we
see continued delays in carrier spending, that strategy has started
to serve us well. We have made the first major inroads into the
enterprise telephony market, and we have done so with our first new
enterprise-focused offering in years. With three product lines that
address three critical market segments -- enterprise, government
and carrier -- we have a strong revenue base and diverse
opportunities for growth." Highlights: * Microsoft Corporation
selected net.com's ShoutIP platform as the gateway component in its
global voice over IP (VoIP) network. After extensive competitive
testing, Microsoft selected SHOUT2500 for its Redmond headquarters
and larger offices and SHOUT900 for its smaller offices. ShoutIP
will provide the gateway components that will help to migrate the
company's voice traffic from a wide variety of PBX platforms to a
global VoIP network as part of the company's IP-PBX strategy,
providing linking, cross connection, and voice switching across a
worldwide network infrastructure. * The Promina platform was
deployed to deliver high quality voice and data services over the
IP networks of the principal media facilities for the Democratic
National Convention, the Republican National Convention, and the
Olympic Games in Athens. * The company achieved TL 9000 quality
system certification from the Quality Excellence for Suppliers of
Telecommunications (QuEST) Forum. net.com is now among an elite
group of telecommunications companies to have met the rigorous
standards for TL 9000 registration. * The SCREAMlink program
continued to gain traction with sales of over $1.5 million in
equipment to customers in the Government sales channel to migrate
their existing Promina networks to broadband. * The company saw
additional ShoutIP related activity as it successfully tested
secure voice applications within the Department of Defense, for
executive mobile deployments, and sales into multiple accounts,
including the Air Force, Navy, Marines, and Army. DSCS, DISA and
KICC all deployed additional SCREAM and Promina equipment. Expense
Control and Restructuring Whyte added, "Because the market remains
unpredictable, particularly in the carrier space, and we have now
achieved key development milestones in the SCREAM and ShoutIP
product families, we are refining our ongoing investment in certain
areas of R&D to focus on the business at hand. In addition, we
continue to trim costs and expenses throughout the organization to
allow us to achieve profitability on lower revenues. Conference
Call Management will discuss the quarter's results in a conference
call beginning today at 2:00 p.m. PDT. The toll-free number to
participate in the conference is 800-603-9684, conference name
"Network Equipment Technologies." Additionally, the conference is
being webcast live from the company's website, http://ir.net.com/ .
Slides that accompany the prepared discussion will also be
available on the website. Participants are advised to log in early
to the website to download slides and media plug-ins, if needed,
and perform webcast system compatibility tests. Live Q&A at the
conclusion of prepared remarks will be conducted from the
conference call only. About net.com Network Equipment Technologies,
Inc., doing business as net.com, develops and delivers service
creation platforms for broadband, Internet protocol (IP) telephony,
and multiservice networks. An architect of the networking industry,
net.com has been supplying service providers, governments and
enterprises around the world with bullet-proof networking
technology for more than 20 years. net performance. net results.
net.com. NOTE: Promina, ShoutIP, and SCREAM are registered
trademarks, and net.com is a trademark of Network Equipment
Technologies, Inc. Forward-looking statements Statements made in
this press release other than statements of historical fact are
forward-looking including, for example, those relating to products
and applications, existing and future customers, business
operations, expense controls and future profitability or other
financial results. Investors are cautioned that these statements
are based upon current expectations, forecasts and assumptions that
involve risks and uncertainty that may cause actual results, events
or company performance to differ materially from those expressed or
implied in the forward-looking statements. Among other risks and
uncertainties, our new products have not achieved broad market
acceptance and future sales of such products may fluctuate
dramatically; customer testing and trials of our new products can
be lengthy and might not lead to additional sales; new applications
for our products, even if adopted by some customers, might not have
broad usage; and many of our current and prospective customers are
restricting spending, which could negatively affect our earnings in
future quarters. The factors identified in net.com's filings with
the Securities and Exchange Commission, including Forms 10-K and
10-Q, could also affect the forward-looking statements contained in
this press release. net.com disclaims any intention or obligation
to update or revise any forward looking statements, whether as a
result of new information, future events or otherwise. NETWORK
EQUIPMENT TECHNOLOGIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS (in thousands except per share data) Quarter Ended Six
Months Ended Sep 24, Sep 26, Sep 24, Sep 26, 2004 2003 2004 2003
Revenue: Product $27,461 $27,776 $51,854 $57,073 Service and other
4,135 4,164 8,839 8,968 Total revenue 31,596 31,940 60,693 66,041
Costs of sales: Cost of product revenue 10,120 11,013 19,190 23,367
Cost of service and other revenue 4,317 3,607 8,330 7,565 Total
cost of sales 14,437 14,620 27,520 30,932 Gross margin 17,159
17,320 33,173 35,109 Operating expenses: Sales and marketing 6,816
7,264 14,551 15,118 Research and development 7,088 6,949 13,941
13,789 General and administrative 2,442 2,442 5,109 5,190
Restructuring costs (benefits) (103) -- 1,271 266 Total operating
expenses 16,243 16,655 34,872 34,363 Income (loss) from operations
916 665 (1,699) 746 Other income (expense), net (26) (68) 1,343
1,519 Interest expense, net (99) (197) (203) (290) Income (loss)
before taxes 791 400 (559) 1,975 Income tax benefit (599) --
(1,120) (15) Net income $1,390 $400 $561 $1,990 Per share data: Net
income: Basic $0.06 $0.02 $0.02 $0.09 Diluted $0.06 $0.02 $0.02
$0.08 Common and common equivalent shares: Basic 24,343 23,066
24,286 22,939 Diluted 25,070 24,342 24,650 24,136 NETWORK EQUIPMENT
TECHNOLOGIES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in
thousands) Sep 24, Mar 26, 2004 2004 Assets (unaudited) Cash and
investments $99,506 $99,732 Accounts receivable, net 24,214 19,709
Inventories 12,709 13,665 Prepaid expenses and other assets 2,755
2,898 Total current assets 139,184 136,004 Property and equipment,
net 29,715 31,423 Other assets 4,390 4,657 $173,289 $172,084
Liabilities and Stockholders' Equity Accounts payable $6,290 $6,334
Other current liabilities 15,705 15,681 Total current liabilities
21,995 22,015 Long term liabilities 1,518 1,705 7 1/4% convertible
subordinated debentures 24,706 24,706 Stockholders' equity 125,070
123,658 $173,289 $172,084 DATASOURCE: Network Equipment
Technologies, Inc. CONTACT: Brenda Ropoulos, Director of Corporate
Relations of net.com, +1-510-574-2508, or Web site:
http://www.net.com/
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