Network Equipment Technologies, Inc. Announces Results for Third
Quarter FY 2005 Company Grows Cash to Highest Level Since FY 2002
Despite Restructuring FREMONT, Calif., Jan. 12
/PRNewswire-FirstCall/ -- net.com (NYSE:NWK), a global provider of
networking equipment, today reported results for the quarter ended
December 24, 2004, the Company's fiscal third quarter, posting a
loss of $0.12 per share. The loss includes a charge for
restructuring as the company reshaped the organization to sharpen
its focus. Total revenue for the third quarter of fiscal 2005
decreased 12 percent year over year and 6 percent sequentially, to
$29.7 million, from $33.9 million in the third quarter of the prior
year and $31.6 million in the second quarter of fiscal 2005.
Product revenue decreased 11 percent year over year and 8 percent
sequentially, to $25.4 million, from $28.4 million in the third
quarter of the prior year and $27.5 million in the second quarter
of fiscal 2005. New product revenue in Q3 fiscal 2005 was 18
percent of product revenue and 15 percent of total revenue. Net
loss for the third quarter of fiscal 2005 was $2.9 million, or
$0.12 per share, compared to net income of $909,000, or $0.04 per
share, in the third quarter of the prior year and $1.4 million, or
$0.06 per share, in the second quarter of fiscal 2005. Included in
the third quarter loss was a restructure charge of $2.8 million.
The restructuring was primarily the result of streamlining the
company's engineering efforts, as the company increases its focus
on the enterprise voice over IP (VoIP) and government sectors.
Excluding restructure charges, operating expenses decreased $1.1
million from the second to the third quarter of fiscal 2005. Total
revenue for the nine-month period ended December 24, 2004 was $90.4
million, compared to $99.9 million for the same period last year.
The company reported a net loss of $2.3 million, or $0.10 per basic
and diluted share, for the current nine-month period, compared to a
net profit of $2.9 million, or $0.13 per basic share and $0.12 per
diluted share, for the same period in fiscal 2004. Hubert "Bert"
Whyte, president and CEO, noted, "I am pleased with a good
performance this quarter, despite the fact that we were
restructuring our resources. Our initiatives around our ShoutIP
platform for enterprise voice over IP as well as developmental work
for the government market were timely. We continue to see traction
with independent carriers as well, for both our SCREAM and ShoutIP
platforms, while Promina remains the workhorse both for government
customers and our multinational customers around the world."
Highlights for Third Quarter FY05 Highlights from the quarter
include the following: -- Purchases of over $2.0 million by defense
and intelligence agencies of SCREAM broadband platform, for
tactical IP implementations; -- Purchase of ShoutIP by Defense
Information Systems Agency (DISA) for secure VoIP applications in
support of senior government officials; -- Cash and investments
increased $2.9 million, to $104.7 million, including long-term
restricted cash, at quarter-end; -- Continued expansion of networks
globally with Promina equipment, including the Central Bank of
Russia, Mauritel, Reuters, Equant, and the USMC; -- Began
implementation of Microsoft contract, including training; -- New
sales of ShoutIP to independent operating companies (IOCs), as
evidenced by today's accompanying announcement of new VoIP network
for southern Indiana carrier Enhanced Telecommunications
Corporation; -- Partnership agreement signed with Diversified
Technologies to develop the WHISPER platform, based on ShoutIP,
expanding the presence of secure voice over IP applications with
ShoutIP into mobile, remote deployments; -- Product of the year
award by Internet Telephony for ShoutIP's function as an
intelligent VoIP gateway and session controller for VoIP migration
solutions; -- The company's SCREAM platform was named as a finalist
for two separate product awards, including the World Communications
Award in October, and the Light Reading "Leading Lights" product of
the year award in December; -- The company was named as a finalist
for two separate manufacturing and operations awards, winning the
Supply Chain Systems Magazine "Innovators" award in October for
supply chain management and awaiting announcement in March of the
"Supply Chain Mastery" award from Managing Automation. The Company
also announced that it has appointed Frederick D'Alessio, veteran
telecommunications executive, to the company's board of directors,
effective as of January 11, 2005. About net.com Network Equipment
Technologies, Inc., doing business as net.com, develops and
delivers platforms for broadband services, Internet telephony, and
multiservice networks. An architect of the networking industry,
net.com has been supplying service providers, governments and
enterprises around the world with bulletproof networking technology
for more than 20 years. net performance. net results. net.com.
Visit http://www.net.com/ for more information. 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, customers, operations,
strategic partners, and market sectors. 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, product testing
and trials, by independent operating companies and other potential
customers, might not be successful and even if successful might not
result in product orders. Also, the newly targeted market sectors
for the company's products, including the enterprise VoIP sector,
might not accept the products and the products face substantial
competition in such markets. Furthermore, many of the Company's
existing sales contracts, including those discussed in this press
release, provide for discretionary ordering and will not result in
revenue unless and until such orders are received and fulfilled. In
addition to the factors set forth in the press release, 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. Network
Equipment Technologies, Inc. disclaims any intention or obligation
to update or revise any forward looking statements, whether as a
result of new information, future events or otherwise. NOTE:
Promina, SCREAM, and ShoutIP are trademarks of Network Equipment
Technologies, Inc. NETWORK EQUIPMENT TECHNOLOGIES, INC. CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per
share data) (unaudited) Quarter Ended Nine Months Ended Dec 24, Dec
26, Dec 24, Dec 26, 2004 2003 2004 2003 Revenue: Product $25,363
$28,438 $77,217 $85,511 Service and other 4,314 5,433 13,153 14,401
Total revenue 29,677 33,871 90,370 99,912 Costs of sales: Cost of
product revenue 10,381 11,033 29,571 34,400 Cost of service and
other revenue 4,081 4,394 12,411 11,959 Total cost of sales 14,462
15,427 41,982 46,359 Gross margin 15,215 18,444 48,388 53,553
Operating expenses: Sales and marketing 6,629 8,202 21,180 23,320
Research and development 6,134 6,939 20,075 20,728 General and
administrative 2,514 2,349 7,623 7,539 Restructuring costs 2,846 --
4,117 266 Total operating expenses 18,123 17,490 52,995 51,853
Income (loss) from operations (2,908) 954 (4,607) 1,700 Other
income, net 37 69 1,380 1,588 Interest expense, net (7) (117) (210)
(407) Income (loss) before taxes (2,878) 906 (3,437) 2,881 Income
tax provision (benefit) 5 (3) (1,115) (18) Net income (loss)
$(2,883) $909 $(2,322) $2,899 Per share data: Net income (loss):
Basic $(0.12) $0.04 $(0.10) $0.13 Diluted $(0.12) $0.04 $(0.10)
$0.12 Common and common equivalent shares: Basic 24,597 23,395
24,332 23,091 Diluted 24,597 24,884 24,332 24,385 NETWORK EQUIPMENT
TECHNOLOGIES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in
thousands) (unaudited) Dec 24, Mar 26, 2004 2004 Assets Cash and
investments $103,955 $99,732 Accounts receivable, net 22,964 19,709
Inventories 12,796 13,665 Prepaid expenses and other assets 2,574
2,898 Total current assets 142,289 136,004 Property and equipment,
net 28,074 31,423 Other assets 2,750 4,657 $173,113 $172,084
Liabilities and Stockholders' Equity Accounts payable $5,702 $6,334
Other current liabilities 17,209 15,681 Total current liabilities
22,911 22,015 Long term liabilities 1,473 1,705 7 1/4% convertible
subordinated debentures 24,706 24,706 Stockholders' equity 124,023
123,658 $173,113 $172,084 DATASOURCE: Network Equipment
Technologies, Inc. CONTACT: Brenda Ropoulos, Director of Corporate
Relations, +1-510-574-2508, or Web site: http://www.net.com/
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