NWK Network Equip Tech

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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