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Enterasys Networks reports Q2 fiscal 2003 results

  • 25 July, 2003 11:01

<p>Company Reports 3.8% Sequential Growth in Total Revenue, Including a 7.4% Sequential Increase in Product Revenue</p>
<p>ANDOVER, MA- July 24, 2003-- — Enterasys Networks Inc. (NYSE: ETS), a leading provider of Business-Driven Networks™ for enterprise customers, today announced financial results for its second fiscal quarter ended June 28, 2003. Net revenue for the second quarter increased 3.8 % to $108.4 million, compared with net revenue of $104.5 million for the first quarter of 2003. Product revenue for the second quarter increased 7.4% to $80.0 million, compared to $74.5 million for the first quarter of 2003.</p>
<p>The Company reported that its new high end Layer 3 switching platform, the N-Series, which was generally available to customers on May 15th, represented approximately 9% of product shipments in the second quarter. The Company noted that it expects the N-Series to represent an increasing proportion of its overall product revenue mix going forward.</p>
<p>“Our second quarter product revenue growth is continued validation of the fact that Enterasys remains a formidable competitor in the enterprise data networking market,” stated William K. O’Brien, Chief Executive Officer of Enterasys Networks. “We believe that continued execution on our product roadmaps, coupled with focused sales and marketing initiatives yielded tangible positive results in the second quarter. We are particularly encouraged with the early momentum and the market’s reception of the N-Series.”</p>
<p>The Company’s overall gross margin for the second quarter was 50.3%, compared to a gross margin of 50.7% in the first quarter. In addition, product gross margin showed continued improvement and increased to 46.0% in the second quarter compared to 44.2% in the first quarter of 2003. This margin increase was achieved despite the fact that the high margin N-Series was only available for 45 days of shipment.</p>
<p>Net loss available to common shareholders for the second quarter of fiscal 2003, which includes an $8.2 million special charge related to restructuring costs primarily associated with workforce reductions, and a $16.1 million charge for the write down of certain minority investments, was $35.4 million, or $0.17 loss per share. This compared with a net loss of $14.5 million, or $0.07 loss per share for the first quarter of fiscal 2003. The Company announced it commenced a workforce reduction initiative in the second quarter to reduce its workforce by approximately 16.5%, or 270 employees.</p>
<p>As of June 28, 2003, the Company had $215.5 million of cash and marketable securities on hand, including $19.9 million of restricted cash.</p>
<p>“Our product sales growth coupled with our continuing cost reduction efforts represent significant steps forward in bringing the Company's cost structure and resources in line with our strategic goals,” stated O’Brien. “We remain focused on aligning our resources more closely with industry best practices and better positioning the Company for long term growth. By doing this, we will deliver greater value to our customers, partners, employees, and shareholders.”</p>
<p>O’Brien concluded, “We remain optimistic about our business opportunities but cautious in the short term given the lingering uncertainty about the global economic environment. We remain confident in our ability to execute against our strategy and committed to our stated goals.”</p>
<p>Conference Call:
Enterasys Networks will host a conference call to further discuss these results. The call will be available for replay beginning at 8:00 pm ET on July 24th and ending August 7, 2003. To access the replay, dial 877-519-4471 and enter pass code 4033085 or visit the investor relations section of Enterasys’ website located at http://www.enterasys.com/corporate/ir/.</p>
<p>About Enterasys Networks
Enterasys Networks (NYSE: ETS) is a leading worldwide provider of Business-Driven Networks™ for enterprise-class customers. Enterasys’ innovative network infrastructure offerings deliver the security, productivity and agility benefits required by Global 2000 organisations, coupled with the industry’s strongest service and support. For more information on Enterasys and its products, including multilayer switches and routers, wireless LANs, VPN, network management, and intrusion detection systems (IDS), visit www.enterasys.com.</p>
<p>This press release contains projections and other forward-looking statements regarding the future revenue, cash flows and other financial performance of us or other future events and circumstances, and actual results, events and circumstances could differ materially. Such statements include, but are not limited to, statements reflecting management's expectations regarding our future financial performance; strategic relationships and market opportunities; and our other business and marketing strategies and objectives. These statements may be identified with such words as "we expect", "we believe", "we anticipate", or similar indications of future expectations. These statements are neither promises nor guarantees, and involve risks and uncertainties that could cause actual results to differ materially from such forward-looking statements. Such risks and uncertainties include, among other things, the following factors: the lingering effects of the recently settled SEC investigation and our financial statement restatements could materially harm our business, operating results and financial condition; worldwide economic weakness, deteriorating market conditions and recent political and social turmoil have negatively affected our business and revenues and made forecasting more difficult, which could harm our financial condition; we have a history of losses in recent years and may not operate profitably in the future; our quarterly operating results are likely to fluctuate, which could cause us to fail to meet quarterly operating targets and result in a decline in our stock price; we earn a substantial portion of our revenue for each quarter in the last month of each quarter, which reduces our ability to accurately forecast our quarterly results and increases the risk that we will be unable to achieve previously forecasted results; we may need additional capital to fund our future operations and, if it is not available when needed, our business and financial condition may be harmed; pending and future litigation could materially harm our business, operating results and financial condition; the limitations of our director and officer liability insurance may materially harm our financial condition; our failure to improve our management information systems and internal controls could harm our business; we have experienced significant turnover of senior management and our current management team has been together for only a limited time, which could harm our business operations; retaining key management and employees is critical to our success; there is intense competition in the market for enterprise network equipment, which could prevent us from increasing our revenue and achieving profitability; we may be unable to expand our indirect distribution channels, which may hinder our ability to grow our customer base and increase our revenue; we expect the average selling prices of our products to decrease over time, which may reduce our revenue and gross margins; we use several key components for our products that we purchase from single or limited sources, and we could lose sales if these sources fail to fulfill our need on a timely basis; we depend upon a limited number of contract manufacturers for substantially all of our manufacturing requirements, and the loss of any of our primary contract manufacturers would impair our ability to meet the demands of our customers; and those additional risks and uncertainties discussed in our most recent filings with the Securities and Exchange Commission, including our annual report on Form 10-K for the fiscal year ended December 28, 2002. Readers are cautioned not to place undue reliance on these forward looking statements, which speak only as of the date hereof. We expressly disclaim any obligation to publicly update or revise any such statements to reflect any change in these forward-looking statements, or in events, conditions, or circumstances on which any such statements may be based, or that may affect the likelihood that actual results will differ from those set forth in the forward-looking statements.</p>

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