ANDOVER, MA -- July 29, 2004 -- Enterasys Networks Inc. (NYSE: ETS), the Secure Networks CompanyTM, today announced financial results for its second fiscal quarter ended July 3, 2004.
Net revenue for the quarter increased 5 percent to $91.7 million, compared with net revenue of $87.2 million for the first quarter of 2004. Net loss for the second quarter of 2004 was $19.3 million, or $0.09 per share, compared with a net loss of $35.7 million, or $0.16 per share, in the first quarter of 2004.
The Company's overall gross margin for the second quarter rose to 51.3 percent compared to a gross margin of 50.2 percent in the first quarter.
Enterasys ended the second quarter of 2004 with $173.4 million in cash and marketable securities, including $10.6 million of restricted cash.
Comments on the Quarter
"Enterasys made solid progress in the second quarter," said William K. O'Brien, Chief Executive Officer of Enterasys. "Consistent with our objectives, we succeeded in increasing revenue—particularly in North America—improving sales execution and reducing our net loss. Our restructuring program is on target and cash burn from operations, excluding working capital, was within our expectations."
During the second quarter, the company advanced on several key fronts. "We strengthened our sales leadership and our relationships with key partners, and aggressively pursued business with new and installed-base customers," said Enterasys President and Chief Operating Officer Mark Aslett. "We also delivered on our product roadmap—launching a total of 14 products, modules and software releases—and our Secure NetworksTM solutions gained additional momentum with customers. As a result, new products reached 50 percent of product revenue in the second quarter, up from 46 percent in the first quarter, led by the Matrix N-Series, our high-end Layer 3 switching platform. The N-Series accounted for 36 percent of product revenue, up from 33 percent in the first quarter. Revenue from new customers increased to 14 percent of total revenue, up from 10 percent in the first quarter. In addition, revenue from our relationships with global partners increased more than 25 percent from the first quarter."
Outlook
"We expect to make continued quarter-over-quarter progress, but anticipate that the full impact of our strategic growth and cost-control initiatives will not be realized for another two to three quarters," said O'Brien. "We're currently anticipating flat to modestly higher revenue in the third quarter, a traditionally weak period. To the extent we see sequential growth during the second half of the year, we believe our goals of achieving profitability and positive cash flow in the fourth quarter should be attainable."
About Enterasys Networks
Enterasys Networks (NYSE: ETS) is a global provider of Secure NetworksTM for enterprise customers. Enterasys' innovative network infrastructure offerings deliver the security, productivity and adaptability benefits required by Global 2000 organizations, coupled with the industry's strongest service and support. For more information on Enterasys and its products, including multilayer switches, core routers, WAN routers, wireless LANs, network management, and intrusion defense systems (IDS), visit enterasys.com.
