Enterasys posts $104.5 M Q1 revenue

By SiliconIndia   |   Friday, 25 April 2003, 07:00 Hrs
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BANGALORE: Enterasys Networks Inc. (NYSE:ETS), posted net revenues of $104.5 million for the first quarter of fiscal 2003.

This compares with net revenue $121.2 million for the fourth quarter of fiscal 2002 and net revenue of $120.8 million for the first quarter of fiscal 2002. The Company narrowed its net loss available to common shareholders for the first quarter of fiscal 2003 to $14.5 million, or $0.07 per share, compared with a net loss of $30.6 million, or $0.15 per share for the fourth quarter of fiscal 2002, and a net loss of $13.7 million, or $0.07 per share, for the first quarter of fiscal 2002. The fourth and first quarters of fiscal 2002 included net tax benefits of $9.1 million and $61.0 million, respectively.

As of March 29, 2003, the Company had $236.6 million of cash and marketable securities on hand, including $24.6 million of restricted cash. The balance at March 29, 2003, reflects the Company's March 3, 2003 net redemption of all previously outstanding Series D&E preferred shares for $97.1 million in cash, and the Company's collection of approximately $25.5 million of net tax refunds during the first quarter. The Company generated $15.7 million of cash from its first quarter operating activities.

The Company's gross margin for the first quarter continued to improve to 50.7%, compared to a gross margin of 34.9% for the fourth quarter of fiscal 2002, and a gross margin of 40.0% for the first quarter of fiscal 2002. The sequential gross margin improvement in the first quarter resulted primarily from a lower provision for excess and obsolete inventory in the first quarter of fiscal 2003 versus the fourth quarter of fiscal 2002. In addition, the Company saw an improvement in product gross margin.

Total operating expenses for the first quarter declined 12.7% to $66.4 million, compared to $76.1 million in the fourth quarter of fiscal 2002, and $94.4 million in the first quarter of fiscal 2002.

"While first quarter revenue declined from prior periods and continues to reflect the impact of a challenging economy, our overall results for the quarter show solid improvement across our operations," stated William K. O'Brien, Chief Executive Officer of Enterasys Networks. "We are encouraged by our progress to date in serving our installed base of customers well, driving further operational improvements, and, importantly, we have recently begun making strategic incursions into new customer accounts and channel partners. In addition, we believe our new N-Series of advanced layer 3 switches will enhance our competitive position and further strengthen our strategic relationships with customers and key partners."

The Company noted that sales in the first quarter were impacted by a decrease in purchasing levels among customers due to challenging economic conditions, seasonality, and the Company's current product transition. The decline also reflects a decrease in the Company's service revenue associated with lower maintenance contract renewal rates, and shipment delays by stocking distributors in the final days of the quarter.

While the Company did not provide guidance for the remainder of fiscal 2003, management stated that it has not changed its full year goals of achieving modest revenue growth, market share gains, sustainable positive operating cash flow, and profitability by the end of 2003.

"We remain optimistic about our business prospects, but cautious in the short term," stated O'Brien. "We continue to influence factors within our control and focus on aligning our business model to achieve our goals. With the addition of new products and new management talent including Mark Aslett as President, and Leon Woo as EVP of Engineering, I am confident in our ability to drive further improvements and revitalize sales."

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