Enterasys posts narrower Q2 loss

By SiliconIndia   |   Friday, 25 July 2003, 07:00 Hrs
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ANDOVER: Enterasys Networks Inc. (NYSE:ETS) Thursday posted narrower loss based on strong demand for their new switching product and stringent cost controls.

Net loss to common shareholders, which includes an $8.2 million special charge related to restructuring costs, 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 is as compared to a net loss of $48.2 million, or 25 cents per share in the year ago period.

Enterasys also said it would cut its work force by about 16.5 percent, or 270 employees.

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.

"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."

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.

The Company announced it commenced a workforce reduction initiative in the second quarter to reduce its workforce by approximately 16.5%, or 270 employees.

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.

"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."

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."

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