Enterasys Networks Inc, a leading provider of business-driven networks for enterprise customers, today announced financial results for its second fiscal quarter ended 28 June 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 million, compared to $74.5 million for the first quarter of 2003.
The company reported that its new high-end Layer 3 switching platform, the N-Series, which was generally available to customers on 15 May, 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.
"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% 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.
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.
As of 28 June 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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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 enterasys.com.