Siemens' U.S. Sales Jump 46 Percent for Third Quarter; Worldwide, Siemens Sees Substantial Increase in Profitability - Company Financial Information

Cambridge Telcom Report, August 2, 1999

Siemens' U.S. business units posted a dramatic increase in sales for the first nine months of fiscal 1998/99 (10/1/98 to 6/30/99), up 46 percent to $10.2 billion from $7.0 billion over the corresponding 1997/98 period. Nine-month figures represent the volume of all Siemens' U.S. businesses in which Siemens holds more than 50 percent ownership.

"Orders for Siemens' U.S. business units in the first nine months were boosted 51 percent to $11.3 billion (as compared to $7.5 billion for the comparable 1997/98 period).

Among the U.S. units showing particularly strong nine-month volume increases over the same period last year were:

* Siemens Automotive Corporation, which reported a 39 percent increase in both sales and orders, primarily due to the continued growth of the electronic automotive component market.

* Siemens ElectroCom L.P., which reported a 134 percent increase in orders, due to a new $100 million order from the United States Postal Service for the state-of-the-art Tray Management System (a postal automation technology). Sales for this unit increased 28 percent.

* Siemens Power Transmission & Distribution, LLC, which recorded an 81 percent increase in orders and a 57 percent jump in sales, due tothe sustained growth of utility purchasing (spurred, in part, by continued energy deregulation).

Siemens Westinghouse Power Corporation and Siemens Building Technologies, Inc., both of which were acquired in 1998, added combined sales of $2.3 billion and orders of $2.9 billion to the current period figure. The two new acquisitions added approximately 13,000 employees to the workforce. In total, Siemens' U.S. businesses had 62,700 employees at the end of the third quarter, compared with 50,290 for the same period last year.

* Third Quarter 10/1/98 - 6/30/99 10/1/97 - 6/30/98* Sales (billions) $10.2 $7.0

* Orders (billions) $11.3 $7.5

* Employees 62,700 50,290

Worldwide Results

In the first nine months of the 1998/99 fiscal year, Siemens recorded worldwide sales of DM92.2 (1998: DM81.9) billion, a 12 percent increase over the same period last year. Worldwide orders grew 11 percent to DM97.6 (1998: DM87.6) billion. Orders and sales increased seven percent due to the effects of changes in the consolidated group, namely the first-time consolidation of Elektrowatt's industrial activities and the Westinghouse conventional power plant business.

Domestic sales rose two percent to DM26.0 billion, while international sales climbed 17 percent to DM66.2 billion (international business now accounts for 72 percent of sales). In the Americas, sales rose 23 percent to DM23.2 billion, and in Europe (excluding Germany), sales rose 17 percent to DM28.7 billion. Sales growth was especially strong in the Asia Pacific region; due to major project billing, sales in the region increased 24 percent to DM10.6 billion.

Domestic orders rose nine percent to DM28.2 billion and international orders climbed 12 percent to DM69.4 billion during the first nine months. The Power Generation Group (KWU), the Automotive Systems Group (AT), Infineon Technologies AG (formerly Siemens Semiconductors), Siemens Business Services (SBS) and the Production and Logistics Systems Group (PL) contributed significantly to the increase in orders by posting double-digit growth rates. Orders in the Americas were especially high, climbing 20 percent to DM24.3 billion. While orders in the Asia Pacific showed an eight percent increase for the first nine months to DM9.8 billion, orders in China alone increased 64 percent to DM2.9 billion.

As of June 30, 1999, Siemens employed 444,000 people worldwide -- some 28,000 more than at the close of the previous fiscal year on September 30, 1998. While the number of employees in Germany remained virtually unchanged at 193,000 (as compared to the September 30, 1998 number of 194,000), outside Germany the figure rose by 29,000 to 251,000. This increase resulted mainly from the acquisition of the industrial activities of Switzerland's Elektrowatt and SBS's takeover of employees as part of outsourcing contracts.

Capital expenditures and investments in the first nine months totaled DM6.9 (1998: DM8.7) billion. Capital spending for property, plant and equipment reached the level of 1998. Investments, which were especially high last year due to the Elektrowatt acquisition, chiefly include expenditures for Information and Communication Networks' (ICN) acquisitions in the U.S.

Net income for the period rose 17 percent to DM2.09 (1998: DM1.78) billion. Third quarter earnings alone totaled DM697 million. While nearly all groups contributed to the earnings increase, Infineon, the Power Generation Group, the Medical Engineering Group (Med), Siemens Business Services and the Information and Communication Products Group (ICP) showed the most significant improvements. As in 1998, the Automation and Drives Group (A&D), the Information and Communication Networks Group and Osram were the biggest earners.

DAVOX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per Share Data)
(Unaudited)

For the three months For the six months
ended June 30,      ended June 30,
                                1999      1998      1999      1998

Product revenue              $12,389   $15,072   $23,821   $31,426
Service revenue                9,619     9,118    18,436    17,184

Total revenue                 22,008    24,190    42,257    48,610

Cost of product revenue        2,188     2,804     4,405     5,951
Cost of service revenue        5,320     4,789    10,574     9,561

Total cost of revenue          7,508     7,593    14,979    15,512

Gross profit                  14,500    16,597    27,278    33,098

Operating expenses:
Research, development
and engineering                3,137     2,918     6,259     6,022
Selling, general and
administrative                 9,155     8,930    17,452    18,137
Non-recurring transaction costs   --     1,329      --       1,329
Non-recurring merger-related
integration costs                 --       597      --         597

Total operating expenses      12,292    13,774    23,711    26,085

Income from operations         2,208     2,823     3,567     7,013

Other income, net                625       724     1,264     1,472

Income before provision for
income taxes                   2,833     3,547     4,831     8,485

Provision for income taxes       425     1,206       724     2,885

Net income                   $ 2,408   $ 2,341   $ 4,107   $ 5,600

Earnings per share:
Basic                        $  0.18   $  0.17   $  0.30   $  0.40

Diluted                      $  0.17   $  0.16   $  0.29   $  0.37

Weighted average shares outstanding:
Basic                         13,453    14,077    13,892    13,991

Diluted                       13,940    14,870    14,368    14,956

Pro-forma fully taxed diluted earnings
per share, excluding non-recurring
costs (assuming 38%
tax rate)                    $  0.13   $  0.23   $  0.21   $  0.43

DAVOX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)

                                          JUNE 30,  DECEMBER 31,
                                             1999         1998
                                       (unaudited)   (audited)
ASSETS

Current assets:
Cash and short term investments            $55,403       $59,470
Accounts receivable, net                    17,578        15,959
Interest receivable                            409           739
Deferred tax assets                          4,887         4,887
Prepaid expenses & other current assets      1,390         1,776

Total current assets                        79,667        82,831

Property and equipment, net                  4,953         5,298
Other assets                                 1,114         1,294

                                           $85,734       $89,423

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Accounts payable                           $ 5,044       $ 4,965
Accrued expenses                             8,794         9,461
Customer deposits                            2,314         1,892
Deferred revenue                             6,177         3,778

Total liabilities                           22,329        20,096

Total stockholders' equity                  63,405        69,327

                                           $85,734       $89,423