Datum Reports Second Quarter Results - Company Financial Information

Cambridge Telcom Report, August 2, 1999

Datum Inc. (Nasdaq: DATM) has announced improved results for the second quarter ended June 30, 1999.

Revenues for the quarter were $24,765,000, compared with $26,150,000 reported for the comparable period of 1998. Net income for the quarter was $222,000, or $0.04 per diluted share, compared with net income of $43,000, or $0.01 per diluted share, for the second quarter of 1998.

For the six months ended June 30, 1999, revenues were $49,317,000, compared to $51,528,000 in the prior year period. Net income was significantly improved for the 1999 six month period at $31,000, or $0.01 per diluted share, compared to a net loss of $769,000, or $0.14 per diluted share, in the same period last year.

Erik H. van der Kaay, the Company's President and Chief Executive Officer, commented, "While we are pleased to report improved results, we continue to focus on the initiatives we've laid out over the past five quarters. Manufacturing cost reduction programs are on target with the exception of the rubidium unit, which we now believe will be available in the first quarter of 2000. We are experiencing excellent performance in our wireline sales, which are currently being driven by strong domestic orders, however, the wireless market continues to be stagnant. Our domestic and international sales reorganization is essentially complete with the opening of the Sao Paulo sales office."

Mr. van der Kaay continued, "We are beginning to see results from our OEM sales initiatives including four new sockets for wireless voice and LAN base station applications. We had an excellent quarter in cesium primary reference clock shipments and continue to see strong demand in this area. Other highlights include:

* Booked and shipped the first order for the AntennaLess CDMA timing and synchronization product. Additionally, Datum delivered evaluation units to eight other carriers.

* Shipped over 1,000 units of our ATC-1000, a UTC clock, which has been developed for the OATS (Order Audit Trail System). OATS is a mandate set by NASD that requires all buy and sell stock tickets to be stamped within three seconds of a national time standard.

* Received an order from Deutsche Telekom in excess of $5.5 million, representing a significant achievement in our expansion into international markets."

David A. Young, Chief Financial Officer, added, "Gross margins improved 510 basis points to 42.9% compared to 37.8% in the previous quarter. The significant improvement was primarily a result of improved efficiency in the manufacturing process, overhead reductions, material cost savings, and the mix of products shipped. However, we are still experiencing softness in the wireless market, which, coupled with our contractual price decrease with Lucent, will have a negative effect on our results during the second half of the year. Research and Development costs increased this quarter and will continue to remain high as we invest in the future of our business."

Mr. Young continued, "On the balance sheet, our cash position in the quarter improved by $1.5 million over the first quarter. This was primarily a result of a reduction in our accounts receivable, and an income tax refund. In addition, our conversion to our new Y2K compliant ERP system is on schedule, and will be centrally located so we have everyone working on the same network, creating better synergies between departments across the entire organization."

Datum Inc. designs, manufactures and markets a wide variety of high-performance time and frequency products used to synchronize the flow of information in telecommunications networks. The Company is also a leading supplier of precise timing products for enterprise computing networks and a wide variety of space, scientific and industrial test and measurement applications.