Newbridge Networks Announces Record Revenue for First Quarter Fiscal Year 2000 - Company Financial Information

Cambridge Telcom Report, August 30, 1999

Newbridge Networks Corporation (TSE:NNC)(NYSE:NN) Tuesday announced financial results for the first quarter of fiscal year 2000, ending August 1, 1999. Revenue for the quarter was $495 million, a record for the Company, and an increase of 8 percent over the previous quarter. Net earnings for the quarter were $47 million -- 26c per share basic and fully diluted under Canadian GAAP, or U.S. 18c per share basic and diluted under U.S. GAAP -- an increase of 50 percent compared with the previous quarter.

"This was a solid quarter," said Alan Lutz, president and chief operating officer, Newbridge Networks. "We said we were going to fix our supply line management issues and we largely have. We said we were going to achieve significant growth and we did. We said we were going to control expenditures and margins and we did. I want to thank all Newbridge employees for significantly improving our credibility with investors."

WAN packet revenue grew by more than 12 percent sequentially to reach $357 million in the quarter, representing 72 percent of total revenue and resulting in record WAN packet revenue. WAN packet revenue growth was driven by 16 percent sequential growth in the Company's flagship broadband multiservice platform and the industry's best selling ATM system, the MainStreetXpress 36170 Multiservices Switch. Sales of the 36170 switch were more than double that of the previous year's first quarter, as the platform continues to capture market share, growing at approximately twice the annual growth rate for the overall ATM WAN market.

There were approximately 140 customers for the MainStreetXpress 36170 system in the quarter -- a record number of 36170 customers for any quarter -- including 28 new customers. This brings the total number of customers for the platform to over 380. Customers include most of the largest service providers in the world. The Company has received strong interest from all clients in the 50 Gbit/sec and 320 Gbit/sec expanded versions of the 36170 Multiservices Switch. These systems are scheduled for trials later this fiscal year.

Company management continued to closely control operating expenses. First quarter operating expenses were $209 million, an increase of only $3 million from the prior quarter, despite the fact that the Company's common salary review date of May 1st resulted in an increase in payroll expenses in the quarter of approximately $12 million compared with the prior quarter.

"As we entered the quarter I stated that our objective was to achieve the revenue and earnings goals for the quarter -- traditionally the lightest quarter of the fiscal year -- without significantly diminishing the record level of backlog we had built," continued Mr. Lutz. "With the revenue and EPS numbers we posted, and a book-to-bill ratio of approximately one, we achieved this objective.

"We have implemented a great deal of change over the past year to strengthen Newbridge. Significant reorganization has been completed. New blood and fresh ideas have been injected into the Company through the addition of new executives to the leadership team. The product portfolio has been expanded and rejuvenated. The supply line management issues outlined at the beginning of the quarter have been largely rectified, eliminating the constraint on our ability to grow the business.

I believe we are well positioned to take advantage of the opportunities created by the rapidly expanding networking market. Client response to our broadband access products has been exceptional. Adding to our enthusiasm is early reaction to our differentiated IP services offering, and, in particular, our Digital Multimedia Distribution System."

Newbridge Networks designs, manufactures, markets and services wide area networking solutions for Internet service providers; local, long-distance, and wireless communications companies; cable television carriers; and corporate customers in more than 100 countries. The Company leverages its relationship with a growing family of Newbridge Affiliate companies and strategic alliances with numerous other networking companies to deliver complete, end-to-end solutions. Newbridge customers include the world's 350 largest telecommunications service providers and more than 10,000 corporations, government organizations and other institutions. Founded in 1986, the Company employs more than 6,000 people on six continents. News and information are available at www.newbridge.com.

                 Newbridge Networks Corporation
    Condensed Consolidated Statements of Earnings (unaudited)
     (Canadian dollars in thousands, except per share data)

                                        Fiscal quarters ended
                                    -----------------------------

                                   August 1,            August 2,
                                    1999                 1998
                                  ---------            ----------
Sales                              $495,070              $426,056
Cost of Sales                       215,521               176,562
                                  ---------            ----------
Gross Margin                        279,549               249,494


Expenses
  Selling, general
 and administrative                 141,037               129,039
  Research and development           67,621                67,156
  Amortization of acquired
intangibles                           2,745                   927
                                -----------           -----------
Income from operations               68,146                52,372
Net gain on investments               3,512                     -
Other expense                        (1,332)               (1,598)
                                   ---------            ----------
Earnings before income taxes
  and non-controlling interest       70,326                50,774
Provision for income taxes           21,705                14,978
Non-controlling interest              1,335                   276
                                  ---------            ----------


Net earnings                       $ 47,286              $ 35,520
                                   ---------            ----------
                                   ---------            ----------


Earnings per share


  Cdn. GAAP - basic                $   0.26              $   0.20
  Cdn. GAAP - fully diluted        $   0.26              $   0.20
  U.S. GAAP - basic - US$          $   0.18              $   0.14
  U.S. GAAP - diluted - US$        $   0.18              $   0.14


Weighted average number of shares


  Basic - Cdn. GAAP and U.S. GAAP   180,399               176,105
  Fully diluted - Cdn. GAAP         180,399               176,105
  Diluted - U.S. GAAP               182,500               178,419


                 Newbridge Networks Corporation
        Condensed Consolidated Balance Sheets (unaudited)
                 (Canadian dollars in thousands)


                                   August 1,              May 2,
                                     1999                  1999

Cash and marketable securities $  630,742             $  879,694
Accounts receivable               560,204                472,811
Inventory                         271,373                210,286
Property, plant and equipment     463,242                455,483
Goodwill                           38,939                 40,022
Other assets                      557,834                412,328
                               -----------           -----------
                               $2,522,334             $2,470,624
                               -----------           -----------
                               -----------           -----------


Accounts payable and accruals  $  365,955             $  391,991
Income taxes                       85,488                 16,853
Long term obligations             392,620                386,890
Future tax obligations             54,277                123,088
Non-controlling interest           24,348                 22,583
                               -----------           -----------
                                  922,688                941,405

Shareholders' equity            1,599,646              1,529,219
                               -----------           -----------
                               $2,522,334             $2,470,624

            Supplementary Condensed and Consolidated
              Statements of Earnings (unaudited)(x)
     (Canadian dollars in thousands, except per share data)


                                        Fiscal quarters ended
                                      -------------------------

                                   August 1,           August 2,
                                      1999              1998
                                  ----------        ------------

Sales                              $495,070             $426,056
Cost of Sales                       215,521              176,562
                               -----------           -----------
Gross Margin                        279,549              249,494


Expenses


  Selling, general
 and administrative                 141,037              129,039
  Research and development           67,621               67,156
Income from operations               70,891               53,299
Other expense                        (1,332)              (1,598)
                                -----------           -----------
Earnings before income taxes
  and non-controlling interest       69,559               51,701
Provision for income taxes           20,520               14,978
Non-controlling interest              1,335                  276


Net earnings                       $ 47,704             $ 36,447
                                -----------           -----------
                                -----------           -----------


Earnings per share


  Cdn. GAAP - basic                $   0.26             $   0.20
  Cdn. GAAP - fully diluted        $   0.26             $   0.20
  U.S. GAAP - basic - US$          $   0.18             $   0.14
  U.S. GAAP - diluted - US$        $   0.18             $   0.14

  (x)Supplementary earnings exclude the impact of net gain on
investments, amortization of acquired intangibles, and
non-recurring gains and charges.