Newbridge Networks Announces Results for Second Quarter Fiscal Year 2000 and Significant Restructuring of the Company - Company Financial Information

Cambridge Telcom Report, Nov 22, 1999

Newbridge Networks Corporation (TSE:NNC.)(NYSE:NN) Thursday announced financial results for the Company's second quarter of fiscal 2000, which ended October 31, 1999. Revenue for the quarter was $481 million and net earnings were $302 million. Earnings per share, which include investment gains and the amortization of acquired intangible assets, were $1.67 per share basic and $1.52 per share fully diluted under Canadian GAAP, or U.S. 98 cents per share basic and U.S. 97 cents per share diluted under U.S. GAAP. Earnings per share for the quarter, excluding the effect of items related to acquisitions and non-recurring items, were 12 cents per share basic and fully diluted under Canadian GAAP, or U.S. 8 cents per share basic and diluted under U.S. GAAP.

"The disappointing results of the quarter compelled us to accelerate the deployment of a comprehensive strategic action plan, which was unanimously approved Thursday by the Company's Board of Directors," said Terence Matthews, chairman and chief executive officer, of Newbridge Networks. "The principal objective is to leverage the power of our industry leading products to create shareholder value. To achieve this objective, we are fully committed to considering all strategic options."

"The immediate operational actions we are undertaking represent a significant restructuring of the Company," said Pearse Flynn, president and chief operating officer. These actions include cutting overhead costs; streamlining operations; and sharpening our product portfolio and R&D focus to concentrate on the Company's areas of strength, in particular ATM IP switches, and broadband wireless and digital subscriber line (DSL) access product families. Specific actions include outsourcing of volume manufacturing, outsourcing of global customer service, and headcount reductions totaling more than 10 percent of the Company's workforce, primarily in the areas of overhead and administration.

"Newbridge's competitive position is anchored by a number of key assets. These include a broad and solid customer base of over 350 of the world's largest carriers in more than 100 countries throughout the world; a world-class R&D organization comprising some 2,000 experienced networking engineers and designers; and market leading positions in key technologies such as ATM IP switching and broadband wireless.

"We are building on these strengths with the introduction this quarter of our next generation multi-protocol platform. This new product family breaks new ground in the industry. With unmatched traffic management, carrier class reliability, and high density, high speed optical networking interfaces from OC-3 to OC-192, it is the only product in the market capable of scaling in service from 50 Gbit/sec to 5 Tbit/sec. Customer response to this product, as well as to our broadband access products, has been exceptional. The Company's product portfolio positions it squarely in the highest growth areas of wide area networking."

The Company's IP ATM multi-protocol switch revenues increased by approximately 70 percent compared with a year ago, while order intake was up over 80 percent year-over-year and approximately 20 percent on a sequential basis. There were approximately 200 customers for the Company's ATM IP product line in the quarter, including more than 50 new customers this quarter. In addition, Newbridge is winning one out of every two contract bids for broadband wireless networks on a worldwide basis.

"The growth prospects for the wide area network ATM IP switches and broadband access markets are strong," concluded Mr. Flynn. "Newbridge is focused squarely on these markets and is a solid leader in these spaces, with key customers that include SBC, British Telecom, France Telecom, Deutsche Telecom, Cable and Wireless, Bell Canada and AT&T. The Company is introducing a new portfolio of IP ATM switched routers and broadband access products that significantly expand our addressable markets."

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 enterprise 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.