Tekelec Reports First Quarter Results; Revenues Up 84% on Strength in All Divisions; Order Backlog Grows to $155 Million - Company Financial Information

Cambridge Telcom Report, May 1, 2000

Tekelec (Nasdaq:TKLC) Wednesday reported financial results for the first quarter ended March 31, 2000.

Revenues for the first quarter increased 84 percent to a first quarter record $60.1 million from $32.7 million in the first quarter of 1999. Revenues for the first quarter of 2000 include product sales resulting from the acquisition of IEX Corporation completed in the second quarter of 1999. Pro forma net income, excluding net amortization of intangible assets resulting from the IEX acquisition, increased to $5.0 million, or $0.08 per diluted share, from pro forma net income of $1.6 million, or $0.03 per diluted share, before a one-time restructuring charge of $1.8 million in the 1999 first quarter. Including net amortization of intangible assets in the first quarter of 2000, the Company incurred a net loss of $1.8 million, or $0.03 per share. This compares to net income of $0.5 million, or $0.01 per diluted share, including the restructuring charge in the 1999 first quarter.

The Company's improved profitability reflects strong sales growth across all operating divisions. Orders for the Company's products in the first quarter increased 46 percent to $72.5 million from $49.8 million a year ago. Total backlog at March 31, 2000 grew to $154.7 million, consisting of $86.0 million in product backlog and $68.7 million in multi-year service agreements.

Tekelec President and CEO Michael L. Margolis commented, "As our first quarter results demonstrate, we continue to benefit from our strategic initiatives and R&D investments of 1999, both in terms of increased demand for our expanded portfolio of solutions and new product introductions. The leadership position we've achieved in deploying SS7/IP solutions for converging circuit- and packet-based networks has been very important to our business, as we've demonstrated to customers that they can deploy any Tekelec solution today and migrate to next generation solutions when they are ready.

"In addition, while Tekelec's network systems, diagnostic solutions and service applications add value to all types of networks, demand from wireless carriers and wireless equipment manufacturers was particularly robust during the quarter and included a major follow-on order from AT&T Wireless. We expect that the future growth of wireless subscribers and enhanced wireless voice/data services will continue to be an important driver of our business going forward.

"Recent operating highlights include: -- The deployments of our IP7 Secure Gateway for converging voice and data networks by Global Crossing and Gateway Networks. Each of these carriers chose to upgrade its installed EAGLE STPs to our IP7 solutions. The upgrade from our EAGLE platform to IP7 Secure Gateways yields the dual benefits of the efficiency and services capabilities of packet technologies, and preservation of the value of their existing investments in Tekelec solutions.

-- The expansion of our portfolio of IP7 converged network solutions to include the IP7 Front End, an SS7/IP signaling solution for equipment manufacturers of next-generation solutions. IP7 Front End broadens our base of solutions for the OEM marketplace and provides SS7 connectivity for voice over IP and voice over ATM network elements to ensure interoperability with PSTN networks.

-- Announcement of a collaboration agreement with Cisco to enhance interoperability between our IP7 Secure Gateway and Cisco products using the TALI (transport adapter layer interface) interface. Together Tekelec and Cisco products provide a migration path to packet networks, including the provision of SS7 over Internet Protocol (IP).

-- Continued progress in international markets where we added four new customers of our network infrastructure solutions, including France Telecom Mobiles, which is conducting a trial of Eagle STPs; Globalstar, a global satellite communications provider; Centennial de Puerto Rico, a provider of PCS services in Puerto Rico; and a "new-breed" subsidiary of a major European telco.

-- The introduction of the velOSity family of diagnostic products for testing by equipment manufacturers for wireless, wireline, and converged network technologies. Hosted on our powerful i3000 platform introduced in 1999, velOSity uniquely enables product developers to perform converged technology testing on a single system -- with complete interoperability.

-- The launch of the TotalView Workforce Management Small TotalView Small Business solution, which targets call centers that employ less than 100 agents, expands our market potential while providing small business operators the proven functionality of our TotalView platform."

Tekelec, a leading supplier of signaling and control systems, develops innovative network switching and diagnostic solutions that enable the convergence of traditional and converged wireline, wireless and IP voice and data communications networks. The company also provides products and solutions for call centers and other telecommunications markets. Tekelec has its headquarters in Calabasas, California, and divisions in Morrisville, North Carolina, and Richardson, Texas. For more information, visit www.tekelec.com.