Proxim, Inc. Q2 1999 Results - Company Financial Information

Edge: Work-Group Computing Report, August 2, 1999

Proxim, Inc. (Nasdaq:PROX) has announced its financial results for the second quarter ended June 30, 1999.

Revenue for the second quarter of 1999 was $16,002,000 compared to revenue of $11,500,000 for the second quarter of 1998, and compared to revenue of $14,750,000 for the first quarter of 1999. Revenue for the six months ended June 30, 1999 was $30,752,000 compared to revenue of $21,750,000 for the six months ended June 30, 1998.

During the first and second quarters of 1999, the company took charges of $1,100,000 and $900,000, respectively, to research and development expense related to a minority investment in a startup company developing ultra-broadband wireless products.

Excluding the charges, pro forma net income for the second quarter of 1999 was $2,111,000, or $.17 per share (diluted), compared to net income of $1,160,000, or $.11 per share (diluted) for the second quarter of 1998, and pro forma net income of $1,836,000, or $.15 per share (diluted) for the first quarter of 1999.

Excluding the charges, pro forma net income for the six months ended June 30, 1999 was $3,947,000, or $.32 per share (diluted), compared to net income of $2,026,000, or $.19 per share (diluted) for the first six months of 1998.

Including the charges, net income for the second quarter of 1999 was $1,211,000, or $.10 per share (diluted), compared to net income of $1,160,000, or $.11 per share (diluted) for the second quarter of 1998, and compared to net income $736,000, or $.06 per share (diluted) for the first quarter of 1999.

Including the charges, net income for the six months ended June 30, 1999 was $1,947,000, or $.16 per share (diluted), compared to net income of $2,026,000, or $.19 per share (diluted) for the first six months of 1998.

The effective income tax rate is 35% before the charges in 1999 compared to 30% in 1998. "Second quarter 1999 highlights for Proxim included strategic HomeRF partnership announcements with Intel and Motorola, each of which completed $10 million equity investments in the company, as well as expanded sales and distribution channels for our award-winning Symphony suite of cordless home networking products," said David C. King, Proxim's Chairman, President and CEO. "Symphony continues to achieve strong end-user acceptance based on its reliability, advanced internet software features, and ease of installation. Thus far, Symphony has won "best of class" in every major competitive home networking product review, including awards from PC Magazine, CNET, PC World, PC Computing and Home Office Computing."

Headquartered in Sunnyvale, Proxim, Inc., is the world's leading supplier of spread spectrum wireless LAN products to OEMs and wireless solutions providers. In 1994, Proxim was first to market with its industry-leading RangeLAN2 2.4 GHz frequency hopping wireless LAN product family, which has attracted more than 100 OEMs and wireless solutions providers worldwide. In 1998, the company introduced its high-performance RangeLAN802 product line, which operates at 2 Mbps and is fully compliant with the IEEE 802.11 standard. In 1999, Proxim has established itself as a leader in the emerging home networking market with its award-winning Symphony suite of cordless networking products for home and small office environments.

Proxim is a founding member of the Wireless LAN Interoperability Forum (WLI Forum), established to deliver and test interoperable wireless LAN products and services (www.wlif.com). Proxim is also a core member of the Home Radio Frequency Working Group (HomeRF), which is committed to providing a broad range of interoperable cordless consumer devices (www.homerf.org). See www.proxim.com for additional information.

                          Proxim, Inc.
                     Statement of Operations
              (in thousands, except per share data)
                           (unaudited)

                     Three Months Ended          Six Months Ended
                --------------------------*   ------------------
                     June 30,       March 31,         June 30,
                  1999      1998       1999        1999      1998
                ---------------*   -----*    -----*  -------
Revenue         $16,002   $11,500    $14,750     $30,752   $21,750
Cost of revenue   8,403     5,945      7,674      16,077    11,244
                -----*  -----*   -----*    -----*  -------
Gross profit      7,599     5,555      7,076      14,675    10,506
Research and
 development      3,081     1,976      3,108       6,189     3,787
Selling, general
 and administrative  3,140  2,743      3,096       6,236     5,441
                -----*  -----*   -----*    -----*  -------
Income from
 operations       1,378       836        872       2,250     1,278
Interest and
 other income       969       820        852       1,821     1,615
                -----*  -----*   -----*    -----*  -------
Income before
 income taxes     2,347     1,656      1,724       4,071     2,893
Provision for
 income taxes     1,136       496        988       2,124       867
                -----*  -----*   -----*    -----*  -------
Net income      $ 1,211   $ 1,160    $   736     $ 1,947   $ 2,026
                =======   =======    =======     =======   =======
Basic net
 income per share  $  0.11$  0.11    $  0.07     $  0.18   $  0.20
                =======   =======    =======     =======   =======
Weighted average
 common shares   11,114    10,279     10,593      10,854    10,265
                =======   =======    =======     =======   =======
Diluted net
 income per share  $  0.10$  0.11    $  0.06     $  0.16   $  0.19
                =======   =======    =======     =======   =======
Weighted average
 common shares
 and equivalents 12,697    11,000     12,041      12,344    10,944
                =======   =======    =======     =======   =======

As a percentage
 of revenue:

Gross margin       47.5%     48.3%      48.0%       47.7%     48.3%
Research and
 development       19.3%     17.2%      21.1%       20.1%     17.4%
Selling, general
 and administrative19.6%     23.8%      21.0%       20.3%     25.0%
Income from
 operations         8.6%      7.3%       5.9%        7.3%      5.9%
Net income          7.6%     10.1%       5.0%        6.3%      9.3%


                          Proxim, Inc.
                     Condensed Balance Sheet
                         (in thousands)
                           (unaudited)

                                          June 30,    December 31,
                                            1999          1998
                                        ---------* -------------
Assets
Current assets:
  Cash and marketable securities          $ 88,048      $ 66,687
  Accounts receivable                        9,106         9,193
  Inventories                               12,544        11,825
  Deferred tax assets                        1,612         1,612
  Other assets                                 278           297
                                         --------*   ----------
    Total current assets                   111,588        89,614
Property and equipment, net                  6,299         3,355
Deferred tax assets and other assets         3,273         1,273
                                         --------*   ----------
                                          $121,160      $ 94,242
                                         ==========    ==========

Liabilities and Stockholders' Equity
Current liabilities:
  Accounts payable                        $  2,331      $  2,321
  Other current liabilities                  9,306         6,451
                                         --------*   ----------
 Total current liabilities                  11,637         8,772
                                         --------*   ----------
Capital stock                              105,281        83,175
Retained earnings                            4,242         2,295
                                         --------*   ----------
 Total stockholders' equity                109,523        85,470
                                         --------*   ----------
                                          $121,160       $94,242
                                         ==========    ==========