Financial: Olicom Q4 1998 and Full Year Results - Company Financial Information

Edge: Work-Group Computing Report, Feb 8, 1999

Olicom A/S (Nasdaq NMS: OLCMF), a leading global supplier of high- performance networking solutions, Thursday reported financial results for the fourth quarter and fiscal year ended December 31, 1998. o Unsatisfactory results for the fourth quarter and full year 1998. o As previously announced, Olicom A/S has divested its 75% holding in LASAT A/S.

Accordingly, the Company's share of the result and net assets in LASAT for the fourth quarter and full year 1998, and comparable prior year periods, is presented separately as discontinued operations. o Fourth quarter net sales were $23.1 million, down 63 percent compared to $62.8 million in 1997; full year revenues were down 2 percent to $206.8 million. o Net loss for the fourth quarter was $29.9 million, compared to $6.7 million in net income reported for the fourth quarter of 1997. For the full year, a net loss of $22.9 million was recorded (1997 net loss $18.1 million). o Gross margin for the fourth quarter of 1998 was negative by 10.7 percent compared to positive 52.1 percent for the fourth quarter of 1997; on a full year basis, the gross margin was positive 40.6 percent (1997 positive 51.6 percent). o The loss per share in the final quarter of 1998 was $1.68 on 17.9 million shares outstanding, compared with a gain of $0.35 per share reported for the fourth quarter of 1997 on 18.8 million shares outstanding. The loss per share for the year ended December 31, 1998 was $1.27 for 17.9 million shares outstanding, compared to a loss per share of $1.20 for 15.7 million shares outstanding for full year 1997. These results include restructuring pre-tax charges recognized in the final quarter of 1998 of $4.1 million, primarily related to the staff reductions associated with the corporate restructuring announced on November 30, 1998. In addition, there were discontinued product write-offs of $2.5 million. Excluding these charges, the loss for the quarter totaled $23.4 million, corresponding to a loss of $1.31 per share. Niels Christian Furu, Olicom's chief executive officer, commented: "The results for the fourth quarter were primarily a consequence of our decision, announced November 30 last year, to effect a major restructuring of the business. As part of that process, we decided to bring inventory in the channel into line with appropriate levels, which historically has corresponded to six to seven weeks of estimated end user demand. A significant part of that adjustment was achieved during the fourth quarter, with the remainder expected to be completed during the first quarter of 1999. Externally, we were affected by continued price competition in our core Token- Ring market. This led to lower sales revenue even though volumes held reasonably steady. In addition, the Company did not capitalize tax losses for 1998." "The final quarter of last year marked a watershed in Olicom's history. Our decision to pursue a new strategy was a bold one. It was designed to position the Company to take advantage of the fundamental transition in data networking to a more diversified environment, as illustrated by the growth of Fast Ethernet switching. To achieve our new goals, it was necessary to make significant changes to our marketing model and cost structure." "We remain fully committed to our Token-Ring business, where Olicom's technological expertise and service excellence have enabled the Company to achieve market leadership. As fully described in our strategy statement last November, we will continue to develop products for this market, while leveraging our highly loyal Token-Ring customer base to enter the Fast Ethernet arena." Niels Christian Furu continued: "I am encouraged by a number of recent successes. Today, we are announcing a significant OEM agreement with Cabletron Systems, which will have an immediate positive impact on our sales of Token-Ring switching products world-wide. We have also made material changes to our cost structure, and we enter 1999 with a sound financial position. Last month, we disposed of our majority interest in LASAT. On the product side, we were first-to- market with our High Speed Token-Ring adapter, further confirming the Company's leadership in Token-Ring, as well as its ability to deliver new products to market on a timely basis." For fiscal 1999, the Company is targeting revenue growth of 15 percent compared to 1998, and full year earnings per share in excess of $0.40. "We remain cautious about our near term outlook. Our projections are predicated on Olicom's successful penetration of the Fast Ethernet switching market and our continued leadership in Token-Ring," concluded Niels Christian Furu. Olicom, a leading global supplier of high-performance data networking solutions, designs, develops, manufactures, and markets its products for large, geographically dispersed enterprises. It specializes in providing campus network connectivity solutions, advanced technical support services and ClearStep evolution strategies for networks in transition. The Company's products are distributed worldwide by a network of strategic partners and resellers. More information on Olicom is available from the Company's SEC filings or by contacting the Company directly. See Olicom news, product, and service information on its Web site at http://www.olicom.com.