Financial: MRV Communications Inc. Q1 Results - Company Financial Information

Edge: Work-Group Computing Report, May 3, 1999

MRV Communications Inc. (Nasdaq: MRVC), a leading provider of high speed optical network components and systems, today reported results for the first quarter ended March 31, 1999.

Revenues for the March quarter were $70,116,000, a 15% increase from $60,826,000 in the first quarter of 1998. Net loss for the first quarter of 1999 was $909,000 compared to pro forma net income of $7,339,000, excluding one-time charges related to the Xyplex acquisition in the quarter ended March 31, 1998. Including the one-time charges related to the acquisition of Xyplex, net loss in the quarter ended March 31, 1998 was $30,221,000.

Basic and diluted loss per share for the first quarter of 1999 were $0.03 compared to pro forma basic earnings per share of $0.28 and pro forma diluted earnings per share of $0.26 in the first quarter of 1998. Including one-time charges related to the Xyplex acquisition, basic and diluted loss per share were $1.15 for the quarter ended March 31, 1998.

Noam Lotan, President and CEO, commented: "We are satisfied with the progress the company is making as well as the progress of the three new ventures that we funded. MRV is now the only pure player in the convergence of internetworking technologies. We are in a unique position with our well-focused approach on LAN, WAN, optical networks, and the Internet.

"Our core business, Lightwave Transmission, is very healthy. To that effect we continue to invest in production capacity, additional space and new talents.

"On April 6, MRV announced (under our NBase-Xyplex brand) the first Linux Switch/Router (`OSR'). This is a high capacity machine with a 40 Gbps switching fabric, capable of routing 26 million packets per second, at layers 3 and 4. The OSR will support 10/100 Mbps Ethernet, Gigabit Ethernet, ATM OC3 and ATM OC12 interfaces. In addition to this impressive throughput, unique programmable processors allow new features to be added without hardware upgrades. By using integrated applications of the Linux Operating System, the OSR provides smart network applications powered by Symmetric Multiprocessing Performance (`SMP'). SMP provides faster route table re-calculations and therefore faster recovery from route changes than routers with a single processor. The OSR starts with two processors, and will scale to 16. This is important, as other routers might not have the horsepower to support future requirements for robust Internet connectivity. Cisco for example, uses a single processor.

"The Linux Router is the first in the world, allowing programmers to add or write new applications that will run on top of Linux OS, and will control the router functionality. This brings a level of openness and flexibility to the world of routing that proprietary (and closed) operating systems do not have.

"The OSR was developed and will be manufactured in Israel. It will be demonstrated for the first time at the upcoming NetWorld-InterOp show in Las Vegas, with general availability in Q3."

Lotan continued: "MRV has funded three promising start-up internetworking companies: New Access Communications, for Metro-Access networks, Charlotte's Web Networks, for Carriers' Internet, and HyperChannel, for e-commerce and Network Security.

"New Access is first to combine a commercially viable DWDM system with data switching in a metropolitan ring. During the quarter, New Access won the overall Best Product Achievement Award at the ComNet DC trade show.

"Charlotte's Web's product is the next generation Terabit Switch/Router for Internet backbone applications. It will seamlessly integrate Cell and Packet based traffic, with a rich set of Differentiated Services based on latest IETF definitions. Non-blocking traffic flow starts at 128 Gbps, scaleable to multiple Terabits per second. Packet forwarding starts at 200 million packets per second. Competitive analysis shows Charlotte favorably competing on processing speed and offering the highest port density per rack space. For example, 256 Gigabit Ethernet or 64 ports of OC-48 can be supported in a single 19-inch rack. Charlotte plans to exhibit for the first time at the SuperComm show, the Telecom industry's most prominent annual event, June 7 to 10.

"Our e-commerce startup is HyperChannel. Led by a former Cisco UK executive, HyperChannel's mission is to build an electronic B to B channel across Europe. This is accomplished through a proprietary two-tier e-commerce, between end-users, resellers and distributors. By collapsing the supply chain and automating the commodity aspect of a two-tier transaction, resellers can focus on the more productive part of their business, solving end users' problems. All this effort facilitates the creation of on-line stores. HyperChannel to date has performed beyond our expectations."

MRV Communications is a world class leader in high-speed optical network components and systems. Its products integrate switching, routing, remote access, and fiber-optic transmission to enhance the performance of LANs and WANs and telecommunications networks. MRV's fiber-optic transmission components send voice, data and video to carriers and residential networks. Through its NBase-Xyplex brand, the company provides network enhancement solutions that accelerate the deployment and improve the performance of complex data networks.