Network Engines (NENG)
Sales Trend
1Q02 to 2Q04

Quarter  TidalWire     Centera    Others     Total   

1Q02        -        $  1.5M    $  0.6M    $  2.1M    
2Q02        -           2.3M       0.7M       3.0M    
3Q02        -           3.4M       0.7M       4.1M
4Q02        -           4.8M       0.5M       5.3M    

FY02        -        $ 12.0M    $  2.5M    $ 14.5M

1Q03     $ 0.3M         4.9M       0.8M       6.0M    
2Q03      10.2M         8.1M       1.1M      19.4M   
3Q03      12.6M        13.0M       1.4M      27.0M    
4Q03      14.8M        12.1M       1.9M      28.8M     

FY03    $ 37.9M      $ 38.1M     $ 4.2M    $ 81.2M

1Q04      15.9M        16.8M       3.2M      35.9M
<font color=blue>
2Q04(E)   11.0M       ~16.0M      ~3.0M      30.0M     
2Q04(E)   13.0M       ~17.0M      ~4.0M      34.0M    
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Business Outlook 

Based on current forecasts from certain partners,
the expected impact of the amended EMC HBA 
distribution agreement and historical and 
seasonal trends, the Company currently anticipates
the following results for its fiscal second quarter
ending March 31, 2004: 

- Net revenues in the range of $30 million to 
$34 million.

- OEM Appliance revenues between $19 million and
$21 million.

- Distribution revenues in the range of $11 million
to $13 million.

- Gross profit in the range of 16 percent to 
18 percent.

- Operating expenses between $5.5 million and 
$5.8 million.

- Net income (loss) on a GAAP basis between a
net loss of $(200,000) to net income of $300,000.

- Cash position between $33 million and 
$35 million. 

"In the storage industry, the March quarter is
typically the weakest quarter of the calendar 
year. As a result, we expect revenues for the 
March quarter for both OEM Appliance and 
Distribution operations to be relatively flat
to down," stated Doug Bryant, Vice President 
of Finance and Administration and Chief
Financial Officer. "The guidance range for 
distribution  revenue is lower than the prior 
quarter because of expected seasonality plus
an element of uncertainty as a result of the
recently amended EMC HBA distribution contract.
We will continue to focus on expense controls 
as one of our most important financial metrics,
but in a manner consistent with the execution
of our long-term growth strategy." 

O/S (diluted) - 35.72M shares

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