KANATA, Ont., Nov. 25 /CNW-PRN/ - Newbridge Networks today announced
financial results for the second quarter of fiscal year 1998, which ended
November 2, 1997.
Revenue for the second quarter was $432 million, an increase of 37%
compared with the second quarter of fiscal 1997, but $3 million lower than
first quarter fiscal 1998 revenue. Net earnings for the quarter were $58
million (33 cents per share basic and fully diluted, Canadian GAAP). Earnings
per share in US currency, calculated in accordance with US GAAP, and
translated at the average exchange rate for the quarter of .7205, as reported
by the Federal Reserve Bank of New York, were 23 cents per share primary and
fully diluted.
Order intake increased compared with the prior quarter. Total orders
exceeded shipments, resulting in a record backlog again this quarter. The
strong performance was principally due to the Company's wide area network
(WAN) packet business.
WAN packet products achieved record order intake, revenue and backlog for
the quarter. Order intake increased almost 20% sequentially and approximately
115% compared with the second quarter of fiscal 1997. WAN packet revenue
increased 14% sequentially and approximately 85% year over year. For the first
time in the Company's history, WAN packet revenue exceeded time division
multiplexer (TDM) revenue.
The strong performance in WAN packet business was driven by the industry's
flagship ATM system, the MainStreetXpress(TM) 36170 Multiservices Switch,
which also achieved record order intake, revenue and backlog again this
quarter. Both order intake and revenue for this product increased
approximately 50% sequentially. Orders received for the MainStreetXpress 36170
switch were almost six times the level achieved in the second quarter of
fiscal 1997, while revenue was more than five times the second quarter fiscal
1997 level.
There were 80 customers for the MainStreetXpress 36170 switch in the
second quarter alone, including 24 new customers. The product has now been
sold to more than 130 customers, including many of the largest service
providers throughout the world.
Sales and orders for frame relay capabilities on the MainStreetXpress
36170 Multiservices Switch were both at record levels. There were
approximately 15 new customers for this frame relay over ATM capability in the
quarter, bringing the total number of customers deploying the frame relay
interface cards on the MainStreetXpress 36170 Multiservices Switch to over 80.
In addition, 27 customers have ordered the circuit emulation capabilities on
the product (which only entered volume shipment in the second quarter) further
demonstrating the success of the Company's strategy for its ATM product
platform as a single, unifying, multiservices networking fabric.
TDM revenue was in line with the previous quarter, while order intake
increased sequentially. The current worldwide T1/E1, T3/E3 multiplexer
equipment market is estimated to be US $1.3 billion, at end customer selling
price. Newbridge worldwide market share is approximately 50%, which is up from
approximately 36% two years ago and 44% last year. The Company has
consolidated its global leadership position in this market and expects to grow
its TDM revenue in line with the annual market growth rate forecast of 5% to
6%.
Enterprise networking revenue, comprising the VIVID switched routing
system and the former UB Networks products, was approximately $45 million.
Sales of the VIVID MLS 500 switching hub were below expectations because of
delays in the development of certain key interface cards for the product. In
addition, sales of shared media hubs continued to decline, consistent with the
decline in the overall market for shared media hubs.
''As I stated in the Company's November 3, 1997 announcement of the
preliminary estimates of results for the second quarter of fiscal 1998, we are
disappointed in the results for the quarter,'' said Peter Charbonneau,
President and Chief Operating Officer, Newbridge Networks. ''The shortfall in
revenue and earnings is attributable to the Company's enterprise business,
specifically the former UB Networks business. Our TDM product line, which
delivers guaranteed bandwidth and associated advanced private line services,
continues to generate profitable returns for the Company, and our WAN packet
business, driven principally by the MainStreetXpress 36170 Multiservices
Switch, achieved strong performance again this quarter.
''Newbridge is strongly positioned in its core WAN business. The major
industry analysts have recognized that carriers throughout the world are
migrating their core infrastructures to a multiservices ATM fabric and
continue to position Newbridge with the leading market share position in the
worldwide market for ATM WAN equipment. The Company's successful alliance with
Siemens has further strengthened our leading position. And since we began
volume shipment of frame relay capabilities on the MainStreetXpress 36170
Multiservices Switch in fiscal 1997, we have grown our frame relay revenue via
this platform at an annualized rate of approximately 180%. Our growth strategy
continues to be to provide a comprehensive and 'evergreen' product line to
enable our customers to evolve and expand their service offerings in a
seamless, 'future-proof' fashion. This strategy is proving successful, as more
and more of our customers are migrating to the Company's multiservices ATM
platform.
''The Company's enterprise business did not meet our expectations for the
quarter. The shortfall results from declines in business levels associated
with the former UB Networks, which we acquired in January 1997. When we
acquired UB Networks, we characterized it as a turnaround situation. Clearly,
the performance of this segment of our business has been disappointing. We are
examining the options available and we are developing a comprehensive action
plan to effectively address this market space. We expect to have largely
completed the necessary actions within the current fiscal quarter and we will
communicate the details more fully as we proceed.
''Traditionally about one third of the Company's revenue has come from
Fortune 1000 type corporate customers. This was the case prior to the
acquisition of UB Networks. Newbridge remains committed to the enterprise
market and to serving our corporate customers in this market. Our strategic
direction as we move forward will be to focus on addressing this market from
our position of strength as one of the world's leading WAN networking
companies. In this regard, the Carrier Scale Internetworking (CSI) strategy,
architecture and products we announced at Networld + Interop in October, in
conjunction with Siemens and 3Com, are extremely important in delivering
scalable, end-to-end, fully managed networking services -- including premium
Internet Protocol (IP) -- to enterprise customers.'' |
