Monday October 19, 4:30 pm Eastern Time
Company Press Release
Ascend Communications Reports
Third Quarter 1998 Financial Results
Network Service Providers Fuel 37% Year over Year Revenue Growth
ALAMEDA, Calif.--(BUSINESS WIRE)--Oct. 19, 1998-- Ascend Communications, Inc.
(Nasdaq:ASND - news) today reported financial results for the third quarter ended September 30,
1998. Third quarter net sales grew year-over-year by 37.0% to $370.3 million versus $270.4
million in the third quarter of 1997. Net income increased year-over-year by 64.7% to $66.1 million
($0.32 per share on a diluted basis) versus $40.1 million ($0.20 per share on a diluted basis) in the
third quarter of 1997. Compared to second quarter 1998 results, this represents sequential growth
in net sales and net income of 13.1% and 11.8%, respectively.
Commenting on the third quarter performance, Mory Ejabat, president and CEO said, ''Our
continued growth this quarter illustrates our leadership in providing products and services used to
build next-generation networks. We are also pleased this quarter to show substantial growth
year-over-year for both revenues and earnings, which is indicative of our strong commitment over
the past year to strengthening the fundamentals of the business by focusing on areas such as product
quality, organizational infrastructure and market development.''
Continuing, Mr. Ejabat said ''Revenues for the quarter were fueled by substantial growth in Access
Switching product sales where our advanced solutions, such as voice and fax over IP and Virtual
Private Networking (VPN), have helped drive port demand in the service provider market.''
Ascend's development efforts continue to focus on providing value-added features that allow the
Network Service Providers to increase revenue by offering new applications and services to their
customers while reducing the operational costs associated with operating their networks. This
quarter Ascend was named number one in remote access concentrator revenues to service
providers for the first half of 1998 by research analysts such as Dell'Oro, Cahners In-Stat,
Dataquest and IDC.
In the third quarter, Ascend announced the acquisition of Stratus Computer, which brings to Ascend
Signaling System 7 (SS7) technology and expertise, fault-tolerant technology, intelligent networking
and Operations Support System (OSS) software, and an experienced carrier sales and network
integration organization. Commenting on the Stratus transaction, Mr. Ejabat said, ''We have made
rapid progress integrating these key technologies into Ascend's data networking portfolio for use in
the next-generation network. Our Ascend Signaling Gateway (ASG), using Stratus' enhanced
software and fault-tolerant platform is receiving positive feedback from customers who are
evaluating the product in their networks today.''
Commenting on the rapid integration of voice and data in carrier networks, Mr. Ejabat said, ''There
is a need to redesign the existing voice infrastructure to accommodate both voice and data traffic on
a single, efficient network architecture, which we call the next-generation network. Our goal is to
deliver the products and services that address this need - products that bring down operational
costs while seamlessly integrating into existing circuit-switched networks. The acquisition of Stratus
this quarter is a significant step to achieving that goal.''
In the third quarter, Ascend also announced a joint development arrangement with Alcatel for
next-generation Internet access solutions that will make high-speed data services a reality for
businesses and consumers, while reducing costs for network service providers. New products to be
developed include an IP Service Access Gateway and a high-speed ''router on a card'' for Alcatel's
worldwide installed base of Central Office switches. Both products will use Ascend's high-speed
IP-forwarding technology and serve to broaden the company's IP product offerings. The new
arrangement also strengthens an existing distribution agreement, which is expected to expand
Ascend's presence in international markets.
Looking forward to the remainder of 1998 and into 1999, Mr. Ejabat said, ''We continue to see
strength in the North American and European service provider markets, particularly with CLECs
and other competitive service providers who are moving rapidly to deploy next-generation
networks. We are also encouraged that spending on the next-generation network seems to be of the
highest priority at most carriers. Moving forward, we believe we are well positioned to deliver the
integrated solutions network service providers are demanding today and remain optimistic about our
long-term prospects as one of the leading suppliers to service providers worldwide.''
About Ascend Communications
Ascend Communications, Inc. (Nasdaq: ASND - news) develops, manufactures, sells and services
wide area networking solutions for telecommunications carriers, Internet service providers and
corporate customers worldwide.
For more information about Ascend and its products, please visit the Ascend Web site at
www.ascend.com, or send e-mail to info@ascend.com. For Investor Relations, please call our
communications hotline at 800-648-3059 or 760-704-4423 (outside the US & Canada).
Additional investor information can also be accessed on our Web site at:
ascend.com. Ascend is headquartered at One Ascend Plaza, 1701 Harbor
Bay Parkway, Alameda, Calif. 94502; phone is 800/ASCEND4 and fax is 510-814-2300.
This release, other than historical financial information, contains forward-looking statements that
involve risks and uncertainties. The results or events predicted in these statements may differ
materially from actual future events or results. For instance, factors which could cause actual events
or results to differ from anticipated events or results include the rate of development of new and
enhanced technology by Ascend and its competitors, the integration of new businesses, the
introduction and market acceptance of new products by Ascend and its competitors, competitive
pricing actions and marketing programs, among others. Readers are referred to the documents filed
by Ascend Communications with the Securities and Exchange Commission, specifically the most
recent reports on forms 10-K and 10-Q, which identify important risk factors which could cause
actual results to differ from those contained in the forward-looking statements.
Ascend Communications, Inc.
Combined Consolidated Statements of Operations, Unaudited
(In Thousands, Except Per Share Data)
Quarter Ended Nine Months Ended
Sept. 30, Sept. 30,
----------------------- -----------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
Net sales $ 370,346 $ 270,372 $1,002,815 $ 874,805
Cost of sales 133,444 97,181 360,373 308,245
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Gross profit 236,902 173,191 642,442 566,560
Operating Expenses:
Research and
development 53,418 40,706 140,849 115,595
Sales and marketing 72,553 66,499 207,616 179,616
General and
administrative 33,042 8,475 52,803 27,019
Purchased research
and development - - - 231,100
Cost of mergers (18,279) - (18,279) 150,271
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Total operating
expenses 140,734 115,680 382,989 703,601
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Operating income (loss) 96,168 57,511 259,453 (137,041)
Interest income, net 6,276 6,161 17,163 17,739
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Income (loss) before
income taxes 102,444 63,672 276,616 (119,302)
Provision for income
taxes 36,368 23,544 99,083 52,648
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Net income (loss) $ 66,076 $ 40,128 $ 177,533 $ (171,950)
=========== =========== =========== ===========
=========== =========== =========== ===========
Net income (loss) per
share - Basic $ 0.33 $ 0.21 $ 0.91 $ (0.92)
=========== =========== =========== ===========
Net income (loss) per
share - Diluted $ 0.32 $ 0.20 $ 0.86 $ (0.92)
=========== =========== =========== ===========
=========== =========== =========== ===========
Number of shares used
in per share
calculation - Basic 197,689 189,562 194,779 187,920
=========== =========== =========== ===========
Number of shares used
in per share
calculation - Diluted 208,515 199,838 205,805 187,920
=========== =========== =========== ===========
=========== =========== =========== ===========
Ascend Communications, Inc.
Combined Consolidated Balance Sheets, Unaudited
(In Thousands)
Sept. 30, Dec. 31,
1998 1997
ASSETS
Current assets:
Cash, cash equivalents and $ 352,611 $ 475,427
investments
Accounts receivable, net 311,379 234,183
Inventories 131,790 99,637
Other current assets 145,692 105,340
---------- ----------
---------- ----------
Total current assets 941,472 914,587
Investments 420,625 101,212
Furniture, fixtures and equipment, net 174,595 114,351
Other assets 31,962 7,744
----------- -----------
=========== ===========
Total assets $1,568,654 $1,137,894
=========== ===========
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities 247,375 168,638
----------- -----------
Total current liabilities 247,375 168,638
Stockholders' equity:
Common stock 199 191
Additional paid-in capital 1,052,937 878,455
Retained earnings 268,143 90,610
----------- -----------
----------- -----------
Total stockholders' equity 1,321,279 969,256
----------- -----------
=========== ===========
Total liabilities and stockholders'
equity $1,568,654 $1,137,894
=========== ===========
=========== ===========
Contact:
Ascend Communications, Inc.
Bernie Schneider, 510/747-2618 (Corp. VP & Treasurer)
Kristina Graziano, 510/747-2345 (Investor Relations) |
