Proxim Corporation Reports Third Quarter 2004 Financial Results

Proxim Corporation Reports Third Quarter 2004 Financial Results



SUNNYVALE, Calif., Oct. 26  /PRNewswire-FirstCall/ -- Proxim Corporation
(NASDAQ:PROXD), a global leader in wireless networking equipment for Wi-Fi and
broadband wireless, today announced financial results for the third quarter
ended October 1, 2004.  Revenue for the third quarter of 2004 was $31.5
million, compared to revenue of $31.4 million in the second quarter of 2004,
and $35.1 million for the third quarter of 2003.

The net loss attributable to common stockholders computed in accordance with
generally accepted accounting principles (GAAP) for the third quarter of 2004
was $(4.4) million, or $(0.04) per common share.  This compares with a GAAP net
loss of $(10.1) million, or $(0.08) per common share, in the preceding second
quarter of 2004 and with a GAAP net loss of $(38.2) million, or $(0.31) per
common share, in the third quarter of 2003.

The non-GAAP, or pro-forma, net loss from operations in the third quarter of
2004 was $(2.7) million, or $(0.02) per common share, compared to pro-forma net
loss from operations of $(3.3) million, or $(0.03) per common share, in the
second quarter of 2004, and pro-forma loss from operations of $(4.8) million,
or $(0.04) per common share, in the third quarter of 2003.  A detailed and
specific reconciliation of the differences from the pro-forma loss from
operations to the GAAP loss is included in the accompanying financial tables.

Proxim exited the third quarter of 2004 with $19.1 million in cash, cash
equivalents and restricted cash.  This compares to $12.2 million in cash, cash
equivalents, and restricted cash at the end of the second quarter of 2004,
which excluded $2.5 million in short-term investments.

Key product highlights for the third quarter of 2004, include the following:

  -- Illustrating Proxim's competitive strength in broadband wireless
     access, Proxim Tsunami MP.11 sales were up 46 percent sequentially.
     This product family is rapidly becoming one of the company's largest
     revenue producers.  This success reflects the growing market for
     solutions that enable WiMAX applications, such as public safety,
     security and surveillance, last mile access and metropolitan area
     networking.
  -- Proxim experienced strong growth in its enterprise wireless
     point-to-point business.  Sales of its Tsunami QuickBridge family,
     which delivers low-cost, high-capacity wireless LAN extension and
     dedicated voice and data point-to-point connectivity, grew 41 percent
     sequentially.
  -- Proxim is successfully transitioning from legacy LAN products to its
     next-generation Wi-Fi platforms, which address market requirements for
     advanced security and voice support, including seamless handoff to
     cellular networks.  The Proxim ORiNOCO AP-4000 access point product
     grew 44 percent from the second quarter of 2004 to the third quarter of
     2004.
  -- Sales of Proxim's Lynx digital radios for cellular backhaul fell short
     of expectations, due to reduced carrier spending and consolidation.



"This past quarter reflected continued improvements in gross margin and cash
management, as well as the completion of a capital structure simplification
initiative and the settlement of patent disputes with Symbol," said Frank
Plastina, Chairman and Chief Executive Officer at Proxim.  "These significant
accomplishments provide Proxim with a unique ability to address the rapidly
evolving demand for Wi-Fi and WiMax technology."

Conference Call Information

Proxim will host a conference call to review the company's third quarter 2004
financial results.  Today's call begins at 5:00 p.m. Eastern/2:00 p.m. Pacific
Time.

Dial-In Information

To listen to the conference call via telephone, dial 719-457-2696 at least five
minutes prior to the scheduled start time.

Webcast Information

To listen to the webcast, go to http://www.proxim.com/, and click on the link
titled "Proxim Announces Third Quarter 2004 Results Call."

The minimum requirements to listen include sound capabilities on your personal
computer and installation of RealPlayer software available at no cost for
Windows XP/ME/2000, Windows 95/98, Windows 3.1, Windows NT, Macintosh, and UNIX
systems from Real Networks Inc. http://www.real.com/.

The call will be archived immediately following the conference call and will
remain available at http://investor.proxim.com/ . Additionally, the conference
call will be available on a recorded telephone archive by calling toll free
888-203-1112 and entering pass code 925453, beginning Tuesday, October 26, 2004
at 8:00 p.m., Eastern Time until midnight Eastern Time on Wednesday, November
3, 2004. For international callers, the recorded telephone archive is available
by calling the following toll number:  719-457-0820 and entering pass code
925453.

About Proxim

Proxim(R) Corporation is a global leader in wireless networking equipment for
Wi-Fi and broadband wireless networks. The company provides enterprise and
service provider customers with wireless solutions for the mobile enterprise,
security and surveillance, last mile access, voice and data backhaul, public
hot spots, and metropolitan area networks. Product families include the
Award-winning ORiNOCO Wi-Fi products, Tsunami Ethernet bridges, and Lynx
point-to-point digital radios. Proxim is a principal member of the WiMAX
Forum(TM) and a member of the Wi-Fi(R) Alliance. The company is publicly traded
on the Nasdaq under the symbol PROXD and is on the Web at
http://www.proxim.com/.

Safe Harbor

This press release may contain forward-looking statements as that term is
defined in the Private Securities Litigation Reform Act of 1995. These
forward-looking statements, including statements about expected growth in the
markets for and expected sales of Proxim's products, contribution to revenue by
product family, the effects of the Company's capital simplification plan and
settlement of litigation with Symbol and Proxim's ability to address market
opportunities are subject to risks and uncertainties that could cause actual
results to differ materially from Proxim's expectations in these statements.
For additional information regarding risks relating to Proxim's business, see
Proxim Corporation's Form 10-K for the year ended December 31, 2003 and Forms
10-Q for the quarters ended April 2, 2004 and July 2, 2004, Current Reports on
Form 8-K, and other relevant materials filed by Proxim with the Securities and
Exchange Commission. Proxim assumes no obligation and does not intend to update
these forward-looking statements.

                            Proxim Corporation
                  Condensed Consolidated Balance Sheets
                              (in thousands)
                               (Unaudited)

                                               October 1,       December 31,
  Assets                                          2004              2003
  Current assets:
   Cash and cash equivalents                    $18,313            $19,756
   Accounts receivable, net                       8,859             13,961
   Inventory                                     15,804             19,939
   Other current assets                           4,803              5,301
    Total current assets                         47,779             58,957
  Property and equipment, net                     6,078              7,522
  Goodwill and other intangible assets, net      35,381             50,059
  Restricted cash                                   770              1,254
  Other assets                                      432              2,316
    Total assets                                $90,440           $120,108

  Liabilities, Mandatorily Redeemable
   Convertible Preferred Stock
   and Stockholders' Deficit
  Current liabilities:
   Accounts payable                              $7,932            $10,500
   Capital lease obligations, current             1,144              1,176
   Accrued royalties and interest                 9,523             26,906
   Other accrued liabilities                     20,328             20,804
   Convertible bridge loan                       10,000                 --
   Convertible promissory notes                      --             34,735
    Total current liabilities                    48,927             94,121
  Capital lease obligations, long-term              116                934
  Accrued royalties, long-term                    8,805                 --
  Long-term debt                                    101                101
  Restructuring accruals, long-term               7,823              8,660
  Common stock warrants                           5,500             21,800
    Total liabilities                            71,272            125,616

  Series A mandatorily redeemable
   convertible preferred stock                   80,749             73,580
  Series B mandatorily redeemable
   convertible preferred stock                   49,703                 --
     Total mandatorily redeemable
      convertible preferred stock               130,452             73,580

  Stockholders' deficit:
   Capital stock                                319,170            319,376
   Accumulated deficit                         (429,743)          (397,753)
   Notes receivable from stockholders              (711)              (711)
    Total stockholders' deficit                (111,284)           (79,088)
    Liabilities, mandatorily
     redeemable convertible preferred
     stock and stockholders' deficit            $90,440           $120,108


                            Proxim Corporation
             Condensed Consolidated Statements of Operations
                  (in thousands, except per share data)
                               (Unaudited)

                                    Three Months Ended    Nine Months Ended
                                    Oct. 1,   Sept. 26,   Oct. 1,  Sept. 26,
                                     2004        2003      2004      2003

  Product revenue, net              $31,526     $35,058   $89,640  $103,892
  License revenue                        --          --        --     6,000
    Total revenue, net               31,526      35,058    89,640   109,892
  Cost of revenue                    19,275      22,041    56,792    64,670
  Royalty charges (benefit)          (4,796)     22,869    (3,179)   22,869
  Restructuring provision for
   excess and obsolete inventory         --          --        --    22,549
    Gross profit (loss)              17,047      (9,852)   36,027      (196)
  Operating expenses:
   Research and development           4,748       4,915    14,160    19,032
   Selling, general and
    administrative                   11,497      13,179    34,096    37,720
   Legal expense for certain
    litigation                          105       1,700     1,050     5,700
   Amortization of intangible
    assets                            3,948       5,364    14,676    16,229
   Bad debt expense                      --       2,305        --     2,305
   Restructuring charges (benefit)       --      (5,194)    2,029     7,298
    Loss from operations             (3,251)    (32,121)  (29,984)  (88,480)
  Interest and other income
   (expense), net                     1,949      (4,434)    4,227    (4,527)
    Loss before income taxes         (1,302)    (36,555)  (25,757)  (93,007)
  Income tax provision                  203          --        --        --
    Net loss                         (1,505)    (36,555)  (25,757)  (93,007)
  Accretion of Series A preferred
   stock obligations                 (1,725)     (1,596)   (5,070)   (4,681)
  Accretion of Series B preferred
   stock obligations                 (1,164)         --    (1,164)       --
    Net loss attributable to common
     stockholders - basic and
     diluted                        $(4,394)   $(38,151) $(31,991) $(97,688)

  Net loss per share - basic and
   diluted                           $(0.04)     $(0.31)   $(0.26)   $(0.81)
  Weighted average common shares    123,487     121,985   123,358   121,324

  As a percentage of revenue:
  Gross margin                        54.1%      -28.1%     40.2%     -0.2%
  Research and development expense    15.1%       14.0%     15.8%     17.3%
  Selling, general and
   administrative expense             36.5%       37.6%     38.0%     34.3%


                            Proxim Corporation
        Pro Forma Condensed Consolidated Statements of Operations
                  (in thousands, except per share data)
                               (Unaudited)

                                      Three Months Ended Nine Months Ended
                                       Oct. 1, Sept. 26,  Oct. 1,   Sept.26,
                                         2004     2003     2004       2003

  Product revenue, net                 $31,526  $35,058   $89,640  $103,892
  License revenue                           --       --        --     6,000
    Total revenue, net                  31,526   35,058    89,640   109,892
  Cost of revenue                       19,275   22,041    56,792    64,670
    Gross profit                        12,251   13,017    32,848    45,222
  Operating expenses:
   Research and development              4,748    4,915    14,160    19,032
   Selling, general and administrative  11,497   13,179    34,096    37,720
   Legal expense for certain
    litigation                             105    1,700     1,050     5,700
    Loss from operations                (4,099)  (6,777)  (16,458)  (17,230)
  Interest and other expense, net           (4)  (1,484)     (533)   (1,577)
    Loss before income taxes            (4,103)  (8,261)  (16,991)  (18,807)
   Income tax benefit                   (1,436)  (3,418)   (5,947)   (6,582)
    Net loss                           $(2,667) $(4,843) $(11,044) $(12,225)

  Net loss per share - basic and
   diluted                              $(0.02)  $(0.04)   $(0.09)   $(0.10)
  Weighted average common shares       123,487  121,985   123,358   121,324

  As a percentage of revenue:
  Gross margin                           38.9%    37.1%     36.6%     41.2%
  Research and development expense       15.1%    14.0%     15.8%     17.3%
  Selling, general and administrative
   expense                               36.5%    37.6%     38.0%     34.3%


                              Proxim Corporation
                  GAAP to Pro Forma Net Loss Reconciliation
                    (in thousands, except per share data)
                                 (Unaudited)

                                      Three Months Ended   Nine Months Ended
                                       Oct. 1,  Sept. 26,  Oct. 1, Sept. 26,
                                        2004      2003      2004      2003

  GAAP net loss                       $(4,394) $(38,151) $(31,991) $(97,688)
  Royalty charges (benefit) and
   interest                            (8,029)   25,819    (6,197)   25,819
  Restructuring provision for excess
   and obsolete inventory                  --        --        --    22,549
  Amortization of intangible assets     3,948     5,364    14,676    16,229
  Bad debt expense                         --     2,305        --     2,305
  Restructuring charges (benefit)          --    (5,194)    2,029     7,298
  Interest on convertible promissory
   notes                                1,331        --     7,517        --
  Amortization of debt discount and
   issuance costs                       1,870        --     6,462        --
  Interest on convertible bridge loan     271        --       271        --
  Revaluation of common stock
   warrants                            (2,500)      --   (16,300)        --
  Accretion of Series A preferred
   stock obligations                    1,725     1,596     5,070     4,681
  Accretion of Series B preferred
   stock obligations                    1,164        --     1,164        --
  Loss on sale of investment              308        --       308        --
  Income tax benefit                    1,639     3,418     5,947     6,582
  Pro forma net loss                  $(2,667)  $(4,843) $(11,044) $(12,225)

   Use of Pro Forma Financial Information
   To supplement our consolidated financial statements presented on a GAAP
   basis, Proxim uses non-GAAP, or pro forma, measures of operating results,
   net income/loss and income/loss per share, which are adjusted to exclude
   certain costs, expenses, gains and losses that we believe are useful to
   enhance the overall understanding of our financial performance. These
   adjustments to our GAAP results are made with the intent of providing
   both management and investors a supplemental understanding of Proxim's
   underlying operational results and trends. Adjusted pro forma results are
   among the primary indicators management uses as a basis for planning and
   forecasting our business. The presentation of this additional information
   is not meant to be considered in isolation or as a substitute for
   Proxim's financial results prepared in accordance with generally accepted
   accounting principles in the United States of America.


DATASOURCE: Proxim Corporation



CONTACT:  Ben Gibson, Vice President, Corporate Marketing,

[phone], or Michael Angel, Chief Financial Officer, [phone],

both of Proxim Corporation



Web site:  http://www.proxim.com/ 

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