Larscom Incorporated Reports First Quarter 2004 Results

Larscom Incorporated Reports First Quarter 2004 Results
Joint Call With Verilink Corporation to Discuss Merger Will Immediately Follow
Earnings Call 


NEWARK, Calif., May 3  /PRNewswire-FirstCall/ -- Larscom Incorporated , a
leading provider of WAN connectivity and network access equipment, today
announced first-quarter financial results for the period ending March 31, 2004.

The Company reported revenues of $5.0 million and a net loss of $(1.8) million
or $(0.36) per share for the first quarter of 2004.  For the first quarter of
2003, the Company had reported revenues of $4.2 million and a net loss of
$(2.2) million or $(0.81) per share.

First Quarter Business Review

"Revenue for the quarter was up 18% over the prior year's first quarter and our
net loss was reduced.  However, I had higher expectations for the quarter given
our Q4 2003 results.  The lower than expected revenues for the quarter were
primarily the result of lower IAD shipments to one of our major customers,"
said Daniel Scharre, president and chief executive officer of Larscom.  "During
the quarter we released a number of new products and enhancements that I
believe will strengthen our competitive position and benefit the business going
forward."

"We remain on track with our Orion 7400 program and continue to make progress
with trials taking place with several major customers.  Some of these trials
are expected to be concluded in the second quarter for future Ethernet service
deployments using the Orion 7400," Scharre concluded.

  Recent product highlights include:

  -- Second release of the Orion 7400 Multi-service Access Platform that
     provides enhanced capabilities required by the carrier market,
     including the RBOCs. The new features include advanced Ethernet
     performance management, support for nested VLAN tags, STS-1 uplink
     capability, and dynamic bandwidth management.
  -- Introduction of new software releases for the eLink and Integrator IADs
     that provide enhanced operations and administration tools to simplify
     maintenance and diagnostics and, additionally, provide a sophisticated
     queuing mechanism for quality of service applications.
  -- Availability of the FT-1 and FXO capability for the eLink platform,
     which allows service providers to more easily integrate the eLink into
     a wider variety of enhanced service offerings.
  -- Launch of the enhanced Orion 4000 as an industry-first solution for the
     economical, high-density transport of multiple international (E1) data
     streams across U.S. T1 networks.



There will be a conference call today at 1:30 p.m. (PDT) to discuss these
highlights as well as the first quarter 2004 financial results.  To listen to
the webcast of this conference call, visit http://www.larscom.com/press
approximately 10 minutes before the start of the call and click on the
conference call link provided.  As indicated in our press release of April 28,
2004, an online audio replay of the webcast of the conference call will also be
available on our website at http://www.larscom.com/press .

A conference call to discuss the recently announced merger between Verilink and
Larscom will immediately follow the earnings conference call.  To participate
in the call, dial 800-450-0788 and enter passcode 050304. The call will also be
broadcast live over the Internet at:
http://www.firstcallevents.com/service/ajwz406101796gf12.html .

About Larscom

Larscom enables high-speed access by providing cost-effective, highly reliable
(carrier-class), and easy-to-use network access equipment.  In June 2003,
Larscom merged with VINA Technologies to create a worldwide leader in
enterprise WAN access for the delivery of high-speed data, and integrated voice
and data services with the deployment of more than 350,000 systems worldwide. 
Larscom's customers include major carriers, Internet service providers, Fortune
500 companies, small and medium enterprises, and government agencies worldwide.
 Larscom's headquarters are in Newark, California. Additional information can
be found at http://www.larscom.com/.

Safe Harbor Statement

Any forward-looking statements in this news release are based on our current
expectations and beliefs and are subject to known and unknown risks and
uncertainties that could cause the actual results to differ materially from
those suggested.  Factors that could cause actual results to differ materially
include (but are not limited to):  risks associated with the approval and
successful conclusion of the proposed merger with Verilink, including the risk
that stockholder approval might not be obtained in a timely manner or at all,
the ability to successfully integrate the two companies and achieve expected
synergies following the merger, the ability of the combined company to develop
and market successfully and in a timely manner new products, the impact of
competitive products and pricing and of alternative technological advances; the
issuance of a "going concern" auditor's explanatory paragraph and its possible
negative effect on our customer base; employees and our ability to acquire
additional financing; lower than expected cash flows from operations; customer
concentration that include MCI (formerly WorldCom) and Lucent Technologies; the
ability to develop successful new products; the ability to hire and maintain
key executive positions; dependence on recently introduced new products and
products under development; market acceptance of new products; the acquisition
of other businesses or technologies; dependence on component availability from
key suppliers; rapid technological change and fluctuations in quarterly
operating results; as well as additional risk factors as discussed in the "Risk
Factors" section of  our annual report on Form 10-K and quarterly reports on
Form 10-Q filed with the U.S. Securities and Exchange Commission.  These
forward-looking statements represent our judgment as of the date of this news
release.  We disclaim, however, any intent or obligation to update these
forward-looking statements.

Additional Information about the Merger and Where to Find It

Verilink plans to file a Registration Statement on Form S-4 with the Securities
and Exchange Commission ("SEC") in connection with the merger, and Verilink and
Larscom expect to mail a Joint Proxy Statement/Prospectus to stockholders of
Verilink and Larscom concerning the proposed merger transaction.  INVESTORS AND
SECURITY HOLDERS OF VERILINK AND LARSCOM ARE URGED TO READ THE REGISTRATION
STATEMENT AND JOINT PROXY STATEMENT/PROSPECTUS AND THE OTHER RELEVANT MATERIALS
CAREFULLY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT
INFORMATION ABOUT VERILINK, LARSCOM, THE MERGER AND RELATED MATTERS.  Investors
and security holders will be able to obtain the documents free of charge at the
SEC's web site at http://www.sec.gov/.  In addition, investors and security
holders may obtain free copies of the documents filed with the SEC by Verilink
by directing a written request to:  Corporate Secretary, Verilink Corporation,
127 Jetplex Circle, Madison, AL 35758. Investors and security holders may
obtain free copies of the documents filed with the SEC by Larscom by directing
a written request to:  Corporate Secretary, Larscom Incorporated, 39745 Eureka
Drive, Newark, CA 94560. Investors and security holders are urged to read the
proxy statement, prospectus and the other relevant materials when they become
available before making any voting or investment decision with respect to the
Acquisition.

In addition to the Registration Statement and Joint Proxy Statement/Prospectus,
Verilink and Larscom file annual, quarterly and special reports, proxy
statements and other information with the SEC.  You may read and copy any
reports, statements or other information filed by Verilink and Larscom at the
SEC public reference room at 450 Fifth Street, N.W., Washington, D.C. 20549. 
Please call the SEC at 1-800-SEC-0330 for further information on the public
reference room.  Verilink's and Larscom's filing with the SEC are also
available to the public from commercial document-retrieval services and at the
SEC's web site at http://www.sec.gov/.

Interests of Certain Persons in the Merger

Verilink and Larscom will be soliciting proxies from the stockholders of
Verilink and Larscom in connection with the merger and issuance of shares of
Verilink common stock in the merger.  In addition, the respective directors and
executive officers of Verilink and Larscom may also be deemed to be
participants in the solicitation of proxies.  Information about the directors
and executive officers of Verilink is set forth in the proxy statement for the
annual meeting of stockholders filed on October 10, 2003.  Information about
the directors and executive officers of Larscom is set forth in the Larscom
Form 10-K/A for the fiscal year ended December 31, 2003, which was filed with
the SEC on April 29, 2004.  The directors and executive officers of Verilink
and Larscom have interests in the merger, some of which may differ from, or may
be in addition to those of the respective stockholders of Verilink and Larscom
generally.  Those interests will be described in greater detail in the Joint
Proxy Statement/Prospectus with respect to the merger, which may include
potential employment relationships, potential membership on the Verilink Board
of Directors, option and stock holdings and indemnification.

    CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
    (In thousands, except per share amounts)
                                                   Quarter Ended
                                                      March 31,
                                          2004                        2003
   Revenues                              $4,966                      $4,225
   Cost of revenues                       3,178                       1,974
   Gross profit                           1,788                       2,251
   Operating expenses:
        Research and development          1,055                       1,107
        Selling, general and
         administrative                   2,566                       3,418
        Amortization of acquisition
         intangibles                        108                          --
        Restructuring                        (7)                        (61)
         Impairment of assets                44                          --
   Total operating expenses               3,766                       4,464
   Loss from operations                  (1,978)                     (2,213)
   Interest and other income, net of
    expense                                 137                          47
   Loss before income taxes              (1,841)                     (2,166)
   Income tax provision                       5                          17
   Net loss                             $(1,846)                    $(2,183)

   Basic & diluted net loss per share    $(0.36)                     $(0.81)

   Basic & diluted weighted average
    shares                                5,100                       2,695


    CONSOLIDATED BALANCE SHEETS (Unaudited)
    (In thousands)
                                                 March 31,      December 31,
                                                   2004              2003
   Assets
   Current assets:
        Cash, restricted cash and cash
         equivalents                              $6,749            $9,285
        Accounts receivable, net                   2,253             3,633
        Inventories                                5,468             5,503
        Other current assets                         829             1,204
             Total current assets                 15,299            19,625
   Property and equipment                          1,174             1,294
   Other non-current assets, net                   2,520             2,781
             Total assets                        $18,993           $23,700
   Liabilities and Stockholders' Equity
   Current liabilities:
        Accounts payable                          $2,760            $4,370
        Accrued expenses and other
         current liabilities                       4,384             5,411
        Deferred revenue                           1,328             1,283
        Due to Axel Johnson                           --               190
             Total current liabilities             8,472            11,254
   Other non-current liabilities                   1,527             1,640
             Total liabilities                     9,999            12,894
   Stockholders' equity                            8,994            10,806
             Total liabilities and
              stockholders' equity               $18,993           $23,700


DATASOURCE: Larscom Incorporated



CONTACT:  Donald W. Morgan, Vice President and CFO of Larscom

Incorporated, [phone]



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

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