Somera Communications Announces Second Quarter Financial Results

DALLAS, Aug. 4  /PRNewswire-FirstCall/ -- Somera Communications (NASDAQ:SMRA), a global provider of telecommunications asset management and recovery services, today announced financial results for the quarter ended June 30, 2005.

Total revenue for the second quarter of 2005 was $18.7 million, compared with $20.5 million in the first quarter of 2005.  This also compares with $25.8 million in the second quarter of 2004.  The sequential quarter decline in revenue is attributable to a temporary decline in brokerage revenues resulting from a restructuring of the sales and supply organizations in this business to better position it for future growth.

Net loss was $7.9 million, or ($0.16) per share, for the second quarter of 2005, compared with a net loss of $3.3 million, or ($0.07) per share, for the first quarter of 2005.  This also compares to a net loss of $3.9 million, or ($0.08) per share, for the second quarter of 2004.

Net loss for the second quarter of 2005 reflects a $1.8 million writedown of goodwill from an acquisition that closed in 2000, the recognition of $421,000 in outstanding sales taxes from 2001, 2002 and 2003, and $749,000 in expenses associated with an acquisition the Company has decided against pursuing.  Excluding these charges, pro forma net loss in the second quarter was ($0.10) per share.

David Heard, CEO of Somera, commented on the second quarter results, "The restructuring of our brokerage business caused us to miss a number of transaction opportunities in the second quarter.  However, the brokerage market remains healthy, and we believe the steps taken to improve our sales and supply organizations will stabilize our brokerage revenues and better position this business for growth in the future.

"We continue to make good progress in developing our Lifecycle Management Services business, with programs and services revenues increasing 43.4% over the prior quarter.  During the second quarter, we received commitments from an RBOC and a major wireless carrier to begin new regional RecoveryPLUS(TM) implementations, which should begin to generate meaningful revenue in the second half of 2005.  Our services business continues to gain momentum -- as demonstrated by our announcement today of a new relationship with S.A. Telecom, a major wireless carrier in Bangladesh -- and we expect to see consistent growth in our customer base with each quarter.

"In the third quarter, we expect modest revenue growth over the second quarter.  We also expect a net loss per share in the range of $0.06 to $0.09 for the third quarter.  We believe we will make steady progress towards profitability, although given the current growth rates in the brokerage and services businesses, we now believe our return to profitability will take place in the first half of 2006.  Following the organizational changes we have made during the first half of 2005, we believe we now have the right people, programs, intellectual property, and financial resources in place to capitalize on the market opportunity emerging for telecom asset management services," said Mr. Heard.

Second Quarter Financial Highlights

Gross margin for the second quarter of 2005 was 33.6% and in line with the Company's expectations.  This compares with a gross margin of 27.1% in the second quarter of 2004, and 37.4% in the first quarter of 2005.

Operating expenses for the second quarter of 2005 were $14.1 million, compared with $10.9 million in the second quarter of 2004, and $10.8 million in the first quarter of 2005.  The sequential quarter increase in operating expenses is primarily due to one-time charges totaling $3.0 million related to goodwill impairment, recognition of outstanding sales taxes from prior years, and terminated M&A activities.

Somera's balance sheet at June 30, 2005 included $27.3 million in cash, cash equivalents, and short-term investments, $30.5 million in working capital and no long-term debt.

Conference Call and Webcast

Management will hold a teleconference with simultaneous webcast today at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) to discuss second quarter results. Please dial 800-240-2134 for domestic callers, or 303-262-2143 for international callers.  The call will be webcast on the Investor Relations page of the Somera web site at http://www.somera.com/.  Listeners will need to have Microsoft Media Player installed on their computers. A telephonic replay will be available from one hour after the call ends through August 11, 2005, at 800-405-2236 for domestic callers, or 303-590-3000 for international callers, passcode 11034468.

Non-GAAP Financial Measures

This press release contains pro forma net loss per share results that are not in accordance with GAAP because they exclude identified non-recurring charges. The estimated amount of the expected excluded charges is stated in this release so that pro forma net loss per share results can be reconciled to GAAP results.  The pro forma net loss per share results should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP, and may be different from non- GAAP financial measures used by other companies. Somera management uses this pro forma measure in evaluating the potential impact of certain operating decisions on projected financial results, in comparing the Company's historical operating results and in comparing to competitors' operating results. Somera includes this pro forma measure in this press release because it believes this measure enhances comparability of Somera's results of operations to those of competitors', to operating results Somera historically has reported and to financial models and expectations of securities analysts.

About Somera

Somera launched its family of Lifecycle Management Services in 2004 in response to an industry-wide need for telecom asset management to optimize return on assets.  Somera's product offerings enable service providers to generate greater value from legacy assets in the form of lower operating costs, longer product life, higher productivity, and real measurable capital savings. With Somera LifecyclePLUS, customers can outsource elements of network operations, logistics, and technical service. Somera RecoveryPLUS(TM) is a program approach to deliver documented savings and expense relief by recovering hidden value in current underutilized assets and inventories. Somera RepairPLUS provides comprehensive support for wireless, wireline, and data products at significant savings and reduced cycle times.  These services are in addition to Somera's traditional Brokerage business that provides immediate availability of quality, warranted new and refurbished equipment at savings of 25 to 60%.  Founded in 1995, Somera has developed an impressive base of over 1,100 customers worldwide, including the industry leaders from each segment of the telecommunications market.  Visit Somera on the web at http://www.somera.com/.

This news release contains forward-looking statements as that term is defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements about Somera's expected financial results for the third quarter of 2005, the timing of Somera's expected return to profitability on a GAAP basis in the first half of 2006, the future performance of its equipment brokerage business and lifecycle management services businesses, Somera's ability to capitalize on business opportunities in light of its reorganization efforts, and Somera's ability to gain new customers, expand its programs with existing customers in future periods and make progress in positioning itself for improved performance.  Actual results in future periods are subject to risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements contained in this release, including, but not limited to, general economic conditions particularly affecting the telecommunications industry; capital equipment spending levels in the telecommunications industry, including the risk of continued customer spending delays associated with carrier consolidation; the impact of competition in the market for supplying equipment and equipment lifecycle management services to telecommunications operators; the risk of potential shortage of product supply; and Somera's ability to build its lifecycle management services capabilities; and other factors fully described in the company's reports to the Securities and Exchange Commission (SEC), including but not limited to, the Annual Report on Form 10-K for the fiscal year ended December, 31, 2004, and Quarterly Reports on Form 10-Q. The company does not undertake to update any forward-looking statements that may be made by or on behalf of the company.  Copies of Somera's Securities & Exchange Commission filings may be obtained by contacting Financial Relations Board at 617-520- 7064 or by visiting the Investor section of Somera's web site at http://www.somera.com/.

                       SOMERA COMMUNICATIONS, INC.

                  CONDENSED CONSOLIDATED BALANCE SHEETS
                  (in thousands, except per share data)
                               (unaudited)


                                                       June 30, December 31,
                                                         2005       2004

                         ASSETS
  Current assets:
    Cash and cash equivalents                            $4,852     $7,654
    Short-term investments                               22,473     32,757
    Accounts receivable, net of allowance for doubtful
     accounts of $552 and $574 at June 30, 2005 and
     December 31, 2004, respectively                     14,651     16,217
    Inventories, net                                     11,209     10,027
    Other current assets                                  2,599      1,876

      Total current assets                               55,784     68,531

  Property and equipment, net                             4,468      4,600
  Other assets                                            2,874        148
  Goodwill                                                   --      1,760
  Intangible assets, net                                     17         50

      Total assets                                      $63,143    $75,089

          LIABILITIES AND STOCKHOLDERS' EQUITY
  Current liabilities:
    Accounts payable                                    $13,893    $12,396
    Accrued compensation                                  2,028      2,503
    Other accrued liabilities                             9,163     11,139
    Deferred revenue                                        188        723

      Total current liabilities                          25,272     26,761

    Commitments and Contingencies (Note 5)
  Stockholders' equity:
    Preferred stock ($0.001 par value per share;
     authorized 20,000 shares, no shares issued)
    Common stock ($0.001 par value per share;
     authorized  200,000 shares, shares issued and
     outstanding: 50,232 and 49,872 at June 30, 2005
     and December 31, 2004, respectively)                    50         49
    Additional paid-in capital                           75,155     74,652
    Unearned stock-based compensation                      (221)       (72)
    Accumulated other comprehensive loss                    204       (191)
    Accumulated deficit                                 (37,317)   (26,110)

      Total stockholders' equity                         37,871     48,328

      Total liabilities and stockholders' equity        $63,143    $75,089



                       SOMERA COMMUNICATIONS, INC.

              CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
                  (in thousands, except per share data)
                               (unaudited)


                                           Three Months        Six Months
                                              Ended              Ended
                                             June 30,           June 30,
                                           2005     2004     2005     2004
  Revenues:

    Equipment revenue                    $16,201  $22,748  $35,005  $45,760
    Service and program revenue            2,480    3,019    4,210    8,395
      Total revenues                      18,681   25,767   39,215   54,155
  Cost of revenues:
    Equipment cost of revenue             11,092   16,833   23,058   34,589
    Service and program cost of revenue    1,319    1,947    2,199    6,099
      Total cost of revenues              12,411   18,780   25,257   40,688
        Gross profit                       6,270    6,987   13,958   13,467
  Operating expenses:
    Sales and marketing                    6,801    5,919   12,631   11,558
    General and administrative             4,306    4,975    9,296    9,623
    Impairment of goodwill                 1,760       --    1,760       --
    Other operating expenses               1,187       17    1,204       34
      Total operating expenses            14,054   10,911   24,891   21,215

  Loss from operations                    (7,784)  (3,924) (10,933)  (7,748)
  Other income (expense), net               (136)      56     (250)    (150)

  Loss before income taxes                (7,920)  (3,868) (11,183)  (7,898)
  Income tax provision (benefit)              11        8       24       34
  Net loss                                (7,931)  (3,876) (11,207)  (7,932)
  Net loss per share: basic and diluted   $(0.16)  $(0.08)  $(0.22)  $(0.16)
  Weighted average shares: basic and
   diluted                                50,210   49,759   49,988   49,639


DATASOURCE: Somera Communications



CONTACT:  Tricia Ross of Financial Relations Board, [phone],

, for Somera Communications



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

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