Stratex Networks Announces Q1 Fiscal 2007 Financial Results

Continued Strength in Revenue, Profitability, and Customer Demand 


SAN JOSE, Calif., Aug. 2  /PRNewswire-FirstCall/ -- Stratex Networks, Inc. (NASDAQ:STXN), a leading provider of wireless transmission solutions, today reported financial results for the first quarter of fiscal 2007, ended June 30, 2006.

Revenues in the first quarter of fiscal 2007 were $66.2 million, compared with $64.0 million in the prior quarter and $54.9 million in the year ago period.  Net income in the first quarter of fiscal 2007 was $1.8 million, resulting in earnings of $0.02 per diluted share.  This compares with earnings of $3.3 million or earnings of $0.03 per diluted share in the prior quarter, and a loss of $(4.2) million, or a loss of $(0.04) per share in the year ago period.  The first quarter of fiscal 2007 includes the impact of Financial Accounting Standard 123 ( R ).

On a non-GAAP basis, Stratex Networks reported net income of $4.8 million in the first fiscal quarter, or earnings of $0.05 per diluted share.  This compares with non-GAAP net income of $3.4 million in the fourth fiscal quarter, or earnings of $0.03 per diluted share and a loss of $(3.9) million, or a loss of $(0.04) per share in the year ago period.  Non-GAAP net income for the first fiscal quarter of 2007 excludes total non-cash stock compensation expense of $3.0 million related to the adoption of Financial Accounting Standard 123 ( R ) and the company's restricted stock plan.  In the prior and year ago quarter non-cash compensation expense was $60,000 and $228,000, respectively, and was related to the Company's restricted stock plan.  A full reconciliation of GAAP net income (loss) to non-GAAP net income (loss) is provided in the accompanying financial tables.

"We are pleased with our financial results for the first quarter of the new fiscal year, as we exceeded both our revenue and earnings guidance originally issued in May, and posted our third consecutive quarter of profitability. The Eclipse product platform continues to benefit from broad acceptance worldwide due to its highly competitive, cost-effective solution for voice- and data-centric applications," said Tom Waechter, president and chief executive officer of Stratex Networks, Inc.  "We are also pleased to report that we are already realizing improvements in our supply chain that position us to better serve our customers and partners, and to maintain our revenue growth.   We are seeing strong demand in our key markets for a wide variety of Eclipse products, as we experienced a positive book to bill in the first fiscal quarter of 2007."

Guidance

The following forecasts are based on current expectations.  These statements are forward-looking, and actual results may differ materially. Please see the Safe Harbor Statement in this release for a description of certain important risk factors that could cause actual results to differ, and refer to the company's reports on file with the Securities and Exchange Commission (SEC) for a more complete description of the risks.

   Second Quarter Fiscal Year 2007 (ending September 30, 2006)
   --   Revenue is expected to range between $63 million and $66 million,
   --   Earnings per share are expected to be in the range of $0.04 to
        $0.06, excluding non-cash stock-based expense of approximately $2.9
        million.

  Use of Non-GAAP Financial Information


To supplement the company's consolidated financial statements presented in accordance with generally accepted accounting principles "GAAP," Stratex Networks, Inc. uses non-GAAP measures of certain components of financial performance, including operating income (loss), net income (loss) and per share data, which are adjusted from results based on GAAP to exclude certain expenses, gains and losses. These non-GAAP measures are provided to enhance investors' overall understanding of the company's current financial performance and the company's prospects for the future. Specifically, the company believes the non-GAAP results provide useful information to both management and investors by excluding certain expenses that may not be indicative of its core operating results. These measures should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for, or superior to, GAAP results. These non-GAAP measures included in this press release have been reconciled to the nearest GAAP measure.

Conference Call

Stratex Networks' management will hold a conference call to provide greater detail on the company's financial results for the quarter and its outlook today, at 5:00 p.m. Eastern Time.  Those wishing to join should dial 303-205-0066 at approximately 4:50 p.m.  A replay of the call will be available starting one hour after the completion of the call until Aug. 9, 2006.  To access the replay, dial 303-590-3000 (pass code:  11065837 #).  A live and an archived webcast of the conference call will also be available via the company's Web site at http://www.stratexnet.com/.

Upcoming Conferences

Stratex Networks' management will be presenting at the CIBC Wireless Technology One-on-One Conference in New York on August 3 and at the Merriman Curhan Ford & Co. 3rd Annual Investor Summit 2006 in San Francisco on Sept. 20.   Those wishing to listen to live and/or archived webcasts of available management presentations may do so at http://www.stratexnet.com/.

About Stratex Networks

With headquarters in San Jose, California, Stratex Networks, Inc. is one of the world's leading providers of high-speed wireless transmission solutions.  Since it was founded in 1984, Stratex Networks has achieved international recognition for quality, innovation, and technical superiority in delivering data, voice, and video communication systems, including comprehensive service and support.  Stratex Networks, with its broad product offering and worldwide sales and support organization, is strategically positioned to serve its customers' needs in wireless high-capacity transmission technology.  Additional information is available at http://www.stratexnet.com/ .

Safe Harbor Statement

This press release contains statements that qualify as "forward-looking statements" under the Private Securities Litigation Reform Act of 1995, including statements relating to the Company's expectations regarding the continued acceptance of, and demand for, the Eclipse wireless transmission platform, continued supply chain improvements and resulting effect on revenue growth; forecasted future revenue and future  earnings. These forward-looking statements are based on current expectations and the Company assumes no obligation to update this information.  The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of significant risks and uncertainties including:

   --   Suppliers inability to perform and timely deliver as a result of
        their financial condition, component shortages or other supply chain
        constraints;
   --   Continued market expansion through strategic alliances;
   --   Continued timely rollout of Eclipse functionality and features;
   --   Unexpected delays in the schedule for shipments of Eclipse and new
        generations of the Eclipse platform;
   --   Failure to realize expected cost improvement throughout the
        Company's supply chain; and
   --   Order cancellations or postponements in product deliveries resulting
        in delayed revenue recognition.
   --   Intellectual property litigation could be costly to defend and
        resolve, and could prevent us from using or selling the challenged
        technology



In addition, orders and backlog are not necessarily indicative of revenue in any future period.  Because the Company's business is heavily concentrated in foreign markets, there is a significant risk of adverse currency fluctuations and unforeseen governmental action including but not limited to the denial of export and/or import licenses.  For a further discussion of these and other factors that impact the Company's business in general, see the information provided under the heading "Factors That May Affect Future Financial Results" in the Company's Annual Report on Form 10-K for the period ended March 31, 2006 and subsequent quarterly filings, on file with the Securities and Exchange Commission.

                  CONDENSED CONSOLIDATED BALANCE SHEETS
                              (in thousands)
                               (unaudited)


                                           June 30,              March 31,
                                             2006                  2006

  Assets

  Cash and short-term
   investments                              $61,274                $57,686
  Accounts receivable, net                   40,152                 42,003
  Inventories                                46,496                 43,867
  Other current assets                       12,327                 12,620
      Total current assets                  160,249                156,176
  Property & equipment, net                  23,299                 24,049
  Other assets                                  804                    605
      Total assets                         $184,352               $180,830

  Liabilities and
  Stockholders' Equity

  Accounts payable                          $41,218                $38,725
  Short-term debt                            11,250                 11,250
  Other current                              30,393                 31,136
  liabilities
      Total current liabilities              82,861                 81,111
  Long-term debt                             19,479                 22,291
  Other long-term                            13,919                 15,085
  liabilities
      Total liabilities                     116,259                118,487

  Stockholders' equity                       68,093                 62,343
  Total liabilities and
   stockholders' equity                    $184,352               $180,830


             CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                 (in thousands, except per share amounts)
                               (unaudited)


                                                   Three Months Ended
                                                       June 30,
                                                   2006          2005

  Net sales                                     $66,237        $54,872
  Cost of sales                                  46,365         42,271
  Gross profit                                   19,872         12,601
  Operating expenses:
   Research and development                       4,584          3,701
   Selling, general and
    administrative                               12,975         11,994
  Total operating expenses                       17,559         15,695
  Operating income (loss)                         2,313         (3,094)
   Other income (expense)                          (256)          (795)
  Income (loss) before income
   taxes                                          2,057         (3,889)
   Provision  for income
    taxes                                           235            277
  Net income (loss)                              $1,822        $(4,166)

  Net income (loss) per common share:
  Basic                                           $0.02         $(0.04)
  Diluted                                         $0.02         $(0.04)

  Weighted average shares
  outstanding
  Basic                                          97,168         94,942
  Diluted                                       100,953         94,942


    UNAUDITED NON-GAAP CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                 (in thousands, except per share amounts)


                          Three Months Ended         Three Months Ended
                            June 30, 2006              June 30, 2005
                          GAAP                      GAAP
                          (As     Adjust-  Non-     (As     Adjust-  Non-
                        Reported)  ments   GAAP   Reported)  ments   GAAP

  Net sales              $66,237         $66,237   $54,872         $54,872
  Cost of sales           46,365   $(288) 46,077    42,271    $(54) 42,217
  Gross profit            19,872     288  20,160    12,601      54  12,655
  Operating expenses:
   Research and
    development            4,584    (694)  3,890     3,701     (21)  3,680
   Selling, general
    and administrative    12,975  (1,978) 10,997    11,994    (153) 11,841
  Total operating
   expenses               17,559  (2,672) 14,887    15,695    (174) 15,521
  Operating income
   (loss)                  2,313   2,960   5,273    (3,094)    228  (2,866)
   Other income
   (expense)                (256)           (256)     (795)           (795)
  Income (loss) before
   income taxes            2,057   2,960   5,017    (3,889)    228  (3,661)
   Provision (benefit)
    for income taxes         235             235       277             277

  Net income (loss)       $1,822  $2,960  $4,782   $(4,166)   $228 $(3,938)


  Net income (loss) per
   common share:
  Basic                    $0.02   $0.03   $0.05    $(0.04)         $(0.04)
  Diluted                  $0.02   $0.03   $0.05    $(0.04)         $(0.04)

  Weighted average
   shares outstanding
  Basic                   97,168          97,168    94,942          94,942
  Diluted                100,953         100,953    94,942          94,942



The above non-GAAP adjustments totaling $3.0 and $0.2 million for the three months ended June 30, 2006 and June 30, 2005, respectively, reflect the non-cash charges related to the company's stock-based compensation plans.

To supplement the company's consolidated financial statements presented in accordance with generally accepted accounting principles "GAAP," Stratex Networks, Inc. uses non-GAAP measures of certain components of financial performance, including operating income (loss), net income (loss) and per share data, which are adjusted from results based on GAAP to exclude certain expenses, gains and losses. These non-GAAP measures are provided to enhance investors' overall understanding of the company's current financial performance and the company's prospects for the future. Specifically, the company believes the non-GAAP results provide useful information to both management and investors by excluding certain expenses, gains and losses that may not be indicative of its core operating results. These measures should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for, or superior to, GAAP results. These non- GAAP measures included in this press release have been reconciled to the nearest GAAP measure. 

DATASOURCE: Stratex Networks, Inc.



CONTACT:  Mary McGowan of Summit IR Group Inc., [phone], or

, for Stratex Networks



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

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