Stratex Networks Announces Q2 Fiscal 2007 Financial Results

Revenue Increases 19% Year over Year; Company Reports Continued Growth in Profitability 


SAN JOSE, Calif., Nov. 1  /PRNewswire-FirstCall/ -- Stratex Networks, Inc. (NASDAQ:STXN), a leading provider of wireless transmission solutions, today reported financial results for the second quarter of fiscal 2007 ended September 30, 2006.

Revenues in the second quarter of fiscal 2007 were $67.3 million, compared with $66.2 million in the prior quarter and $56.6 million in the year ago period.  Net income in the second quarter of fiscal 2007 was $1.6 million or earnings of $0.02 per diluted share.  This compares with earnings of $1.8 million or earnings of $0.02 per diluted share in the prior quarter, and a loss of $(2.3) million, or a loss of $(0.02) per share in the year ago period. The second quarter of fiscal 2007 includes the impact of Financial Accounting Standard No. 123 ( R ), ("FAS 123 ( R )" ), stock compensation and merger- related expenses.

On a non-GAAP basis, Stratex Networks had net income of $5.6 million in the second fiscal quarter, or earnings of $0.06 per diluted share.  This compares with non-GAAP net income of $4.8 million and non-GAAP earnings of $0.05 per diluted share in the first fiscal quarter and non-GAAP net loss of $(1.3) million and a loss of $(0.01) per share in the year ago period.  Non- GAAP net income for the second fiscal quarter of 2007 excludes non-cash stock compensation expense of $2.6 million related to the adoption of FAS 123 ( R ) and the company's restricted stock plan, and $1.5 million in expense related to the proposed merger with Harris Corporation's Microwave Communications Division.  In the prior and year ago quarter non-cash compensation expense was $3.0 million and $0.9 million, respectively, and was related to the Company's adoption of FAS 123 ( R ) and its restricted stock plan.  A full reconciliation of GAAP net income (loss) to non-GAAP net income (loss) is provided in the accompanying financial tables.

"This September quarter marks the fourth consecutive quarter of profitability driven by broad acceptance of the Eclipse wireless transmission system in the international market place, particularly in Africa, the Middle East and Russia," said Tom Waechter, president and chief executive officer of Stratex Networks, Inc.  "We are pleased with our overall financial achievements including continued revenue growth, expanding margins and sustained profitability.

"On September 5, we announced the proposed merger of Stratex Networks and the Microwave Communications Division of Harris Corporation.  We believe that upon completion of this combination, the combined company would be the largest independent global provider of wireless transmission network solutions with trailing 12 month revenues of approximately $620 million as of September 30, 2006, and an unmatched set of solutions.   We believe this will be a compelling value proposition for our customers, our employees as well as our investors who will witness a more competitive company better able to leverage its significant resources," said Waechter.

This combination is expected to close no later than early calendar year 2007.  The new company will be called Harris Stratex Networks.

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 303-262-2142 at approximately 4:50 p.m.  A replay of the call will be available starting one hour after the completion of the call until November 8, 2006.  To access the replay, dial 303-590-3000 (pass code:  11072669 #).  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 AeA Classic Investor Conference in Monterey, Calif. on November 6 and 7, the UBS Communications and Technology Conference in New York on November 15, and the Needham Growth Conference in New York held January 9-12, 2007.  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.  Without regard to the effects of the proposed combination of the Company with Harris Corporation's Microwave Communications Division, 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

-- The potential adverse effects on the Company's operating results and cash flow if the Company fails to complete the proposed combination with Harris Corporations' Microwave Communications Division.

In addition, 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 Item 1A of 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.

In addition, "forward-looking statements" regarding the Company's expectations with regard to the proposed combination with the Microwave Communications Division of Harris Corporation as set forth in the preliminary prospectus/proxy statement included in the registration statement of Harris Stratex Networks, Inc. on Form S-4 filed with the Securities and Exchange Commission on October 13, 2006 are subject to factors that could cause actual results to differ materially and include the following: the possibility that the parties may be unable to achieve expected synergies and operating efficiencies in the proposed transaction within the expected time-frames or at all; integration of the operations of Harris' Microwave Communications Division with those of Stratex Networks now may be more difficult, time- consuming or costly than expected and may not be as successful as the parties anticipate; revenues of the combined business following the transaction may be lower than expected; operating costs, customer loss and business disruption (including, without limitation, difficulties in maintaining relationships with employees, customers, clients or suppliers) of the combined business may be greater than expected following the transaction; the ability to retain key employees in Harris' Microwave Communications Division and at Stratex Networks subsequent to the completion of the transaction; the conditions to the completion of the transaction may not be satisfied; regulatory approvals that might be required for the transaction might not be obtained on the terms expected and obtaining any such approvals or any other necessary regulatory reviews may not occur on the anticipated schedule; the parties' ability to meet expectations regarding the timing, completion and accounting and tax treatments of the transaction; Harris' Microwave Communications Division and Stratex Networks are subject to intense competition; the failure of either Harris' Microwave Communication Division or Stratex Networks to protect its intellectual property rights may weaken the competitive position of the combined company; in the future third parties may assert claims, including intellectual property infringement claims that could materially adversely affect the operating results of the combined company; as well as other factors discussed in "Risk Factors" under Item 1A. of Stratex Networks' Annual Report on Form 10-K for the most recently ended fiscal year and Stratex Networks' other filings with the SEC (which may also be applicable to Harris' Microwave Communication Division), which are available at http://www.sec.gov/.  No person assumes any obligation to update the information in this document, except as otherwise required by law.  Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of the date hereof.

                       - Financial Tables Follow -
                  CONDENSED CONSOLIDATED BALANCE SHEETS
                              (In thousands)
                               (Unaudited)

                                                  Sept. 30,       March 31,
                                                    2006           2006

  Assets

  Cash and short-term investments                  $53,107        $57,686
  Restricted cash                                    2,608              0
  Accounts receivable, net                          51,369         42,003
  Inventories                                       38,980         43,867
  Other current assets                              13,821         12,620
    Total current assets                           159,885        156,176
  Property & equipment, net                         23,479         24,049
  Other assets                                         790            605
    Total assets                                  $184,154       $180,830

  Liabilities and Stockholders' Equity

  Accounts payable                                 $40,330        $38,725
  Short-term debt                                   11,250         11,250
  Other current liabilities                         29,692         31,136
    Total current liabilities                       81,272         81,111
  Long-term debt                                    16,667         22,291
  Other long-term liabilities                       13,225         15,085
    Total liabilities                              111,164        118,487
  Stockholders' equity                              72,990         62,343
  Total liabilities and stockholders' equity      $184,154       $180,830


             CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                 (In thousands, except per share amounts)
                               (Unaudited)

                             Three Months Ended        Six Months Ended
                                   Sept. 30,               Sept. 30,
                                2006        2005         2006       2005

  Net sales                  $67,279     $56,554     $133,516   $111,426
  Cost of sales               46,512      41,386       92,877     83,657
  Gross margins               20,767      15,168       40,639     27,769
  Operating expenses:
    Research and development   4,299       3,703        8,883      7,404
    Selling, general and
      administrative          14,625      12,182       27,600     24,176
  Total operating expenses    18,924      15,885       36,483     31,580
  Operating income (loss)      1,843        (717)       4,156     (3,811)
    Other income (expense)      (268)     (1,048)        (524)    (1,843)
  Income (loss) before
   income taxes                1,575      (1,765)       3,632     (5,654)
    Provision for
     income taxes                 23         496          257        773
  Net income (loss)           $1,552     $(2,261)      $3,375    $(6,427)

  Basic net income (loss)
   per share                   $0.02      $(0.02)       $0.03     $(0.07)
  Diluted net income (loss)
   per share                   $0.02      $(0.02)       $0.03     $(0.07)
  Basic weighted average
   shares outstanding         97,634      95,175       97,405     95,059
  Diluted weighted average
   shares outstanding        100,037      95,175      100,537     95,059


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

                                             Three Months Ended
                                               Sept. 30, 2006

                                     GAAP         Adjust-      Non-GAAP
                               (As Reported)       ments

  Net sales                       $67,279                       $67,279
    Cost of sales                  46,512            (175)(a)    46,337
  Gross margins                    20,767             175
                                   20,942
  Operating expenses:
    Research and development        4,299            (667)(a)     3,632
    Selling, general and
     administrative                14,625          (3,236)(a)(b) 11,389
  Total operating expenses         18,924          (3,903)       15,021
  Operating income (loss)           1,843           4,078         5,921
    Other income (expense)           (268)                         (268)
  Income (loss) before income
   taxes                            1,575           4,078         5,653
    Provision for income taxes         23                            23
  Net income (loss)               $ 1,552          $4,078        $5,630

  Basic net income (loss)
   per share                        $0.02           $0.04         $0.06
  Diluted net income (loss)
   per share                        $0.02           $0.04         $0.06
  Basic weighted average
   shares outstanding              97,634          97,634        97,634
  Diluted weighted average
   shares outstanding             100,037         100,037       100,037


                                             Three Months Ended
                                              Sept. 30, 2005

                                     GAAP         Adjust-      Non-GAAP
                            (As Reported)           ments

  Net sales                       $56,554              --       $56,554
    Cost of sales                  41,386            (163)(c )   41,223
  Gross margins                    15,168             163        15,331
  Operating expenses:
    Research and development        3,703             (62)(c )    3,641
    Selling, general and
     administrative                12,182            (700)(c )   11,482
  Total operating expenses         15,885            (762)       15,123
  Operating income (loss)            (717)            925           208
    Other income (expense)         (1,048)             --        (1,048)
  Income (loss) before income
   taxes                           (1,765)            925          (840)
    Provision for income taxes        496              --           496
  Net income (loss)               $(2,261)           $925       $(1,336)

  Basic net income (loss)
   per share                       $(0.02)          $0.01        $(0.01)
  Diluted net income (loss)
   per share                       $(0.02)          $0.01        $(0.01)
  Basic weighted average
   shares outstanding              95,175          95,175        95,175
  Diluted weighted average
   shares outstanding              95,175          95,175        95,175


   The above non-GAAP adjustments for the three months ended September 30,
   2006 includes (a) $2.6 million of non-cash charges for stock option
   expense related to Financial Accounting Standard 123 ( R ), which was
   adopted by the Company in the first quarter of Fiscal 2007, and the
   Company's restricted stock plan, and (b) $1.5 million of expenses related
   to the proposed combination with Harris Corporation's Microwave
   Communications Division.  (c) The $0.9 million of non-GAAP adjustment for
   the three months ended September 30, 2005 is for non-cash charges related
   to the Company's restricted stock plan.


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

                                             Six Months Ended
                                             Sept. 30, 2006

                                     GAAP         Adjust-      Non-GAAP
                              (As Reported)        ments

  Net sales                      $133,516                      $133,516
    Cost of sales                  92,877            (463)(a)    92,414
  Gross margins                    40,639             463        41,102
  Operating expenses:
  Research and development          8,883          (1,359)(a)     7,524
    Selling, general and
     administrative                27,600          (5,215)(a)(b) 22,385
  Total operating expenses         36,483          (6,574)       29,909
  Operating income (loss)           4,156           7,037        11,193
    Other income (expense)           (524)                         (524)
  Income (loss) before
   income taxes                     3,632           7,037        10,669
    Provision for income taxes        257                           257
  Net income (loss)                $3,375          $7,037       $10,412

  Basic net income (loss)
   per share                        $0.03           $0.07         $0.11
  Diluted net income (loss)
   per share                        $0.03           $0.07         $0.10
  Basic weighted average shares
   outstanding                     97,405          97,405        97,405
  Diluted weighted average
   shares outstanding             100,537         100,537       100,537

                                              Six Months Ended
                                              Sept. 30, 2005

                                     GAAP         Adjust-      Non-GAAP
                              (As Reported)         ments

  Net sales                      $111,426              --      $111,426
    Cost of sales                  83,657            (217)       83,440
  Gross margins                    27,769             217(c)     27,986
  Operating expenses:
  Research and development          7,404             (83)(c)     7,321
    Selling, general and
     administrative                24,176            (853)(c)    23,323
  Total operating expenses         31,580            (936)       30,644
  Operating income (loss)          (3,811)          1,153        (2,658)
    Other income (expense)         (1,843)             --        (1,843)
  Income (loss) before
   income taxes                    (5,654)          1,153        (4,501)
    Provision for income taxes        773              --           773
  Net income (loss)               $(6,427)         $1,153       $(5,274)

  Basic net income (loss)
   per share                       $(0.07)          $0.01        $(0.06)
  Diluted net income (loss)
   per share                       $(0.07)          $0.01        $(0.06)
  Basic weighted average
   shares outstanding              95,059          95,059        95,059
  Diluted weighted average
   shares outstanding              95,059          95,059        95,059

   The above non-GAAP adjustment for the six months ended September 30, 2006
   includes (a) $5.6 million of non-cash charges for stock option expense
   related to Financial Accounting Standard 123 ( R ), which was adopted by
   the Company in the first quarter of Fiscal 2007, and the Company's
   restricted stock plan, and (b) $1.5 million of expenses for the proposed
   combination with Harris Corporation's Microwave Communications Division.
   (c) The $1.2 million of non-GAAP adjustment for the six months ended
   September 30, 2005 is for non-cash charges related to the Company's
   restricted stock plan.

   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 gross margins, operating, expenses,
   operating income (loss), net income (loss) and per share data, which are
   adjusted from results based on GAAP to exclude certain expenses.  These
   non-GAAP measures are used by management and 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.


DATASOURCE: Stratex Networks, Inc.



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





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

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