Network Equipment Technologies, Inc. Announces Results for Third Quarter FY 2005

Network Equipment Technologies, Inc. Announces Results for Third
Quarter FY 2005
Company Grows Cash to Highest Level Since FY 2002 Despite Restructuring 


FREMONT, Calif., Jan. 12  /PRNewswire-FirstCall/ -- net.com (NYSE:NWK), a
global provider of networking equipment, today reported results for the quarter
ended December 24, 2004, the Company's fiscal third quarter, posting a loss of
$0.12 per share. The loss includes a charge for restructuring as the company
reshaped the organization to sharpen its focus.

Total revenue for the third quarter of fiscal 2005 decreased 12 percent year
over year and 6 percent sequentially, to $29.7 million, from $33.9 million in
the third quarter of the prior year and $31.6 million in the second quarter of
fiscal 2005. Product revenue decreased 11 percent year over year and 8 percent
sequentially, to $25.4 million, from $28.4 million in the third quarter of the
prior year and $27.5 million in the second quarter of fiscal 2005. New product
revenue in Q3 fiscal 2005 was 18 percent of product revenue and 15 percent of
total revenue.

Net loss for the third quarter of fiscal 2005 was $2.9 million, or $0.12 per
share, compared to net income of $909,000, or $0.04 per share, in the third
quarter of the prior year and $1.4 million, or $0.06 per share, in the second
quarter of fiscal 2005. Included in the third quarter loss was a restructure
charge of $2.8 million. The restructuring was primarily the result of
streamlining the company's engineering efforts, as the company increases its
focus on the enterprise voice over IP (VoIP) and government sectors. Excluding
restructure charges, operating expenses decreased $1.1 million from the second
to the third quarter of fiscal 2005.

Total revenue for the nine-month period ended December 24, 2004 was $90.4
million, compared to $99.9 million for the same period last year. The company
reported a net loss of $2.3 million, or $0.10 per basic and diluted share, for
the current nine-month period, compared to a net profit of $2.9 million, or
$0.13 per basic share and $0.12 per diluted share, for the same period in
fiscal 2004.

Hubert "Bert" Whyte, president and CEO, noted, "I am pleased with a good
performance this quarter, despite the fact that we were restructuring our
resources. Our initiatives around our ShoutIP platform for enterprise voice
over IP as well as developmental work for the government market were timely. We
continue to see traction with independent carriers as well, for both our SCREAM
and ShoutIP platforms, while Promina remains the workhorse both for government
customers and our multinational customers around the world."

  Highlights for Third Quarter FY05
  Highlights from the quarter include the following:

  -- Purchases of over $2.0 million by defense and intelligence agencies of
     SCREAM broadband platform, for tactical IP implementations;
  -- Purchase of ShoutIP by Defense Information Systems Agency (DISA) for
     secure VoIP applications in support of senior government officials;
  -- Cash and investments increased $2.9 million, to $104.7 million,
     including long-term restricted cash, at quarter-end;
  -- Continued expansion of networks globally with Promina equipment,
     including the Central Bank of Russia, Mauritel, Reuters, Equant, and
     the USMC;
  -- Began implementation of Microsoft contract, including training;
  -- New sales of ShoutIP to independent operating companies (IOCs), as
     evidenced by today's accompanying announcement of new VoIP network for
     southern Indiana carrier Enhanced Telecommunications Corporation;
  -- Partnership agreement signed with Diversified Technologies to develop
     the WHISPER platform, based on ShoutIP, expanding the presence of
     secure voice over IP applications with ShoutIP into mobile, remote
     deployments;
  -- Product of the year award by Internet Telephony for ShoutIP's function
     as an intelligent VoIP gateway and session controller for VoIP
     migration solutions;
  -- The company's SCREAM platform was named as a finalist for two separate
     product awards, including the World Communications Award in October,
     and the Light Reading "Leading Lights" product of the year award in
     December;
  -- The company was named as a finalist for two separate manufacturing and
     operations awards, winning the Supply Chain Systems Magazine
     "Innovators" award in October for supply chain management and awaiting
     announcement in March of the "Supply Chain Mastery" award from Managing
     Automation.



The Company also announced that it has appointed Frederick D'Alessio, veteran
telecommunications executive, to the company's board of directors, effective as
of January 11, 2005.

About net.com

Network Equipment Technologies, Inc., doing business as net.com, develops and
delivers platforms for broadband services, Internet telephony, and multiservice
networks. An architect of the networking industry, net.com has been supplying
service providers, governments and enterprises around the world with
bulletproof networking technology for more than 20 years. net performance. net
results. net.com.

  Visit http://www.net.com/ for more information.

  Forward looking statements


Statements made in this press release other than statements of historical fact
are forward-looking including, for example, those relating to products,
customers, operations, strategic partners, and market sectors. Investors are
cautioned that these statements are based upon current expectations, forecasts
and assumptions that involve risks and uncertainty that may cause actual
results, events or company performance to differ materially from those
expressed or implied in the forward-looking statements. Among other risks and
uncertainties, product testing and trials, by independent operating companies
and other potential customers, might not be successful and even if successful
might not result in product orders. Also, the newly targeted market sectors for
the company's products, including the enterprise VoIP sector, might not accept
the products and the products face substantial competition in such markets.
Furthermore, many of the Company's existing sales contracts, including those
discussed in this press release, provide for discretionary ordering and will
not result in revenue unless and until such orders are received and fulfilled.
In addition to the factors set forth in the press release, the factors
identified in net.com's filings with the Securities and Exchange Commission,
including Forms 10-K and 10-Q, could also affect the forward-looking statements
contained in this press release. Network Equipment Technologies, Inc. disclaims
any intention or obligation to update or revise any forward looking statements,
whether as a result of new information, future events or otherwise.

NOTE:  Promina, SCREAM, and ShoutIP are trademarks of Network Equipment
Technologies, Inc.

                   NETWORK EQUIPMENT TECHNOLOGIES, INC.
             CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                  (in thousands, except per share data)
                               (unaudited)

                                   Quarter Ended         Nine Months Ended
                                 Dec 24,     Dec 26,     Dec 24,    Dec 26,
                                  2004        2003        2004       2003

  Revenue:
    Product                     $25,363     $28,438     $77,217    $85,511
    Service and other             4,314       5,433      13,153     14,401
      Total revenue              29,677      33,871      90,370     99,912
  Costs of sales:
    Cost of product revenue      10,381      11,033      29,571     34,400
    Cost of service and
     other revenue                4,081       4,394      12,411     11,959
      Total cost of sales        14,462      15,427      41,982     46,359

  Gross margin                   15,215      18,444      48,388     53,553
  Operating expenses:
    Sales and marketing           6,629       8,202      21,180     23,320
    Research and development      6,134       6,939      20,075     20,728
    General and administrative    2,514       2,349       7,623      7,539
    Restructuring costs           2,846          --       4,117        266
      Total operating expenses   18,123      17,490      52,995     51,853
  Income (loss) from
   operations                   (2,908)         954     (4,607)      1,700
  Other income, net                  37          69       1,380      1,588
  Interest expense, net             (7)       (117)       (210)      (407)
  Income (loss) before taxes    (2,878)         906     (3,437)      2,881
  Income tax provision
   (benefit)                          5         (3)     (1,115)       (18)
  Net income (loss)            $(2,883)        $909    $(2,322)     $2,899
  Per share data:
  Net income (loss):

    Basic                       $(0.12)       $0.04     $(0.10)      $0.13
    Diluted                     $(0.12)       $0.04     $(0.10)      $0.12

  Common and common
   equivalent shares:

    Basic                        24,597      23,395      24,332     23,091
    Diluted                      24,597      24,884      24,332     24,385




                   NETWORK EQUIPMENT TECHNOLOGIES, INC.
                  CONDENSED CONSOLIDATED BALANCE SHEETS
                              (in thousands)
                               (unaudited)

                                                   Dec 24,       Mar 26,
                                                    2004           2004
  Assets
    Cash and investments                          $103,955        $99,732
    Accounts receivable, net                        22,964         19,709
    Inventories                                     12,796         13,665
    Prepaid expenses and other assets                2,574          2,898
      Total current assets                         142,289        136,004

    Property and equipment, net                     28,074         31,423
    Other assets                                     2,750          4,657
                                                  $173,113       $172,084
  Liabilities and Stockholders' Equity
    Accounts payable                                $5,702         $6,334
    Other current liabilities                       17,209         15,681
      Total current liabilities                     22,911         22,015

    Long term liabilities                            1,473          1,705
    7 1/4% convertible subordinated debentures      24,706         24,706
    Stockholders' equity                           124,023        123,658
                                                  $173,113       $172,084


DATASOURCE: Network Equipment Technologies, Inc.



CONTACT:  Brenda Ropoulos, Director of Corporate Relations,

[phone], or 



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

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