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ATCA/Standard Servers

Interphase Reports Q4

PLANO, Texas -- Interphase Corporation (NASDAQ: INPH), a leading international supplier of next-generation networking technologies, today reported financial results for its fourth quarter and full year ended December 31, 2007.

Revenues for the fourth quarter of 2007 were $9 million, representing an 11% increase over revenues for the fourth quarter of 2006 of $8.1 million. Fourth quarter 2007 revenues increased 7% compared to revenues of $8.4 million in the third quarter of 2007. Interphase revenues continue to be driven by the strength in our broadband telecom product portfolio, which rose 20% to $7.7 million in the fourth quarter of 2007 compared to $6.4 million for the fourth quarter of 2006. Our enterprise product line revenues increased to $917,000 compared to $885,000 on a year to year basis. Gross margin for the fourth quarter of 2007 was 53% compared to 56% for the fourth quarter of 2006. The reduction in gross margin was driven mainly by the ramp up of a new broadband product that was aggressively priced to a new Tier 1 Telecom Equipment Manufacturer (TEM) customer. The company recorded a net loss in the fourth quarter 2007 of $430,000, or $(0.07) per share, as compared to a net income of $458,000, or $0.07 per share in the fourth quarter of 2006. The fourth quarter net loss included a one time charge of approximately $220,000 related to a software license procured for a product that was subsequently discontinued, as well as non-recurring charges of approximately $215,000 for organizational changes related to the Company’s operations in France.

“We have ended the year with a high water mark in terms of revenue generation in the fourth quarter of 2007, with an improved quarterly revenue performance each quarter since the early setback in the first quarter of 2007. In spite of this setback, we were able to diversify our customer base and product portfolio across a broad range of applications in the telecommunications infrastructure. We have completed a year of strong execution with a focus on delivering to our customers a portfolio of AdvancedTCA, AdvancedMC and rack mount server PCI-x and PCI-e products as well as media converter appliances”, said Greg Kalush, president and chief executive officer of Interphase Corporation. “As our Tier 1 customers complete the integration activity associated with mergers and finalize the rationalization of their product portfolios, we are hopeful that the demand picture will stabilize. Many of our customers have noted that they have seen growth in their emerging markets, and in some cases they are leveraging their existing platforms to quickly address the delivery of basic communications and wireless services in these markets. We have seen increased pressure to help our customers cost-reduce their legacy platforms for use in emerging market deployments, as these tend to be very cost sensitive and competitive markets. We will continue to support our customers in these projects. In the very near future, we anticipate production shipments of the packet accelerator portfolio of products that we announced during the fourth quarter. These solutions address our customer’s need for line-rate packet processing, security processing and content inspection which are critical needs of service providers all over the world who deliver advanced communication services over broadband networks. During 2007, we have diligently worked to round out our comprehensive portfolio of products and expand our customer base. I am very proud of the performance of this team in 2007, and look forward with anticipation to solid execution in 2008.”

Interphase Corp.

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