Harmonic Reports Q2

SUNNYVALE, Calif. -- Harmonic Inc. (Nasdaq:HLIT - News), a leading provider of digital video, broadband optical networking and IP delivery systems, today announced its results for the quarter ended July 1, 2005.

For the second quarter of 2005, the Company reported net sales of $59.8 million, compared to $57.0 million in the second quarter of 2004 and $72.9 million in the first quarter of 2005. International sales represented 41% of total sales for the second quarter of 2005, compared to 44% in the same period of 2004 and 36% in the first quarter of 2005.

The Company's CS division, which designs, manufactures and markets digital headend systems for a number of markets, had divisional net sales of $43.0 million in the second quarter of 2005, compared to $33.3 million in the same period of 2004, and $56.6 million in the first quarter of 2005. The sequential decline in CS revenue was primarily a result of slower orders of digital headend systems from domestic cable operators in May and June. The BAN division, which designs, manufactures and markets fiber optic products primarily for broadband cable networks, had divisional net sales of $16.8 million in the second quarter of 2005, compared to $23.7 million in the same period of 2004 and $16.3 million in the first quarter of 2005.

For the second quarter of 2005, the Company reported improved gross margins due in part to the lower sales volume of complementary, lower margin third-party products, as compared to the first quarter of 2005.

The GAAP net loss for the second quarter of 2005 was $2.5 million or $0.03 per share, compared to a GAAP net loss of $1.8 million, or $0.02 per share for the same period of 2004. Excluding the effect of non-cash accounting charges for the amortization of intangibles, the non-GAAP net loss for the second quarter of 2005 was $2.2 million or $0.03 per share, compared to non-GAAP net income of $0.5 million, or $0.01 per share for the same period of 2004. As of July 1, 2005, the Company had cash, cash equivalents and short-term investments of $98.2 million.

The Company's revenue outlook continues to be difficult to forecast. Assuming that major customers order for large projects according to the currently anticipated level and timing, the Company expects net sales in the range of $100 million to $120 million for the second half of 2005.

"Despite the challenge of predicting the timing of customer orders and a very competitive business environment, we continue to maintain our technological leadership and win significant new orders for digital headend and fiber optic systems across different markets," said Anthony J. Ley, Chairman, President and Chief Executive Officer. "During the second quarter, we extended our customer base in Europe and Asia, including shipments to new telco customers for video-over-DSL deployments. We also introduced important new products to further strengthen our competitive position, including our new Electra(TM) encoder and DiviTrackIP(TM) multiplexer. As we move into the second half of the year, another U.S. cable operator recently selected our systems for its initial digital simulcasting installation."

Harmonic Inc.