Tekelec Reports 2Q07

MORRISVILE, N.C. -- Tekelec (NASDAQ:TKLC), a leading developer of high-performance network applicationsfor next-generation fixed, mobile and packet networks, today announcedits results for the quarter and six months ended June 30, 2007.Results from continuing operations for all periods presented includethe results from the Network Signaling Group ("NSG") and theCommunications Software Solutions Group ("CSSG"). Results of theCompany's Switching Solutions Group ("SSG") for the quarter and sixmonths ended June 30 of 2007 and 2006 and the results of the IEXcontact center ("IEX") business unit for the quarter and six monthsended June 30, 2006 are included in the results from discontinuedoperations.

Results from Continuing Operations

Revenue from continuing operations for the second quarter of 2007was $110.0 million, down 8% compared to $119.1 million for the secondquarter of 2006. For the second quarter of 2007, the Company hadorders of $84.7 million, up 4% compared to $81.8 million for thesecond quarter of 2006. Backlog as of June 30, 2007 was $334.7 millioncompared to $360.0 million as of March 31, 2007.

On a GAAP basis, the Company reported income from continuingoperations for the second quarter of 2007 of $3.8 million, or $0.05per diluted share, compared to income from continuing operations of$15.7 million, or $0.22 per diluted share, for the second quarter of2006. On a Non-GAAP basis, income from continuing operations for thesecond quarter of 2007 was $9.0 million, or $0.12 per diluted share,compared to income from continuing operations of $20.7 million, or$0.28 per diluted share, for the second quarter of 2006. Please referto the attached financial statement schedules for a reconciliation ofthe Company's GAAP operating results to its Non-GAAP operatingresults.

Revenue from continuing operations for the first six months of2007 was $218.8 million, up 19% compared to $184.0 million for thefirst six months of 2006. For the first six months of 2007, theCompany had orders from continuing operations of $163.9 million, down3% compared to $168.2 million for the first six months of 2006.

On a GAAP basis, the Company reported income from continuingoperations for the first six months of 2007 of $6.8 million, or $0.10per diluted share, compared to income from continuing operations of$5.4 million, or $0.08 per diluted share, for the first six months of2006. On a Non-GAAP basis, income from continuing operations for thefirst six months of 2007 was $19.6 million, or $0.27 per dilutedshare, compared to income from continuing operations of $13.8 million,or $0.20 per diluted share, for the first six months of 2006. Pleaserefer to the attached financial statement schedules for areconciliation of the Company's GAAP operating results to its Non-GAAPoperating results.

Results from Discontinued Operations

On April 21, 2007, the Company completed the sale of the SSGbusiness to GENBAND Inc. and the operations of SSG have been presentedas a discontinued operation. On a GAAP basis, loss from discontinuedoperations, including a loss on the sale of discontinued operations,in the second quarter of 2007 was $11.5 million, or $0.16 loss perdiluted share, compared to a loss from discontinued operations of $1.1million, or $0.02 loss per diluted share, in the second quarter of2006. On a GAAP basis, loss from discontinued operations, including aloss on the sale of discontinued operations, for the first six monthsof 2007 was $65.0 million, or $0.92 loss per diluted share, comparedto a loss from discontinued operations of $7.4 million, or $0.11 lossper diluted share, for the first six months of 2006.

Included in the income from discontinued operations for the threemonths ended June 30, 2007 is a pretax restructuring charge of $5.8million associated with certain lease exit and moving costs recordedin connection with our exit of the facilities in Plano, Texas utilizedby the SSG business. The Company anticipates an additional charge of$2.0-$3.0 million related to exit of the facilities in Plano, Texas tobe recorded in the third quarter of 2007.

Balance Sheet Results

At June 30, 2007, Tekelec's consolidated cash, cash equivalentsand short-term investments totaled $464.8 million, up from $450.0million at March 31, 2007. Deferred revenues from continuingoperations were $158.8 million at June 30, 2007, down from $173.3million at March 31, 2007.

Frank Plastina, president and chief executive officer of Tekelec,stated, "We are pleased with our operating results from continuingoperations and with our strong balance sheet at the end of the Junequarter. We were disappointed by our volume of orders; however, we areencouraged by the strength of our EAGLE 5 ISS signaling businessinternationally, which included seven new customers this quarter."

Consolidated Results

On a GAAP basis, net loss on a consolidated basis for the threemonths ended June 30, 2007 was $7.8 million, or $0.11 loss per dilutedshare, compared to net income on a consolidated basis for the threemonths ended June 30, 2006 of $14.6 million, or $0.20 per dilutedshare. On a GAAP basis, net loss on a consolidated basis for the sixmonths ended June 30, 2007 was $58.2 million, or $0.82 loss perdiluted share, compared to a net loss on a consolidated basis for thesix months ended June 30, 2006 of $2.0 million, or $0.03 loss perdiluted share.

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