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Net.com Turns Corner to Profits

After three years of struggle, Network Equipment Technologies Inc. (net.com) (NYSE: NWK) looks to be turning the corner toward profitability. After 14 straight quarters of net losses, the company reported a profit in its fiscal fourth-quarter results, announced tonight after the bell. For the seventh quarter in a row its revenues have grown.

For the quarter ending March 28, 2003, the company posted a profit of $0.02 per share and increased its cash position by $6.1 million.

The company reported revenue of $33.8 million, up from $26.7 million in the same period the prior year. In the third quarter of fiscal 2003, the company had posted $33.0 million in revenue. Product revenue for the fourth quarter increased 39 percent to $28.8 million from $20.7 million in the same period of the prior year. Net income was $537,000, or $0.02 per share, compared to a net loss for the same period of fiscal 2002 of $2.1 million, or $0.09 per share.

The company achieved positive cash flow of $6.1 million in the fourth quarter of fiscal 2003, ending the year with cash balances and investments of $94.6 million, compared to $88.4 million at the end of the third quarter. The ending cash balances were nearly flat year over year, compared to $94.9 million at the end of fiscal 2002.

“We have made cash management one of our highest priorities,” said COO John Batty, during the conference call. “We exited this year in a stronger position than we were in 12 months ago.”

The company reported that it is still seeing strong demand from the U.S. government, where it has won several contracts for the newer Scream multiservice switch/router product. The company says on average it gets about 60 to 65 percent of its revenues from the feds.

After seven straight quarters of growth, the company expects the first quarter of fiscal 2004 to be flat. Government business is expected to remain strong, but due to uncertain political and economic situations, the company says it is being cautious. For all of fiscal 2004, the company expects revenue growth between 5 and 15 percent.

The company is still primarily selling its ATM product. Its Scream and its Shout voice-over-IP gateway, are still generating less than 10 percent of the company’s overall revenues. The company would not break out specifics of the product line or talk about specific traction with the new products. “We’re being very cautious,” said Bert Whyte, president and CEO of the company on the call. “We’re looking for sustainable momentum, and then we’ll feel more comfortable giving better guidance on these products. We just want to see that the runway is clear before we say anything.”

Whyte, also said that the company is engaged in many RFPs with incumbent providers and he's hopeful the company will score a “home run” with one of them.

”I was talking to one incumbent provider recently about their plans for upgrades,” he said. “And I believe over the next three to five years, it will be a $300 million to $500 million opportunity. This is the single biggest initiative that carriers are focusing on. It’s getting a lot of interest and it’s going to be big — not just one home run, but more like 28 home runs.”

— Marguerite Reardon, Senior Editor, Light Reading

dljvjbsl 12/5/2012 | 12:12:32 AM
re: Net.com Turns Corner to Profits
Is there any market for the inumerable number of VoIP gateways that are being introduced? There were already a large number of vendors with boxes with equivalent functionaliy before the VoIP hype started. This is especially true given that these boxes supply only some standard trunking protocols and leave the difficult engineering to the customer. Even established vendors have crashed and burned with these boxes. Why wouldn't the customer just buy a SIP stack from some vendor and cut these gateway middlemen out of the loop?
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