NETSCOUT Announces Preliminary First Quarter Fiscal 2002 Results

06 Jul 2001

WESTFORD, Mass., July 6 /PRNewswire/ -- NetScout Systems, Inc. (Nasdaq: NTCT) today announced, based on preliminary information, estimated results for its fiscal first quarter ending June 30, 2001, and revised guidance for fiscal 2002. Slowed economic conditions continue to effect enterprises in most sectors of the Company's customer base. While the Company is seeing no weakening of opportunities, its customers' IT spending constraints have not yet eased. In addition, the change in NetScout's relationship with Cisco, transferring to NetScout responsibility for direct sales of hardware probes to Cisco customers, has caused some disruption in first quarter sales as the Company had anticipated.

For the first quarter of fiscal 2002, NetScout now estimates that revenues will be in the range of $18.0 million to $18.5 million, resulting in a pro forma loss per basic share of $(0.03) to $(0.04). On a GAAP basis, the resultant loss will be in a range of $(0.14) to $(0.15) per basic share. Pro forma earnings are calculated by removing the non-cash charges associated with stock-based compensation and amortization of goodwill and other intangibles from the GAAP income statement calculation of earnings. These non-cash charges derive principally from the acquisition of NextPoint Networks, Inc. in July 2000.

The Company does not expect the sales disruption caused by the Cisco transition to continue in the long term, as the business relationships with Cisco customers are transferred to NetScout. However, in view of current economic and industry projections, the Company expects that weak market conditions will continue for the near term.

"We continue to see cautious decision-making among our major customers that has resulted in slowing of our sales process, making sales cycles more unpredictable and short term visibility more difficult. However, the strong level of interest in our solutions and our good sales pipeline make us optimistic about long term revenue growth," said Anil Singhal, President and CEO of NetScout. "We have had a positive reaction to our new business relationship from the customers we are transitioning from Cisco. Interest in our products by Cisco customers remains high, despite the sales channel realignment precipitated by the relationship change. Our product line is more robust than ever with new software and hardware introductions, we have doubled the size of the sales force over the last 15 months, and our business fundamentals are sound."


NetScout's expectations looking forward are based on widely reported economic forecasts that foresee the current difficult economic conditions continuing through the end of calendar 2001. However, NetScout anticipates that the current slowdown in network management spending by many large enterprises will begin to ease over the next quarter, as they begin to forecast a normalization of their own businesses. Based on these assumptions, NetScout expects quarterly sequential revenue growth in the range of 7% to 10%, off the lower revenue base of the first quarter, for the next several quarters. NetScout continues to take significant actions to lower discretionary spending and to freeze headcount in order to maintain level operating expenses. NetScout expects to be profitable on a pro forma basis through the balance of the fiscal year and to improve pro forma financial performance to return to historical profitability levels next fiscal year. As a result of the Cisco relationship change, NetScout is revising its long term business model ranges to the following: gross margins between 72 percent and 75 percent, operating expenses between 50 percent and 55 percent of revenue, and operating margins of 18 percent to 20 percent. This revision effectively increases gross margin objectives by 2 points, increases operating expenses by 2 points, in sales and marketing, while operating margin objectives remain unchanged.

More information on NetScout's fiscal first quarter results will be available on July 19, 2001 when the company intends to report its final results.

The Company invites shareholders to listen into a conference call today at 5:00 p.m. EDT, which will be Webcast live through the Company's Website at Please log on to the Web site 15 minutes prior to the broadcast. The numbers for the call are 800-479-9001 for U.S./Canada and 719- 457-2618 for International callers. A replay of the call will be available after 8:00 p.m. EDT this evening for approximately one week. The number for the replay is 888-203-1112 for U.S./Canada, and 719-457-0820 for International callers. The access code is 624488.

About NetScout Systems

NetScout Systems, Inc. is a leading provider of infrastructure performance management solutions for leading companies and service providers worldwide. NetScout serves approximately half of the Fortune 500 and counts among its customers 3M Corporation, AT&T, Datek Online, Bristol-Myers Squibb,, Webhire, Intel Online, Fidelity Investments and Sun Microsystems. NetScout's solutions are offered through its nGenius(TM) Performance Management System is an integrated solutions-based suite of advanced monitoring and reporting applications that draw on the rich performance data generated by NetScout's real-time, application-aware probe suite, advanced intelligent software agents, and network devices. The nGenius System helps organizations increase their return on infrastructure investments by optimizing the performance of their network, applications and content. NetScout is headquartered in Westford, Massachusetts and has approximately 360 employees, with offices in North America, Europe and Asia. Further information on the company is available on the World Wide Web at Forward-looking statements in this release are made pursuant to the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934. Investors are cautioned that statements in this press release which are not strictly historical statements, including the plans, objectives and future financial performance of NetScout, constitute forward-looking statements which involve risks and uncertainties. Actual results could differ materially from the forward-looking statements. Risks and uncertainties which could cause actual results to differ include, without limitation, risks and uncertainties associated with the company's strategic relationships with Cisco Systems and other partners, dependence upon broad-based acceptance of the company's infrastructure performance management solutions, the company's ability to achieve and maintain a high rate of growth, introduction and market acceptance of new products and product enhancements such as the delivery of nGenius product platform probes and software solutions, the ability of NetScout to take advantage of service provider opportunities, competitive pricing pressures, reliance on sole source suppliers, successful expansion and management of indirect distribution channels, and dependence on proprietary technology, as well as risks of slowdowns or downturns in economic conditions generally and in the market for infrastructure performance management solutions specifically. For a more detailed description of the risk factors associated with the company, please refer to the company's Annual Report on Form 10-K for the fiscal year ended March 31, 2001, on file with the Securities and Exchange Commission.

NetScout is a registered trademark, and the NetScout logo, nGenius, nGenius Application Service Level Manager, nGenius Real-Time Monitor and nGenius Capacity Planner are trademarks of NetScout Systems, Inc.

/CONTACT: Peggy Flynn, Director, Corporate Relations of NetScout Systems, 978-614-4162,; or Bill Zima, Associate Director, Technology Consulting for Thomson Financial-Carson Group, 212-510-9261,, for NetScout Systems/
SOURCE NetScout Systems, Inc.
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CONTACT: Peggy Flynn, Director, Corporate Relations of NetScout Systems, 978-614-4162,; or Bill Zima, Associate Director, Technology Consulting for Thomson Financial-Carson Group, 212-510-9261,, for NetScout Systems