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."
Guidance:
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
http://www.netscout.com. 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,
Amazon.com, 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 http://www.netscout.com.
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, flynnp@netscout.com; or Bill Zima, Associate Director,
Technology Consulting for Thomson Financial-Carson Group, 212-510-9261,
bill.zima@tfn.com, for NetScout Systems/
SOURCE NetScout Systems, Inc.
Web site: http: //www.netscout.com
CONTACT: Peggy Flynn, Director, Corporate Relations of NetScout Systems, 978-614-4162, flynnp@netscout.com; or Bill Zima, Associate Director, Technology Consulting for Thomson Financial-Carson Group, 212-510-9261, bill.zima@tfn.com, for NetScout Systems