<PAGE> 1
MADGE NETWORKS N.V. [Madge Logo]
Transpolis Schiphol Airport
Polaris Avenue 23
2132 JH Hoofddorp
The Netherlands
Main: (+31) (0) 23 5685526
Fax: (+31) (0) 23 5685528
MADGE NETWORKS N.V.
REPORTS SECOND QUARTER 2000 RESULTS
Amsterdam, The Netherlands (July 26, 2000) -- Madge Networks N.V. (NASDAQ NM:
MADGF), a global network solutions provider, today announced results for its
second fiscal quarter ended June 30, 2000.1 Operating highlights at Madge
Networks companies during the second quarter include:
- Madge.connect experiences significant sequential decline in sales of Token
Ring products;
- Madge.web achieves 22% sequential revenue growth;
- Madge.web launches pan-European Madge Broadcast Network in partnership with
RealNetworks, and opens data centers in Frankfurt and Amsterdam;
- Red-M subsidiary formed to compete in high-growth, wireless Internet and
m-commerce arena;
- Red-M, at first demonstration of its products, publicly acknowledged as
number one innovator in Bluetooth industry.
Madge Networks revenues for the second quarter were US$34.2 million, compared to
first quarter 2000 revenues of $51.5 million and revenues of $53.3 million for
the second quarter of 1999. The net loss for the quarter was $23 million, or
$(0.52) per share, compared to a net loss of $15.1 million, or $(0.36) per
share, for the first quarter of 2000. The net loss for the second quarter of
1999 was $10.1 million, or $(0.25) per share.
In a separate news release issued today, Madge Networks announced that it has
secured a total $60 million funding commitment for Madge Networks N.V. and
Madge.web N.V.
During the quarter, Madge Networks N.V. announced the formation of Red-M, a
subsidiary company developing wireless Internet server products that will
provide rapid and reliable transmission of voice, data and video communications
over a
32
<PAGE> 2
wireless connection using Bluetooth, the emerging short-range wireless
technology. At the Bluetooth Congress in Monte Carlo in June, Red-M demonstrated
its new technology and won the Bluetooth Innovation Award, the only award given
at this annual meeting. The first products from Red-M are due by the end of this
year.
MADGE.WEB
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS Three months ended(2)
-----------------------------
(Unaudited, in thousands) June 30, March 31,
2000 2000
<S> <C> <C>
Sales $8,405 $6,900
Gross loss $(5,008) $(6,952)
EBITDA (loss) $(13,312) $(14,375)
</TABLE>
QUARTERLY HIGHLIGHTS AND RECENT DEVELOPMENTS
Madge.web is a global provider of rich content applications and managed network
services. Madge.web revenues for the second quarter were $8.4 million, a 22%
increase over first quarter revenues of $6.9 million. Results for both quarters
exclude a non-core business segment that has been discontinued in Madge.web. All
comparable quarterly revenues have been restated on a like-for-like basis.
EBITDA loss was $13.3 million in the quarter as Madge.web continued its
aggressive investment plans to drive the business and enhance its global
Overnet, including the addition of new data centers in Frankfurt and Amsterdam.
"We continued to make positive progress in building our business as a leading
service provider supporting the full life cycle of rich content," said Robert
Madge, CEO, Madge.web. "We had a landmark quarter, with the launch of our
pan-European streaming media network, the Madge Broadcast Network, in
partnership with RealNetworks, and in only the first weeks of operation we
broadcast 32 events and deployed eight on-demand services. Madge.web revenues
advanced sequentially 22% to $8.4 million, and we achieved a doubling of
guaranteed revenue contract orders for our advanced IP-based network and
application services."
33
<PAGE> 3
MADGE.CONNECT
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS Three months ended(2)
----------------------------
(Unaudited, in thousands) June 30, Mar. 31,
2000 2000
<S> <C> <C>
Sales $25,746 $44,610
Gross profit $10,846 $22,399
EBITDA $402 $6,635
</TABLE>
QUARTERLY HIGHLIGHTS AND RECENT DEVELOPMENTS
Madge.connect is a global supplier of advanced networking products including
Token Ring solutions, ISDN switching and IP-based video networking for large
enterprises. Madge.connect revenues for the second quarter were $25.7 million,
compared with $44.6 million for the first quarter of 2000. EBITDA was $0.4
million in the quarter. Madge.connect experienced significant market weakness
for its Token Ring products in the second fiscal quarter. In response to the
market downturn, Madge.connect reduced channel inventory by $7.5 million in the
quarter.
-----------------
1 For the purposes of presentation, the Company has indicated its fiscal
quarters within the year as ending on the calendar month end, whereas, in fact,
the Company operates on the basis of thirteen-week financial quarters.
2 March 31 Quarter results are restated for the transfer of a business segment
from Madge.web to Madge.connect.
Investors will have the opportunity to listen to management's discussion of its
second quarter 2000 results in a conference call to be held Thursday, July 27th
at 8:30 a.m. (Eastern Time) over the Internet through Vcall at www.vcall.com. To
listen to the live call please go to the web site at least fifteen minutes early
to register, download, and install any necessary audio software. A link to the
Vcall will also be available from our website at www.madge.com. For those who
cannot listen to the live broadcast, a replay will be available shortly
thereafter by dialing 1-800-633-8284 (858-812-6440 for international callers),
reservation #15866461, or by visiting our website at www.madge.com.
34
<PAGE> 4
ABOUT MADGE NETWORKS N.V.
Madge Networks N.V. (NASDAQ NM: MADGF) is a global provider of advanced
Internet-centric network services and products, and mission-critical enterprise
solutions. The company operates through three primary subsidiaries: Madge.web, a
global provider of rich content applications and managed network services;
Madge.connect, a global supplier of product solutions for mission-critical
enterprise networks; and Red-M, a developer of wireless Internet server products
that provide Internet and Intranet access from a wide range of mobile devices in
the workplace. The company's main business centers are located in Wexham
Springs, United Kingdom; New York City and Dallas, Texas. Information about
Madge's complete range of products and services can be accessed on the World
Wide Web at www.madge.com.
ABOUT MADGE.WEB
Madge.web is a global provider of rich content applications and managed network
services. These services are delivered via the company's Overnet, by-passing the
public Internet to more than 30 countries around the world. Rich content
services from Madge.web - architected to handle on-line video, audio, images and
interactive media -- include encoding services, virtual private networking,
managed hosting, storage, streaming media distribution and marketing services,
and will soon include workflow management. Further information about Madge.web
can be accessed on the World Wide Web at www.madgeweb.com.
ABOUT MADGE.CONNECT
Madge.connect is a global supplier of advanced networking product solutions to
large enterprises. As the market leader in Token Ring, Madge.connect is
pioneering next generation networking solutions which enable the painless
deployment of 100Mbps and Gigabit speed IP-based applications within existing
corporate networks while protecting customers' investments in Token Ring and
ATM. As part of this strategy, Madge.connect provides a range of ISDN switching
and IP-based video networking products for real-time multimedia communications
across the network.
ABOUT RED-M
Founded in 2000, Red-M is a subsidiary of Madge Networks N.V. The company is a
pioneer of mobile commerce solutions that allow the wireless integration of
data, voice and video communications in the work environment, delivering
reliable and secure access to Internet, Intranet and business critical
applications from a wide range of mobile devices. Information on Red-M can be
found on the World Wide Web at www.red-m.com
35
<PAGE> 5
PRIVATE SECURITIES LITIGATION REFORM ACT STATEMENT
Investors should take note that certain statements in this press release are
forward-looking and may not give full weight to all of the potential risks
(e.g., the need for, and ability to raise, additional funds, changing
technologies, competition, planned service and product launches, management of
change and changed resource allocation resulting from these and other factors).
Forward-looking statements in this press release include statements that refer
to Red-M providing rapid and reliable transmission of voice, data and video
communications over a wireless connection using Bluetooth technology, Red-M's
first products being due by the end of this year, Madge.web's rich content
services soon including workflow management and other statements which are not
completely historical. These statements may differ materially from actual future
actions, events or results. For more information on risks, please refer to
Madge's recent SEC filings.
Madge, the Madge logo, Madge.web, Madge.connect and Red-M are trademarks, and in
some jurisdictions may be registered trademarks of Madge Networks or its
affiliated companies.
Contact: Madge Networks, Wexham Springs, United Kingdom
Internet: www.madge.com
Company Contact:
Chris Bradley, Chief Financial Officer
MADGE NETWORKS N.V.
Tel: (+44) 1753 661172
Investor Relations Contact:
Lisa Ellis, Director of Investor & Public Relations
MADGE NETWORKS N.V.
Tel: 212-709-1007
36
<PAGE> 6
Madge Networks N.V.
Condensed Consolidated Balance Sheets(1)
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
JUNE 30, DEC. 31,
2000 1999
---------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash, cash equivalents, and short-term investments(2) $20,048 $29,971
Accounts receivable, net 26,633 38,655
Inventories 12,506 16,160
Prepaid expenses and other current assets 14,152 10,802
---------------------------
Total current assets 73,339 95,588
Investments, property and equipment, net 47,956 44,834
Intangible assets, net 47,681 52,076
---------------------------
Total assets $168,976 $192,498
===========================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $74,854 $92,639
Income taxes payable 15,322 16,715
Short-term borrowings 4,189 7,107
Short-term obligations 3,988 3,298
---------------------------
Total current liabilities 98,353 119,759
Long-term obligations 8,879 3,563
---------------------------
Total liabilities 107,232 123,322
Shareholders' equity 61,744 69,176
---------------------------
Total liabilities and shareholders' equity $168,976 $192,498
===========================
</TABLE>
--------
1 The condensed consolidated results include Madge.web, Madge.connect and
Madge Group Companies.
2 Cash includes a balance of $6.1M at June 30, 2000 and $10.5M at
December 31, 1999 that had restricted use.
37
<PAGE> 7
Madge Networks N.V.
Condensed Consolidated Statements of Operations(3)
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,(4)
--------------------------------
2000 1999
--------------------------------
<S> <C> <C>
Madge.web sales 8,405 8,657
Madge.connect sales 25,746 44,685
-------------------------------
Net sales 34,151 53,342
Cost of sales 28,313 30,018
-------------------------------
Gross profit 5,838 23,324
Operating expenses:
Sales & marketing 16,487 18,320
Research & development 5,637 8,995
General and administrative 6,178 6,316
Special Charges 25
--------------------------------
Total operating expenses 28,302 33,656
--------------------------------
Loss from operations (22,464) (10,332)
Net interest (expense) income (366) 596
--------------------------------
Loss before tax (22,830) (9,736)
Income tax provision (125) (402)
--------------------------------
Net Loss $(22,955) $(10,138)
================================
Earnings per share
Basic $(0.52) $(0.25)
Diluted $(0.25)
$(0.52)
Weighted Average Shares Outstanding
Basic 44,066 40,535
Diluted 44,066 40,535
</TABLE>
--------
3 The condensed consolidated results include Madge.web, Madge.connect and
Madge Group Companies.
4 The 1999 quarter results are restated for the transfer of a business segment
from Madge.web to Madge.connect.
38
<PAGE> 8
Madge Networks N.V.
Condensed Consolidated Statements of Operations(5)
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
GROUP RESULTS
SIX MONTHS ENDED(6)
JUNE 30,
------------------------------
2000 1999
------------------------------
<S> <C> <C>
Madge.web sales $15,305 $13,290
Madge.connect sales $70,356 $88,866
------------------------------
Net sales 85,661 102,156
Cost of sales 64,376 57,918
------------------------------
Gross profit 21,285 44,238
Operating expenses:
Sales & marketing 35,590 35,530
Research & development 11,319 18,370
General and administrative 11,577 10,184
Special Charges 25
------------------------------
Total operating expenses 58,486 64,109
------------------------------
Loss from operations (37,201) (19,871)
Net interest (expense) income (481) 1,658
------------------------------
Loss before tax (37,682) (18,213)
Income tax provision (365) (402)
------------------------------
Net Loss $(38,047) $(18,615)
==============================
Earnings per share
Basic $(0.88) $(0.44)
Diluted $(0.88) $(0.44)
Weighted Average Shares Outstanding
Basic 43,029 41,863
Diluted 43,029 41,863
</TABLE>
--------
5 The condensed consolidated results include Madge.web, Madge.connect and
Madge Group Companies.
6 The 1999 period results are restated for the transfer of a business segment
from Madge.web to Madge.connect.
39