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[MADGE LOGO]
MADGE NETWORKS N.V.
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 THIRD QUARTER 2000 RESULTS
Amsterdam, The Netherlands (October 25, 2000) -- Madge Networks N.V. (NASDAQ NM:
MADGF), a global network solutions provider, today announced results for its
third fiscal quarter ended September 30, 2000.(1) Operating highlights at Madge
Networks companies during the third quarter include:
- Madge.web and Inktomi form strategic technology and marketing alliance to
deploy business-to-business content distribution services;
- Madge.web is founding member of Content Bridge alliance for management and
distribution of rich content, and enhanced performance of the Internet;
- Red-M partners with Bluetooth network service provider Cerulic to deliver
next generation wireless Internet services;
- Madge.connect successfully concludes sale of its Video Networking business.
Madge Networks revenues for the third quarter were US$37.3 million, compared to
second quarter 2000 revenues of $34.2 million and revenues of $42.2 million for
the third quarter of 1999. The net loss for the quarter was $21.7 million, or
$(0.46) per share, compared to a net loss of $23.0 million, or $(0.52) per
share, for the second quarter of 2000. The net loss for the third quarter of
1999 was $16.4 million, or $(0.41) per share.
During the third quarter, Madge.connect concluded the sale of its Video
Networking business. Madge Networks revenues for continuing operations
(excluding the Video Networking business) for the third quarter were US$34.3
million, against a comparable $30.8 million in the second quarter of 2000 and
$37.0 million for the third quarter of 1999. The net loss for the quarter for
continuing operations was $21.0 million, or $(0.45) per share, compared to a net
loss of $22.7 million, or $(0.51) per share, for the second quarter of 2000. The
net loss for continuing operations for the third quarter of 1999 was $16.1
million, or $(0.40) per share.
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During the quarter, Madge Networks N.V. raised $30 million for the funding of
our two growth businesses - Madge.web and Red-M, through the issuance of common
stock under a previously announced agreement, with Volendam Investeringen N.V.
In addition, Madge.web received $20 million under a convertible loan agreement
with Volendam Investeringen. This is an advance of funds against the previously
announced Volendam commitment to purchase, at the option of Madge.web, $30
million of convertible preferred shares of Madge.web N.V.
MADGE.WEB
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS Three months ended
(Unaudited, in thousands) Sept. 30, June 30,
2000 2000
<S> <C> <C>
Sales $ 8,261 $ 8,405
Gross loss $ (7,188) $ (5,008)
EBITDA (loss) $(15,716) $(13,312)
</TABLE>
QUARTERLY HIGHLIGHTS AND RECENT DEVELOPMENTS
Madge.web is a global provider of rich content distribution and application
services. Madge.web revenues for the third quarter were $8.3 million, compared
with second quarter revenues of $8.4 million. EBITDA loss was $15.7 million in
the quarter. Third quarter revenues reflect unfavorable foreign exchange
movements and increased pricing pressure in non-IP services. Revenues for our
advanced IP-based network and application services doubled sequentially to $0.8
million in the third quarter.
"During the quarter, we have continued to make positive progress in building our
rich content services business," said Robert Madge, CEO, Madge.web. "The
alliances we have concluded with Inktomi and Magnifi are further significant
steps in enhancing our integrated rich content service offering. We will
complete phase one of the fast track deployment of our Content Distribution
Network extending to 16 countries by January."
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MADGE.CONNECT - continuing operations(2)
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS Three months ended
(Unaudited, in thousands) Sept. 30, June 30,
2000 2000
<S> <C> <C>
Sales $26,043 $22,408
Gross profit $11,624 $ 9,402
EBITDA $ 5,638 $ 249
</TABLE>
QUARTERLY HIGHLIGHTS AND RECENT DEVELOPMENTS
Madge.connect is a global supplier of advanced networking product solutions to
large enterprises, and is the market leader in Token Ring. Madge.connect
revenues for the third quarter were $26.0 million, compared with $22.4 million
for the second quarter of 2000. EBITDA was $5.6 million in the quarter, compared
to $0.2 million in the second quarter of 2000. Results for both quarters reflect
continuing operations and exclude the Video Networking business sold during the
third quarter.
RED-M
Red-M is a pioneer of mobile commerce solutions based on Bluetooth(TM)
technology. EBITDA loss was $3.5 million in the quarter compared to $2.4 million
in the second quarter of 2000, reflecting increased investment in R&D. During
the quarter we announced partnerships with a number of companies including
Strio, Cerulic and EVCI. "The market is in the first stages of development and
we have achieved an early but significant competitive lead," said Michael
Wilson, CEO, Red-M. "We are at the point of making our first product shipments
which will go into customer trials and application development."
Ends
--------------------------------------------------------------------------------
(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) September 30, 2000 and June 30, 2000 Quarter results are restated for the
sale of Madge.connect's Video Networking business, disposed of in the third
quarter.
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CONFERENCE CALL
Investors will have the opportunity to listen to management's discussion of its
third quarter 2000 results in a conference call to be held on Thursday, October
26th at 8:30 a.m. (Eastern Time) over the Internet. To listen to the live call
please go to our web site, www.madge.com, at least fifteen minutes early to
register, download, and install any necessary audio software. A replay of the
conference call will be available on October 26 by dialing 800-633-8284
(858-812-6440 for international callers), reservation #16641222, or by visiting
our web site.
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 distribution and application
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.
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 based on Bluetooth technology. Bluetooth
allows the wireless integration of data, voice and video communications in the
work place and public concourses, 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
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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 Madge.web completing phase one of the fast track deployment of its Content
Distribution Network extending to 16 countries by January 2001, Red-M being
about to make its first product shipments, 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. Other trademarks appearing in this release are those of
their respective owners.
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
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Madge Networks N.V.
Condensed Consolidated Balance Sheets(1)
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
SEPT. 30, DEC. 31,
2000 1999
------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash, cash equivalents, and short-term investments(2) $ 48,050 $ 29,971
Accounts receivable, net 19,702 38,655
Inventories 9,067 16,160
Prepaid expenses and other current assets 14,383 10,802
--------------------------------------------------------------------------------
Total current assets 91,202 95,588
Investments, property and equipment, net 60,989 44,834
Intangible assets, net 44,098 52,076
--------------------------------------------------------------------------------
Total assets $196,289 $192,498
================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 77,803 $ 92,639
Income taxes payable 15,075 16,715
Short-term borrowings 22,284 7,107
Short-term obligations 4,577 3,298
--------------------------------------------------------------------------------
Total current liabilities 119,739 119,759
Long-term obligations 8,377 3,563
--------------------------------------------------------------------------------
Total liabilities 128,116 123,322
Shareholders' equity 68,173 69,176
--------------------------------------------------------------------------------
Total liabilities and shareholders' equity $196,289 $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 September 30, 2000 and $10.5M at
December 31, 1999 that had restricted use.
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Madge Networks N.V.
Condensed Consolidated Statements of Operations(1)
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
RESULTS OF CONTINUING GROUP RESULTS
OPERATIONS(2) (INCL. DISCONTINUED OPERATIONS)
THREE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Madge.web sales $ 8,261 $ 7,280 $ 8,261 $ 7,280
Madge.connect sales 26,043 29,685 29,024 34,913
-------------------------------------------------------------------------------------------------
Net sales 34,304 36,965 37,285 42,193
Cost of sales 29,868 23,692 31,576 26,079
-------------------------------------------------------------------------------------------------
Gross profit 4,436 13,273 5,709 16,114
Operating expenses:
Sales & marketing 14,510 17,181 14,822 18,262
Research & development 4,122 5,926 4,698 8,001
General and administrative 6,519 5,294 6,631 5,331
Special charges -- 1,212 882 1,212
-------------------------------------------------------------------------------------------------
Total operating expenses 25,151 29,613 27,033 32,806
-------------------------------------------------------------------------------------------------
Loss from operations (20,715) (16,340) (21,324) (16,692)
Net interest (expense) income (320) 377 (320) 377
-------------------------------------------------------------------------------------------------
Loss before tax (21,035) (15,963) (21,644) (16,315)
Income tax provision (14) (127) (14) (127)
-------------------------------------------------------------------------------------------------
Net loss $(21,049) $(16,090) $(21,658) $(16,442)
=================================================================================================
Earnings per share
Basic $ (0.45) $ (0.40) $ (0.46) $ (0.41)
Diluted $ (0.45) $ (0.40) $ (0.46) $ (0.41)
Weighted Average Shares Outstanding
Basic 46,832 40,095 46,832 40,095
Diluted 46,832 40,095 46,832 40,095
</TABLE>
----------
(1) The condensed consolidated results include Madge.web, Madge.connect and
Madge Group Companies.
(2) Results of Continuing Operations exclude Madge.connect's Video Networking
business, disposed of in the third quarter.
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Madge Networks N.V.
Condensed Consolidated Statements of Operations(1)
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
RESULTS OF CONTINUING GROUP RESULTS
OPERATIONS(2) (INCL. DISCONTINUED OPERATIONS)
NINE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Madge.web sales $ 23,568 $ 20,570 $ 23,568 $ 20,570
Madge.connect sales 89,270 109,238 99,378 123,779
---------------------------------------------------------------------------------------------------
Net sales 112,838 129,808 122,946 144,349
Cost of sales 90,085 76,006 95,952 83,997
---------------------------------------------------------------------------------------------------
Gross profit 22,753 53,802 26,994 60,352
Operating expenses:
Sales & marketing 49,240 48,886 50,414 53,792
Research & development 13,134 18,911 16,018 26,371
General and administrative 18,005 14,641 18,207 15,515
Special charges -- 1,237 882 1,237
---------------------------------------------------------------------------------------------------
Total operating expenses 80,379 83,675 85,521 96,915
---------------------------------------------------------------------------------------------------
Loss from operations (57,626) (29,873) (58,527) (36,563)
Net interest (expense) income (800) 2,035 (800) 2,035
---------------------------------------------------------------------------------------------------
Loss before tax (58,426) (27,838) (59,327) (34,528)
Income tax provision (378) (529) (378) (529)
---------------------------------------------------------------------------------------------------
Net loss $ (58,804) $ (28,367) $ (59,705) $ (35,057)
===================================================================================================
Basic $ (1.33) $ (0.70) $ (1.35) $ (0.86)
Diluted $ (1.33) $ (0.70) $ (1.35) $ (0.86)
Weighted Average Shares Outstanding
Basic 44,297 40,747 44,297 40,747
Diluted 44,297 40,747 44,297 40,747
</TABLE>
--------
(1) The condensed consolidated results include Madge.web, Madge.connect and
Madge Group Companies.
(2) Results of Continuing Operations exclude Madge.connect's Video Networking
business, disposed of in the third quarter.
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