Foundry Networks Reports Second Quarter 2008 Results

Foundry Networks recently announced financial results for its second quarter ended June 30, 2008.

Foundry's revenue for the second quarter of 2008 was $160.7 million, compared to $143.2 million in the second quarter of 2007, and compared to $150.1 million in the first quarter of 2008, an increase of 12% and 7% respectively. Net income was $18.3 million or $0.12 per diluted share, compared to net income of $15.6 million, or $0.10 per diluted share in the second quarter of 2007, and net income of $13.9 million, or $0.09 per diluted share in the first quarter of 2008.

Revenue for the first six months of 2008 was $310.7 million, compared to $279.1 million for the first six months of 2007, an increase of 11%.Net income for the first six months of 2008 was $32.2 million, or $0.21 per diluted share, compared to net income of $24.7 million, or $0.16 per diluted share, for the same period in 2007.

Included in Foundry's results for the second quarter of 2008 was $11.2 million of non-cash stock-based compensation expense.Excluding these expenses and the related tax effect, non-GAAP net income in the second quarter of 2008 was $25.3 million and non-GAAP net income per diluted share was $0.17 per share. Please refer to the table below for a reconciliation of GAAP to non-GAAP net income.

In the second quarter of 2008, North American non-Federal commercial revenue represented 58.2% of total revenue; a record for the segment, primarily due to increased revenue from service provider customers. Sales to Europe, the Middle East and Africa (EMEA) represented 14.8% of total revenue and were essentially flat in absolute dollars from the first quarter of 2008. Sales to Japan represented 3.1% of total revenue while the rest of Asia represented 6.6%. Sales to the U.S. Federal Government represented approximately 17.3% of total sales.

The Company's cash and investments balance was $950.1 million in the second quarter of 2008.During the quarter, the Company spent $15.7 million repurchasing 1.2 million shares of Foundry common stock at an average price of $12.84 per share. To date, the Company has spent $158.7 million to repurchase 10.0 million shares of Foundry common stock at an average price of $15.82 per share.

Quarterly Highlights

· Revenue breakdown: US Commercial = 58.2%, Federal = 17.3%, EMEA = 14.8%, Japan = 3.1%, Rest of Asia = 6.6%
· Technology breakdown: Layer 2/3 Switching = 50.7%, Internet & Metro Routers = 24.8%, Layer 4-7 = 8.6%, Support = 15.9%
· Chassis revenue = 71.7%, stackable revenue = 28.3%
· Enterprise revenue = 73.0%, service provider = 27.0%
· Total headcount as of June 30, 2008 = 1,068
· DSO = 63 days
· Book-to-bill was greater than one
· Gross margin improvement driven primarily by stable pricing and cost reduction

Foundry Networks