Enterasys Networks Announces Executive Management Changes and Preliminary Quarterly Revenue Estimates
Contact:
Kristen Sheppard
Investor Relations
(603) 337-1502
ksheppar@enterasys.com
PORTSMOUTH, NH-- April 4, 2002--Enterasys Networks, Inc. (NYSE: ETS), a leader in enterprise network solutions, today announced the appointments of William K. O’Brien as interim Chief Executive Officer and Director, and Yuda Doron as President. Mr. O’Brien has assumed overall operating responsibilities and Mr. Doron is focusing primarily on sales execution, partner and customer relationships.
Enrique P. Fiallo resigned as Chairman, Chief Executive Officer, and President effective today to pursue other business opportunities. In addition, J.E. Riddle, Vice Chairman and Executive Vice President of Worldwide Marketing, and Jerry Shanahan, Chief Operating Officer have resigned their positions. Mr. Riddle will be assisting new management during a transition period, while Mr. Shanahan will be returning to Ireland pursuant to his original plans.
Mr. O’Brien served as Global Managing Partner of PricewaterhouseCoopers until 2000, capping a career of more than thirty-three years. As one of eight members of the firm’s Global Leadership Team, Mr. O’Brien served as transition leader for the merger of Price Waterhouse and Coopers & Lybrand worldwide. Mr. O’ Brien also served as chief operating officer of Coopers & Lybrand and led the firm’s technology practice, which included clients such as EMC, Digital and Lotus.
Mr. Doron has over 20 years of experience with a variety of international and domestic technology companies. He started his career by founding a software and integration company, and in 1988 he joined Texas Instruments, where he led the start up of a supply-chain software division. Later, Mr. Doron joined Cheyenne Software, where he served in a number of senior executive roles including executive vice president of worldwide sales, technical support, and services. Following the sale of Cheyenne to Computer Associates, Doron managed Computer Associates’ $2 billion channel sales operation.
“We are very excited to welcome Bill and Yuda to Enterasys,” said Jim Davidson, Enterasys Networks Board of Directors member. “We are operating in a very difficult environment and are confident that they bring with them the wealth of experience, skill sets and leadership abilities necessary to lead the Company successfully through its current challenges.”
“Enterasys is a company with a great deal of value and potential. I welcome the opportunity to work with the outstanding people in this organization and get this company back on track. Our focus will be on restoring customer, partner, employee and shareholder confidence” said Mr. O’Brien.
Mr. Doron added, “We will build upon our award-winning products, technologies, large and diversified customer base, and outstanding reputation for customer service. We are implementing strategies to address current issues and reestablish sales momentum.” The Company also indicated that its Board of Directors has initiated a search for a permanent chief executive officer.
Preliminary Revenue Estimates
The Company also provided preliminary unaudited revenue estimates for the quarters ended December 29, 2001 and March 30, 2002.
Enterasys Networks estimates revenue for the fourth quarter ended December 29, 2001 of approximately $145-155 million. This revised estimate is lower than previous estimates due to revenue recognition issues in the Asia Pacific region and a comprehensive analysis of revenue recognition in the remaining regions of the company. The Company expects to report a loss from operations in the fourth quarter.
For the first quarter ended March 30, 2002 Enterasys Networks estimates revenue of approximately $110-120 million. The first quarter revenue estimate reflects continued lengthening of the sales cycle due to difficult market conditions, poor sales execution, and the previously announced Securities and Exchange Commission investigation. The Company also expects an operating loss for the first quarter, and a cash decrease of approximately $70 million. As of March 30, 2002, Enterasys had cash of approximately $260 million which included $70 million of cash transferred from Aprisma Management Technologies Inc.
“In light of our estimated results and the current business environment, we are implementing a comprehensive plan to restructure the Company and achieve break even cash flow as soon as possible, while maintaining our investment in new product initiatives,” stated Enterasys Networks’ Chief Financial Officer, Robert J. Gagalis.
Summarized in the table immediately below is the Company’s preliminary percentage of revenue estimates by geographic region.
ENTERASYS NETWORKS, INC. UNAUDITED PRELIMINARY PERCENTAGE OF REVENUE ESTIMATES BY GEOGRAPHIC REGION
North America EMEA APAC Latin America Total Q4 FY01 56% 33% 8% 3% $145-155mm Q1FY02 51% 37% 4% 8% $110-120mm With respect to Aprisma, the Company estimates first quarter 2002 revenue of approximately $13 million, down from an estimated $17 million for the three months ended December 29, 2001. Aprisma’s cash on hand at March 30, 2002 was approximately $10 million. Aprisma continues to be reflected as discontinued operations.
The Company will provide more detailed financial results for the quarters ended December 29, 2001 and March 30, 2002, and an update concerning the Securities and Exchange Commission investigation as soon as practicable. The Company noted that its Annual Report on Form 10-k would be delayed pending completion of it annual audit, and that it does not presently expect to meet the April 15th deadline.
Internal Review Update
As previously announced, Enterasys is in the process of completing a comprehensive review of its revenue recognition practices. The review is being performed by the law firm of Ropes & Gray and the audit firm of Deloitte Touche Tomatsu. In light of the revenue recognition issues identified in the Asia Pacific region, the Company expanded this internal review to include North America, Europe and Latin America. As a result of this review, the Company indicated that certain quarters may be restated to reflect adjustments to previously reported revenue and cost of revenue.
About Enterasys Networks
Enterasys Networks (NYSE: ETS) is a leading worldwide provider of communications infrastructures for enterprise-class customers. Enterasys' networking hardware and software offerings deliver the innovative security, availability and mobility solutions required by Global 2000 organizations coupled with the industry’s strongest service and support. For more information, visit enterasys.com.