NETWORK EQUIPMENT TECHNOLOGIES ANNOUNCES FINANCIAL RESULTS FOR FOURTH QUARTER AND FISCAL 2009

11 May 2009

FREMONT, CA--(Marketwire - May 11, 2009) - Network Equipment Technologies, Inc. ("NET") (NASDAQ: NWK) announced today its results for the fourth quarter and year ended March 27, 2009.

Total revenue in the fourth quarter of fiscal 2009 was $12.7 million, a 33% decrease from $19.0 million in the third quarter and a 62% decrease from $33.4 million in the fourth quarter of fiscal 2008. The decline was mostly due to a reduction in product revenue from the company's government business, which was down 50% from the third quarter and down 75% from the fourth quarter of fiscal 2008. Net loss in the fourth quarter of fiscal 2009 was $9.3 million or $0.32 per share, compared to net income in the third quarter of $13.1 million or $0.42 per share, attributable to gains from the early retirement of convertible bonds, and net income of $2.8 million or $0.09 per share in the fourth quarter of the prior year.

Total revenue in the fiscal year was $65.8 million, down 43% from $116.1 million in fiscal 2008. Net loss was $53.5 million or $1.85 per share, compared to net income of $7.1 million or $0.25 per share in fiscal 2008. Fiscal 2009 results include a full year of operating results for Quintum Technologies, acquired by NET in December 2007, compared to approximately four months in the prior year. Fiscal 2009 results also include charges for the impairment of goodwill and intangible assets acquired from Quintum.

On a non-GAAP basis excluding items noted below, net loss in the fourth quarter was $7.3 million or $0.25 per share, compared to net loss of $3.2 million or $0.11 per share in the prior quarter, and net income of $2.6 million or $0.09 per share in the fourth quarter of fiscal 2008. Non-GAAP net income and loss were calculated by excluding the impairment of goodwill and other intangible assets, non-cash stock-based compensation expense, amortization of intangible assets from our acquisition of Quintum, accretion, and other restructure charges resulting from severance and vacating our former manufacturing facility; as well as excluding the gain on the retirement of debt from the repurchase of convertible bonds. Refer to the table below for reconciliation of GAAP to non-GAAP net income and loss.

Cash and investment balances at the end of the fourth quarter were $98.2 million, down from $101.6 million at the end of the prior quarter. Cash and investments decreased by $67.5 million from the prior year due in large part to the use of $41.8 million to repurchase the company's convertible debt, along with $21.0 million used in operations.

"Throughout this economic downturn, we carefully leveraged our existing resources, strengthened our balance sheet, and continued to reduce costs, while shifting our development investment from legacy products to a full range of IP-based platforms. Increasingly, we are earning recognition from industry leaders and being brought into larger opportunities within government entities and enterprise customers. This recognition reflects the early and continued investment we made in delivering the best products for the unified communications and secure voice markets," said president and CEO C. Nicholas Keating, Jr. "While it is still too early in the business cycle for many customers to have commenced full deployment within their organization, we continue to grow pilot programs and are keeping the pipeline strong through a direct touch sales organization and an expanding network of quality partners."

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