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Q2 FY2002 Revenues Grow to 0 million, Pro Forma Net Income Up 126% year over year


Newbury, England - Enterasys Networks, Inc. (NYSE: ETS), a leader in enterprise network solutions, today announced second quarter results that exceeded Wall Street estimates for the sixth consecutive quarter, with revenue of 0 million, an increase of 26% compared with the second quarter of fiscal 2002. Fully diluted, pro forma earnings per share increased to $.11 in the current quarter from $.05 in the second quarter of fiscal 2002.


“We are extremely pleased with our results for the second quarter, particularly in view of the challenges presented by the prevailing economic conditions,” said Henry Fiallo, CEO and Chairman of Enterasys Networks. “We have continued to outperform the market led by our broad product offering exclusively targeting the enterprise market, our large customer base, solutions orientation, and our high touch sales model.”


On a pro forma basis, Enterasys’ gross margins were stable at 50% and pretax income increased by .5 million to .5 million in the second quarter of fiscal 2002.


Enterasys Second Quarter Highlights:

· Dell’Oro ranks Enterasys #1 for 10th consecutive quarter: The Dell’Oro Group ranked Enterasys #1 in the rapidly growing modular layer 3 market for the 10th consecutive quarter. With Dell’Oro predicting that the Layer 3 market will grow to .2 billion by 2004, Enterasys is the leader in a key market segment.


· Enterasys grows security and mobility revenues by 19%. In the second quarter, Enterasys grew security and mobility revenues to over million, compared to revenues of million in the prior quarter, representing a growth rate of approximately 19%.


· Significant customer wins: Significant customers wins in the second quarter included: GE Aircraft Engines, Ernst & Young, Compaq, City of Mesa, Colgate University, Demoulas, First USA, NEC (Australia), Ningxia Power Utility (China), Pacific Union, Provicia di Roma, Seagate, Shanghai Songjian University City, Toshiba, and Vertis Advertising.


· Enterasys achieves sequential sales out growth of 15% from distribution partners: Enterasys generated strong sales out from its distribution partners.


· Deloitte Consulting joins Enterasys Partner Program. Enterasys added Deloitte Consulting as a global elite partner in its successful Partner Program. Deloitte Consulting, a global leader in providing services in all aspects of enterprise transformation, from strategy and processes to information technology, will jointly sell solutions to Global 50 accounts.


· Enterasys strengthens its product position: During the second quarter, Enterasys shipped the R2, the industry’s first 54 MB capable wireless access platform; released the next generation of our award winning IDS product, Dragon 5.0, which most recently captured Network Computing Editor’s Choice Award; launched a new line of VPN Gateways, our ANG-1100 series; and, Layer-3 enabled our Vertical Horizon switching line.


· Enterasys established as public company. Enterasys was established as an independent public company on August 6, 2001 and began trading on the New York Stock Exchange under the ticker symbol “ETS.”



Aprisma Management Technologies is a leader in the rapidly growing infrastructure management market focusing on intelligent, scalable service assurance solutions. Aprisma's award-winning SPECTRUM solution delivers Service Level Intelligenceä across multi-vendor network, system, application and security elements. Aprisma is capitalizing on a decade of root-cause analysis and fault isolation development to integrate and correlate data pertaining to the infrastructure’s health ¾ throughout the business process ¾ and contain it in a central repository where potential service degradation or network failure symptoms are quickly addressed before the infrastructure breaks down.


On June 27, 2001, the Company announced that it expected to complete a direct spin of Aprisma Management Technologies, Inc. by the end of this calendar year to Enterasys’ shareholders. Aprisma delivered revenues of .4 million in the second quarter of fiscal 2002 compared to .3 million in the second quarter of fiscal 2001. Aprisma maintained its pro forma gross margins of approximately 75% during the second quarter of fiscal 2002 compared to 67% in the second quarter of fiscal 2001. Aprisma maintained its pro forma profitability with income before income taxes of .4 million in the second quarter of fiscal 2002 compared to .4 million in the prior quarter and a loss before income taxes of .7 million in the second quarter of fiscal 2001. Aprisma’s results are reflected in the consolidated financial results from discontinued operations.


Aprisma Second Quarter Highlights:


· Enterprise and Service Provider customer wins during the quarter included: Daiwa Securities, Defense Dept., BlueCross BlueShield, Cedar Sinai Medical Center, Ciba Geigy, Cecom “Communications and Electronics Command”, the National Education Association, the Ookaloosa School District of Florida, Starwood Hotels, Telefonica Spain, Everest Broadband and Comcast.

· Aprisma also expanded its presence in existing customer accounts such as Volvo IT, Qwest, Digex, Global One, Scientific Atlanta, Northeast Utilities, Teleias, AT&T Broadband, Boeing North America, Williams Telecommunications, Compaq Canada, the Philadelphia Stock Exchange, Bed Bath and Beyond, MCI, Infosys, Lucent, Spacenet, and Corning.

· During the second quarter, Aprisma added several new technology patents to its portfolio of over 88 current U.S. issued patents and 100 pending global patents.

· This quarter IDC completed and published a study of 17 of Aprisma’s largest enterprise and service provider customers demonstrating a 970% return on an average 3 year .4 million dollar investment in the SPECTRUM service assurance solution. Some of the customers who participated in this study included Aurora Health Care, Compaq Future Sourcing based in Switzerland, Source Integrated Networks based in Australia, and a large U.S. cable operator. These customers realized on average over million dollars annually in savings as a result of increased management productivity, efficiency, and a reduction in downtime and downtime incidences.

· In addition to expanding our integrator relationships with Greenwich Technology Partners and ThruPoint, Aprisma has launched new hardware and software technology partner programs. These programs enable Aprisma to leverage partner product roadmaps as well as combine resources to address their joint customer base through combined sales and marketing initiatives.

· Aprisma has filed its Form-10 with the SEC on September 18th, representing a significant milestone in Aprisma’s quest to establish itself as a publicly traded company. For more information on Aprisma, please visit, www.aprisma.com.



Discontinued Operations:


Enterasys pro forma financial results now completely exclude the results of Riverstone Networks, which completed its tax-free spin on August 6, 2001. Also excluded from the pro forma results are the discontinuation of GNTS for million, a million loss from operations, and a million one-time write-off for the closure of operations primarily for severance, office closings and goodwill. Additionally, the results of Enterasys’ wholly owned subsidiary, Aprisma, are reported as discontinued operations in the Enterasys fully accounted consolidated results based on the pending nature of the spin of that business.



About Enterasys Networks


Enterasys Networks (NYSE: ETS) is a new type of company that combines a single market focus with a strong technology heritage to provide 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. Based in Rochester, New Hampshire, Enterasys was named a “Company to Watch in 2001” by CIO Magazine.

For more information, visit http://www.enterasys.com



SAFE HARBOR DISCLOSURE



This press release contains contain projections and other forward-looking statements regarding the future financial performance of the Company or other future events and circumstances, and actual results, events and circumstances could differ materially. These forward-looking statements are not historical facts or guarantees of future performance, and are based on current estimates and numerous assumptions. These estimates and assumptions reflect subjective judgments concerning future events and circumstances and may be incomplete or incorrect, and unanticipated events or circumstances may occur causing these estimates and assumptions to be wrong. Risks that could cause actual events or results to differ materially from those described in the projections or forward-looking statements include business disruption, timing, execution, and market perceptions associated the recent terrorist activity experienced in the United States and any possible continuation or repercussions!
thereof or responses thereto, as well as risks associated with competitive conditions, pricing and margin pressures as a result of product shifts and changes in market dynamics, greater use of, and expenses associate with, distributors and resellers, limited management resources, the Company's acquisition strategy, extension or deterioration of prevailing economic conditions, volatility in the stock markets and market valuations being placed on communications infrastructure and service companies, technological changes, intellectual property protection and related issues, dependence on suppliers and contract manufacturers, and potential volatility in operating results, among others. For a more detailed discussion of these and other risks and uncertainties related to the company's business, please refer to the most recent filings of Enterasys Networks, Inc. and Cabletron Systems Inc. with the Securities and Exchange Commission, including Cabletron’s annual report on Form 10-K for the fiscal year ended March 3, 2001 and their other more recent reports on Form 10-Q and Form 8-K.



Contact:


Editorial Contacts:


Annmarie Dickson
Enterasys Networks
Tel: +44 1635 810723
E: adickson@enterasys.com


Martin Brindley/Adrian Brophy
MCC International Ltd
Tel: +44 1962 888100
E: martin.brindley@mccint.com
adrian.brophy@mccint.com


Kristen Sheppard, Esq.
Senior Director of Investor Relations
(603) 337-1502
ksheppar@enterasys.com


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