April 5, 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’ 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 organisation 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 5-155 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 0-120 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 million. As of March 30, 2002, Enterasys had cash of approximately 0 million which included 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.
With respect to Aprisma, the Company estimates first quarter 2002 revenue of approximately million, down from an estimated million for the three months ended December 29, 2001. Aprisma’s cash on hand at March 30, 2002 was approximately 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 http://www.enterasys.com .
This press release contains 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, market perceptions, and economic trends associated with the recent terrorist activities experienced in the United States as well as any 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 2, 2001 and their other more recent reports on Form 10-Q and Form 8-K.
Martin Brindley/Adrian Brophy
MCC International Ltd
Tel: +44 1962 888100
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