Woodland Hills, CA, January 19, 1999 – Vertel®
(NASDAQ:VRTL), a leading
supplier of telecommunications network software, expects to report net
revenues of approximately $3.5 million to $3.7 million for the fourth quarter
ended Dec. 31, 1998, compared with fourth quarter revenues of $5.1 million
in 1997. Loss from operations for the fourth quarter, excluding a
gain on the sale of an investment described below, is expected to total
approximately $2.2 million to $2.6 million. In the fourth quarter
of 1997, Vertel reported an operating loss from continuing operations of
$1.5 million, which included a charge of $1.5 million for restructuring
expenses.
Also during the fourth quarter, the company sold its holdings of Series B and Series C preferred stock in Sonoma Systems to a party related to Newbridge Networks Corporation (NYSE:NN; TSE:NNC), a significant customer of Sonoma, for approximately $10.3 million. As a result of the transaction, which was completed on Dec. 31, 1998, Vertel expects to record a gain of approximately $7.6 million during the quarter. Net income, including the gain on sale, is expected to be from $6.2 to $6.6 million, or between $0.25 and $0.26 per share. In the fourth quarter of 1997, Vertel reported a net loss from continuing operations of $1.4 million, or $0.06 per share, including $1.5 million in restructuring expenses. Vertel will retain an investment in Sonoma Systems primarily consisting of $1.0 million of Series A preferred stock which is non-convertible and non-voting.
“Vertel’s fourth quarter financial performance was hindered by what we believe to be deferral of customer orders,” said Bruce Brown, chief executive officer of Vertel. “These deferrals, which were primarily among international customers, were caused by both economic and budgetary factors. However, the gains we achieved in our overall financial strength should position Vertel for significant operational growth and improve our financial performance in 1999.
“Vertel will focus on broadening the mediation and element management solutions portfolio for the access and backbone technology markets, which are expected to be among the industry’s fastest growing,” Mr. Brown said. “Building on our strengths in these areas facilitates our move into the market for carrier grade Internet protocol, or IP, telecommunications operations support systems so that we may capitalize on the exponential growth of the Internet and the deployment of IP-based public network infrastructures that is now underway.”
“Selling the majority of our investment in Sonoma Systems significantly enhances our already strong balance sheet,” said Gordon Almquist, Vertel’s vice president of finance and chief financial officer. “The sale provides us with substantial working capital to expand our core business in the delivery of standards based, turnkey telecommunications network management software solutions and acquire technologies to support our entry into new markets.”
Dick Hamilton, who brings 25 years of experience as a services executive with companies including UB Networks, McDATA, and Xantel Corporation, fills the newly created position of vice president of customer service.
In addition to these changes, Vertel will seek new members to the board of directors with experience in the company’s target markets who can help implement the strategic initiatives currently under development.
“This executive realignment will better focus our company on our most promising growth markets in advanced telecommunications software and services,” Mr. Brown said. “As a result of these changes, we are better positioned to build and deliver a comprehensive suite of management solutions so that we may expand our share of existing markets and effectively penetrate promising new markets.”
Vertel expects to report results for the fourth quarter and year ended Dec. 31, 1998, on February 4, 1999.
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