March Networks Provides Q2 2012 Revenue Estimate and Revised FY 2012 Financial Expectations

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Nov 08, 2011, 04:21 ET

OTTAWA, Nov. 8, 2011 /PRNewswire/ - March Networks^® (TSX: MN), a global provider of intelligent IP video solutions, announced today a preliminary revenue estimate for the second quarter ended October 31, 2011 and revised financial expectations for fiscal 2012. All figures are in US dollars and in accordance with IFRS unless otherwise specified.

The Company expects revenue for the second quarter of fiscal 2012 to be approximately $22 million, which compares to $27.5 million in the second quarter of fiscal 2011 and $22.4 million in the first quarter of fiscal year 2012. The Company's second quarter fiscal 2012 results are still subject to review by its external auditors and the Company expects to release its full financial results for its second quarter on December 8, 2011.

"The Company believes that delays in order intake and revenue declines in the first half of fiscal 2012 are attributable to normal quarterly revenue volatility and the negative impact of the ongoing global macro-economic situation, particularly in the banking sector," said Peter Strom, President and CEO of March Networks. "We expect this situation to improve in the second half of the year based on our growing pipeline of activity and improved visibility with some of our largest customers."

Financial Guidance
Ken Taylor, CFO of March Networks, commented, "The Company anticipates revenue growth in the second half of fiscal 2012 as supported by today's announcement of orders received from a large retail customer that are expected to generate approximately $14 million in revenue in the Company's third quarter ending January 31, 2012. However, the Company may not achieve revenue growth in fiscal 2012 relative to fiscal 2011 due to the lower than expected revenue and order intake in the first six months of the fiscal year. The Company no longer anticipates generating net earnings in fiscal 2012 due to lower expectations for revenue and gross margin as a percentage of revenue."

Peter Strom added, "As we continue to explore strategic alternatives for March Networks, we remain focused on operating our business and remain committed to returning the Company to profitability."

Financial Results Call Scheduled for December 9, 2011
March Networks will release its second quarter fiscal year 2012 financial results on Thursday, December 8, 2011 following the market close. The Company will discuss the results on a conference call and webcast on Friday, December 9, 2011 at 8:30 a.m. EST (1:30 p.m. UTC). Further details to be provided on how to access the call and webcast.

Update on Strategic Alternative Review Process
As disclosed previously, the Board of Directors of the Company established a Special Committee to review strategic alternatives for the Company. The Special Committee, together with its financial and legal advisors, continues to explore potential strategic alternatives for the Company with the goal of enhancing value for the Company's shareholders. The Company does not intend to disclose developments with respect to the progress of its strategic alternative review process until such time as the Board of Directors approves or completes a transaction or otherwise determines that further disclosure is appropriate.

Forward-Looking Statements
Certain statements included in this release constitute forward-looking statements, including those identified by the expressions "anticipate", "believe", "plan", "estimate", "expect", "intend" and similar expressions to the extent they relate to the Company or its management. The forward-looking statements are not historical facts but reflect the Company's current assumptions and expectations regarding future results or events. These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results or events to differ materially from current assumptions and expectations. Assumptions made in preparing the forward-looking statements contained in this release include, but are not limited to, the following:

The addressable market for the Company's products will grow by at least 10% annually.
The Company will develop and deliver new products on time in order to satisfy the demands of current and potential customers.
The Company's new products will address the needs of new and existing customers and contribute to near term profitability.
The Company will successfully reduce product costs to improve the Company's gross margin and/or avoid any margin erosion associated with competitive pricing pressure.
The average exchange rates for Canadian dollars and Euros to US dollars will be US$1.00=CDN$1.00 and Euro 1=US$1.40.
The Company will have adequate component supply to meet customer demand.

Factors that could cause actual results to differ materially from expected results include, but are not limited to, the following:

The Company is conducting a review of strategic alternatives that could disrupt its business and affect the Company's financial condition, operating results, share price and/ or ability to attract and retain staff.
The Company's quarterly revenue is generally dependent upon conversion of opportunities in the sales pipeline during the quarter and, as a result, revenue and operating results can be difficult to predict and can fluctuate substantially. The Company's success in realizing customer opportunities may be negatively impacted by depressed economic conditions, changes in sales cycles, and/or weaker than expected success versus competitors.
Longer than expected lead times from component suppliers could result in production delays resulting in delayed or lost revenue and /or reduced profits. There is currently a global shortage of hard drives as a result of recent flooding in Thailand, which is the world's second largest exporter of hard drives. Failure to secure adequate hard drive supply and/or an increased cost in securing adequate supply may have a material negative effect on the Company's revenue and profitability.
The Company's gross margin and operating results may be adversely affected by pricing models required to compete successfully, lower than expected revenue mix of software and high margin hardware products, and/or a failure by the Company to achieve its product cost targets.
Product issues that result in increased costs to the Company and/or lost revenue opportunities.
Delays in product development programs for new products and new product features which lead to cost overruns and /or missed customer opportunities.
The Company plans to become increasingly dependent upon third parties for product design and supply. Higher than expected costs and delayed or lost revenue may result if these activities are not transitioned and managed effectively.
Shifts in value of the US dollar relative to the Canadian dollar may cause the Company's operating costs to fluctuate significantly.

Additional risks are discussed under "Risk Factors" in the Company's Annual Information Form available online at www.sedar.com.

About March Networks
March Networks^® (TSX:MN) is a leading provider of intelligent IP video solutions. For more than a decade, the company has helped some of the world's largest commercial and government organizations transition from traditional CCTV to advanced surveillance technologies used for security, loss prevention, risk mitigation and operational efficiency. Its highly scalable and easy to use Command^™ video management platform incorporates a web-based client interface to enable rapid system deployment and complete system control. It is complemented by the company's portfolio of high-definition IP cameras, encoders, video analytics and hybrid recorders, as well as outstanding professional and managed services. March Networks systems are delivered through an extensive distribution and partner network in more than 50 countries. For more information, please visit www.marchnetworks.com.

*MARCH NETWORKS, March Networks Command and the MARCH NETWORKS logo are trademarks of March Networks Corporation. All other trademarks are the property of their respective owners.

SOURCE MARCH NETWORKS CORPORATION