March Networks Announces First Quarter Fiscal 2012 Financial Results

OTTAWA, Sept. 7, 2011 /PRNewswire/ - March Networks^®  (TSX:MN), a global provider of intelligent IP video solutions, today announced financial results for the fiscal quarter ended July 31, 2011. All figures are in US dollars and in accordance with International Financial Reporting Standards ("IFRS") unless otherwise specified.

The Company's first quarter fiscal 2012 revenue of $22.4 million represented an 11% decrease as compared to revenue of $25.3 million in the first quarter of fiscal 2011 and a 21% decline as compared to the fourth quarter of fiscal 2011 due primarily to lower than expected demand from large end users in North America and project opportunities in the Middle East.

Net loss for the first quarter of fiscal 2012 was $923,000 or $0.05 per common share as compared to net earnings of $30,000 or $0.00 per share in the first quarter of fiscal 2011 and net earnings of $2.7 million or $0.15 per share in the fourth quarter of fiscal 2011. The fourth quarter fiscal 2011 comparative period includes a $2.1 million foreign exchange gain mainly associated with converting Canadian dollar assets at April 30, 2011 to US dollars on the transition to IFRS.

The Company's cash and short-term investment position at July 31, 2011 increased by $3.6 million as compared to July 31, 2010 but declined by $1.1 million during the first quarter of fiscal 2012 relative to $45.8 million at April 30, 2011 primarily as a result of spending on intangible assets associated with the implementation of a new ERP system. The Company's working capital ratio at July 31, 2011 improved to 3.8:1 as compared to 3.4:1 at April 30, 2011.

"Pursuant to its announcement on June 8, 2011, the Company continues to be actively engaged in its review of strategic alternatives," commented Peter Strom, CEO of March Networks. "The Special Committee of the Company's Board of Directors, with support from its independent financial advisor, continues to evaluate the Company's strategic alternatives and will report to shareholders on the status of its strategic review when the Company has completed the review or has further information which it is required to disclose to all shareholders."

The company will discuss the results on a conference call and webcast on Thursday, September 8, 2011 at 8:30 a.m. EDT (12:30 p.m. UTC). The conference call may be accessed by dialing 1-800-814-4859 (North America) or +1 416-644-3414.

The conference call webcast can be accessed at: http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=3623620

A replay of the conference call will be available from September 8, 2011 at 10:30 a.m. EDT until September 15, 2011 at 11:59 p.m. EDT. The replay can be accessed at 1-877-289-8525 or +1 416-640-1917. The replay passcode is 4443846#.

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.

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'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.
• 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.
• The Company is undertaking 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.
• 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.
• Weaker than expected market acceptance of a several new products being introduced by the Company that are expected to contribute significant revenue in the second half of fiscal 2012.
• 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.
• Longer than expected lead times from component suppliers could result in production delays resulting in delayed or lost revenue.
• Shifts in value of the US dollar relative to the Canadian Dollar may cause the Company's operating costs to fluctuate significantly.
• The Company is currently undertaking an initiative to replace its core ERP platform with SAP, an enterprise-wide computing system which will be integrated with certain other key business applications currently being used by the Company. The Company has dedicated considerable resources to the implementation of SAP and has carefully designed an implementation plan to reduce operational disruptions. However, there can be no guarantee that the implementation will not disrupt the Company's operations, or that the implementation will be completed within the identified period of time and budget. In addition, there cannot be any guarantee that the implementation of SAP will improve current processes or operating results. Any of these failures could have a material adverse impact on the Company's financial condition and results of operations.

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

SOURCE MARCH NETWORKS CORPORATION