PROX Proxim (MM)

Proxim Corporation Reports Fourth Quarter 2004 and Year-End Financial Results SUNNYVALE, Calif., Jan. 27 /PRNewswire-FirstCall/ -- Proxim Corporation (NASDAQ:PROX), a global leader in wireless networking equipment for Wi-Fi and broadband wireless, today announced financial results for the fourth quarter ended December 31, 2004. Revenue for the fourth quarter of 2004 was $24.1 million, consistent with the revised guidance range of $22 million to $24 million provided on December 29, 2004. This compares with revenue of $31.5 million in the third quarter of 2004, and $38.6 million for the fourth quarter of 2003. Total revenue for the fiscal year ended December 31, 2004 was $113.7 million, compared to $148.5 million for the year ended December 31, 2003. The net loss attributable to common stockholders computed in accordance with generally accepted accounting principles (GAAP) for the fourth quarter of 2004 was $(67.7) million, or $(2.69) per common share. This compares with a GAAP net loss of $(4.4) million, or $(0.36) per common share, in the preceding third quarter of 2004 and with a GAAP net loss of $(36.1) million, or $(2.94) per common share, in the fourth quarter of 2003. The fourth quarter of 2004 GAAP net loss attributable to common stockholders included: (i) a non-cash induced conversion charge of $44 million related to the recent exchange of the Series A and Series B Preferred Stock held by Warburg Pincus and BCP Capital for shares of the Company's Common Stock and Series C Preferred Stock, and (ii) a non-cash charge of $12.2 million for the impairment of a portion of the Company's intangible assets. The GAAP net loss attributable to common stockholders for the year ended December 31, 2004 was $(99.7) million, or $(6.42) per share, compared to the GAAP net loss of $(133.7) million, or $(10.99) per share for the year ended December 31, 2003. The non-GAAP, or pro-forma net loss in the fourth quarter of 2004 was $(7.6) million, or $(0.30) per common share, compared to a pro-forma net loss of $(2.7) million, or $(0.22) per common share, in the third quarter of 2004, and a pro-forma net loss of $(2.5) million, or $(0.20) per common share, in the fourth quarter of 2003. The non-GAAP, or pro-forma net loss for the year ended December 31, 2004 was $(18.6) million or $(1.20) per common share, compared to a pro-forma net loss of $(14.7) million or $(1.21) per share for the year ended December 31, 2003. A detailed and specific reconciliation of the differences between the GAAP net loss and the pro-forma net loss is included in an accompanying financial table. Factors contributing to the decline in the fourth quarter of 2004 revenue included the following: * Lower than expected Wi-Fi product revenue due to two primary factors: * An unforeseen Wi-Fi pricing action from Cisco Systems, Inc. and resulting pricing pressure; and * Delayed transitions from the ORiNOCO AP-2000 platform to the ORiNOCO AP-4000 platform primarily within key OEM accounts; * Unexpected MP.11 Model 5054R product availability issues that prevented product shipments of several orders; and * Lower than expected wireless carrier revenue due to continued carrier consolidation and delayed deployments. "We remain encouraged by our market opportunities, particularly in the municipal area network, last mile access, mobile enterprise and education markets," said Kevin Duffy, President and Chief Executive Officer at Proxim. "We are particularly pleased with our point-to-multipoint MP.11 product, which is our precursor to WiMAX, which grew more than 10 percent sequentially." Proxim also announced today that it has engaged Bear, Stearns & Co. to explore strategic alternatives for the company, including capital raising and merger opportunities. "In light of the recent consolidation in the wireless networking industry coupled with the significant market opportunities that we see, Proxim believes that it is appropriate to explore all avenues that could enhance our ability to take advantage of these opportunities," said Frank Plastina, Executive Chairman of Proxim. Conference Call Information Proxim will host a conference call to review the company's fourth quarter 2004 financial results. Today's call begins at 5:00 PM Eastern/2:00 PM Pacific Time. Dial-In Information To listen to the conference call via telephone, dial (719) 955-1565 at least five minutes prior to the scheduled start time. Webcast Information To listen to the webcast, go to http://www.proxim.com/, and click on the link titled "Proxim Announces Fourth Quarter 2004 Results Call." The minimum requirements to listen include sound capabilities on your personal computer and installation of RealPlayer software available at no cost for Windows XP/ME/2000/98/95, Windows 3.1, Windows NT, Macintosh, and UNIX systems from Real Networks, Inc., http://www.real.com/. The call will be archived immediately following the conference call and will remain available at http://investor.proxim.com/. Additionally, the conference call will be available on a recorded telephone archive by calling toll free 888-203-1112 and entering pass code 1811436, beginning Thursday, January 27, 2005 at 8:00 PM, Eastern Time until midnight Eastern Time on Friday, February, 2005. For international callers, the recorded telephone archive is available by calling the following toll number: 719-457-0820 and entering pass code 1811436. About Proxim Proxim(R) Corporation is a global leader in wireless networking equipment for Wi-Fi and broadband wireless networks. The company provides enterprise and service provider customers with wireless solutions for the mobile enterprise, security and surveillance, last mile access, voice and data backhaul, public hot spots, and metropolitan area networks. Product families include the Award- winning ORiNOCO Wi-Fi products, Tsunami Ethernet bridges, and Lynx point-to- point digital radios. Proxim is a principal member of the WiMAX Forum(TM) and a member of the Wi-Fi(R) Alliance. The company is publicly traded on the NASDAQ under the symbol PROX and is on the Web at http://www.proxim.com/. Safe Harbor This press release contains forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements concerning Proxim's preliminary unaudited results for the fourth quarter and fiscal year and the Company's expectation regarding positive market developments, future growth opportunities, and the exploration of strategic alternatives to enhance Proxim's ability to take advantage of opportunities, and are subject to risks and uncertainties that could cause actual results to differ materially. These risks and uncertainties include, but are not limited to: Proxim's financial results for the fourth quarter and fiscal year differing from the unaudited results as a result of the final determination of adjustments resulting from the final review and audit of the Company's independent registered public accounting firm and the audit committee; Proxim's ability to complete financing or other strategic alternatives; Proxim's efforts to address transitions of product platforms not succeeding; the market for Proxim's products not growing as anticipated or Proxim not taking advantage of market opportunities or successfully exploring or consummating strategic alternatives due to competition, product performance, product pricing, product supply, liquidity constraints or other issues and other risks and uncertainties associated with Proxim's business. For additional information regarding risks relating to Proxim's business, see Proxim Corporation's Form 10-K for the year ended December 31, 2003 and Forms 10-Q for quarters ended April 2, 2004, July 2, 2004 and October 1, 2004, and current reports on Form 8-K, and other relevant materials filed by Proxim with the Securities and Exchange Commission. Proxim assumes no obligation and does not intend to update these forward-looking statements. Use of Pro Forma Financial Information To supplement our consolidated financial statements presented on a GAAP basis, Proxim uses non-GAAP, or pro forma, measures of operating results, net income/loss and income/loss per share, which are adjusted to exclude certain costs, expenses, gains and losses that we believe are useful to enhance the overall understanding of our financial performance. These adjustments to our GAAP results are made with the intent of providing both management and investors a supplemental understanding of Proxim's underlying operational results and trends. Adjusted pro forma results are among the primary indicators management uses as a basis for planning and forecasting our business. The presentation of this additional information is not meant to be considered in isolation or as a substitute for Proxim's financial results prepared in accordance with generally accepted accounting principles in the United States. Proxim Corporation Condensed Consolidated Balance Sheets (in thousands) (Unaudited) December 31, December 31, Assets 2004 2003 Current assets: Cash and cash equivalents $16,003 $19,756 Accounts receivable, net 6,050 13,961 Inventory 13,020 19,939 Other current assets 2,238 5,301 Total current assets 37,311 58,957 Property and equipment, net 5,981 7,522 Goodwill and other intangible assets, net 19,910 50,059 Restricted cash 20 1,254 Other assets 385 2,316 Total assets $63,607 $120,108 Liabilities, Mandatorily Redeemable Convertible Preferred Stock and Stockholders' Deficit Current liabilities: Short-term bank loan, secured $3,000 $-- Accounts payable 8,440 10,500 Capital lease obligations, current 893 1,176 Accrued royalties and interest, current 11,808 26,906 Other accrued liabilities 20,017 20,804 Convertible bridge loan 10,000 -- Convertible promissory notes -- 34,735 Total current liabilities 54,158 94,121 Capital lease obligations, long-term 49 934 Accrued royalties, long-term 6,579 -- Long-term debt 101 101 Restructuring accruals, long-term 6,977 8,660 Common stock warrants -- 21,800 Series C mandatorily redeemable preferred stock 40,671 -- Total liabilities 108,535 125,616 Series A mandatorily redeemable convertible preferred stock -- 73,580 Total mandatorily redeemable convertible preferred stock -- 73,580 Stockholders' deficit: Capital stock 453,087 319,376 Accumulated deficit (497,486) (397,753) Notes receivable from stockholders (529) (711) Total stockholders' deficit (44,928) (79,088) Liabilities, mandatorily redeemable convertible preferred stock and stockholders' deficit $63,607 $120,108 Proxim Corporation Condensed Consolidated Statements of Operations (in thousands, except per share data) (Unaudited) Three Months Ended Year Ended Dec. 31, Dec. 31, Dec. 31, Dec. 31, 2004 2003 2004 2003 Product revenue, net $24,084 $38,574 $113,724 $142,466 License revenue -- -- -- 6,000 Total revenue, net 24,084 38,574 113,724 148,466 Cost of revenue 19,297 23,801 76,089 88,471 Royalty charges (benefit) -- 1,000 (3,179) 23,869 Restructuring provision for (benefit from) -- -- excess and obsolete inventory (820) -- (820) 22,549 Gross profit 5,607 13,773 41,634 13,577 Operating expenses: Research and development 4,935 5,209 19,095 24,241 Selling, general and administrative 11,361 11,711 45,456 49,431 Legal expense for certain litigation 71 1,100 1,121 6,800 Amortization of intangible assets 3,240 5,364 17,916 21,593 Impairment of intangible assets 12,233 -- 12,233 -- Bad debt expense -- -- -- 2,305 Restructuring charges (benefit) 66 (19) 2,095 7,279 Loss from operations (26,299) (9,592) (56,282) (98,072) Interest income (expense), net (1,162) (3,055) (4,406) (7,340) Other income (expense), net 5,289 414 12,760 172 Loss on early extinguishment of debt -- (22,200) -- (22,200) Loss before income taxes (22,172) (34,433) (47,928) (127,440) Income tax provision 799 -- 799 -- Net loss (22,971) (34,433) (48,727) (127,440) Accretion of Series A preferred stock obligations (390) (1,622) (5,460) (6,303) Accretion of Series B preferred stock obligations (382) -- (1,546) -- Induced conversion charge (44,000) -- (44,000) -- Net loss attributable to common stockholders - basic and diluted $(67,743) $(36,055) $(99,733) $(133,743) Net loss per share - basic and diluted $(2.69) $(2.94) $(6.42) $(10.99) Weighted average common shares 25,150 12,267 15,539 12,166 As a percentage of revenue: Gross margin 23.3% 35.7% 36.6% 9.1% Research and development expense 20.5% 13.5% 16.8% 16.3% Selling, general and administrative expense 47.2% 30.4% 40.0% 33.3% Proxim Corporation Pro Forma Condensed Consolidated Statements of Operations (in thousands, except per share data) (Unaudited) Three Months Ended Year Ended Dec. 31, Dec. 31, Dec. 31, Dec. 31, 2004 2003 2004 2003 Product revenue, net $24,084 $38,574 $113,724 $142,466 License revenue -- -- -- 6,000 Total revenue, net 24,084 38,574 113,724 148,466 Cost of revenue 19,297 23,801 76,089 88,471 Gross profit 4,787 14,773 37,635 59,995 Operating expenses: Research and development 4,935 5,209 19,095 24,241 Selling, general and administrative 11,361 11,711 45,456 49,431 Legal expense for certain litigation 71 1,100 1,121 6,800 Loss from operations (11,580) (3,247) (28,037) (20,477) Interest and other expense, net (44) (613) (577) (2,190) Loss before income taxes (11,624) (3,860) (28,614) (22,667) Income tax benefit (4,068) (1,351) (10,015) (7,933) Net loss $(7,556) $(2,509) $(18,599) $(14,734) Net loss per share - basic and diluted $(0.30) $(0.20) $(1.20) $(1.21) Weighted average common shares 25,150 12,267 15,539 12,166 As a percentage of revenue: Gross margin 19.9% 38.3% 33.1% 40.4% Research and development expense 20.5% 13.5% 16.8% 16.3% Selling, general and administrative expense 47.2% 30.4% 40.0% 33.3% Proxim Corporation GAAP to Pro Forma Net Loss Reconciliation (in thousands, except per share data) (Unaudited) Three Months Ended Year Ended Dec. 31, Dec. 31, Dec. 31, Dec. 31, 2004 2003 2004 2003 GAAP net loss $(67,743) $(36,055) $(99,733) $(133,743) Royalty charges and interest 72 1,087 (6,125) 26,906 Restructuring provision for (benefit from) excess and obsolete inventory (820) -- (820) 22,549 Amortization of intangible assets 3,240 5,364 17,916 21,593 Bad debt expense -- -- -- 2,305 Restructuring charges (benefit) 66 (19) 2,095 7,279 Impairment of intangible assets 12,233 -- 12,233 -- Interest on convertible promissory notes -- 2,355 7,517 2,113 Amortization of debt discount and issuance costs 212 363 6,674 605 Interest on bridge loan 374 -- 645 -- Loss (gain) on sale of investment -- (377) 308 (377) Loss on early extinguishment of debt -- 22,200 -- 22,200 Revaluation of common stock warrants (5,500) (400) (21,800) (400) Income tax benefit 4,867 1,351 10,814 7,933 Accretion of Series A preferred stock obligations 390 1,622 5,460 6,303 Accretion of Series B preferred stock obligations 382 -- 1,546 -- Accretion of Series C preferred stock obligations 671 -- 671 -- Induced conversion charge 44,000 -- 44,000 -- Pro forma net loss $(7,556) $(2,509) $(18,599) $(14,734) Use of Pro Forma Financial Information To supplement our consolidated financial statements presented on a GAAP basis, Proxim uses non-GAAP, or pro forma, measures of operating results, net income/loss and income/loss per share, which are adjusted to exclude certain costs, expenses, gains and losses that we believe are useful to enhance the overall understanding of our financial performance. These adjustments to our GAAP results are made with the intent of providing both management and investors a supplemental understanding of Proxim's underlying operational results and trends. Adjusted pro forma results are among the primary indicators management uses as a basis for planning and forecasting our business. The presentation of this additional information is not meant to be considered in isolation or as a substitute for Proxim's financial results prepared in accordance with generally accepted accounting principles in the United States of America. DATASOURCE: Proxim Corporation CONTACT: Ben Gibson, Senior Vice President, Marketing, or Michael Angel, Chief Financial Officer, both of Proxim Corporation, +1-408-542-5200 Web site: http://www.proxim.com/

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