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Radisys Reports Fourth Quarter Results

Radisys Corporation (NASDAQ: RSYS), a market leader providing wireless infrastructure solutions for telecom, aerospace and defense applications, announced fourth quarter 2013 revenues of $50.1 million and a GAAP net loss of $26.0 million or $0.89 per diluted share. Included in the fourth quarter results is $12.5 million of non-cash tax expense that results from the recognition of a valuation allowance against certain of the Company’s foreign deferred tax assets. Fourth quarter non-GAAP net loss was $6.0 million or $0.21 per diluted share and includes a $2.0 million non-cash charge associated with excess inventory resulting from a product end-of-life transition.

Commenting on the fourth quarter results and the Company’s strategic progress, Brian Bronson, Radisys' President and Chief Executive Officer, stated, “Our fourth quarter revenue and profitability were in-line with the expectations we set back in November. We delivered revenue near the top end of the range while at the same time making meaningful progress on our strategic transformation and cost reduction initiatives that will enable us to return to non-GAAP profitability and positive cash flow in the second half of 2014 while at the same time being able to continue to invest in our core focus areas. These strategic and operational objectives include:

  • Market Penetration:
    • Our Media Resource Function providing Voice over LTE and other media processing applications exceeded our full year expectations in terms of both design wins and customer shipments. Our MPX-12000 and MPX-OS (virtualized software only) products are now in 21 trials with our partner’s customers around the globe.
    • LTE software and solutions second half 2013 orders exceeded expectations, increasing 80% compared to the first half of 2013.
    • In Platforms, customer interest in our network function virtualization (NFV) enabled products continues to accelerate as we add additional software capabilities to next generation hardware enabling exponentially greater functionality within the same cost effective footprint.
  • Operational Efficiency - We remain on track to exceed our previously announced cost reduction initiatives that will enable 2014 operating expenses of between $65 million and $70 million.
    • Additionally, our contract manufacturing transfer to Ennoconn Corporation continues to progress well and will enable the closure of our Penang facility. This is the final step towards consolidating our Asian Platforms operations into a single Shenzhen site and will contribute at least $6 million of additional cost savings beginning in the third quarter of 2014.”

Other Fourth Quarter Financial Highlights

  • Total GAAP Research and Development (R&D) and Selling, General and Administrative (SG&A) expenses were $20.1 million and non-GAAP R&D and SG&A expenses were $18.7 million representing a $1.8 million sequential reduction resulting from our previously announced cost reduction initiatives.
  • Cash and cash equivalents were $25.5 million at the end of the fourth quarter representing a $6.1 million sequential decrease from the third quarter. During the quarter, we paid $2.1 million in cash severance associated with our restructuring plans.
  • On February 10, 2014, we amended our Silicon Valley Bank line of credit agreement to enable sufficient working capital flexibility to complete the Company’s transformation efforts. As of the end of the fourth quarter, our borrowing base was $22.9 million leaving $7.9 million unused and available.

2014 Outlook

  • First quarter revenue is expected to be between $40 million and $46 million. At the mid-point, the sequential decrease is primarily due to the timing of MRF revenue combined with anticipated reductions in COMe/RMS and Other Legacy revenue resulting from our decisions to manage certain products for cash.
  • Non-GAAP gross margin is expected to approximate 33% of sales.
  • Non-GAAP R&D and SG&A expenses are expected to decrease to approximately $17.5 million.
  • Non-GAAP net loss is expected to be between ($0.18) and ($0.06) per share.

Mr. Bronson continued, “As a result of the strategic focus, significant operational improvements, and fundamental restructuring and streamlining of the company, we are positioned to return to non-GAAP profitability and positive cash flow in the second half of 2014. Our core focus areas moving into 2014 remain software rich, vertically integrated products that include: media processing, LTE network protocols, solutions and services and our NFV enabled systems and appliance products. We have never had more differentiated products for our sales team to sell than we have available right now. Our 2014 full year outlook is for revenue of between $200 million and $220 million and non-GAAP earnings per share of between $0.15 and $0.30, with an annualized 2014 exit rate of approximately $0.70.”

Conference Call and Webcast Information

Radisys will host a conference call on Tuesday, February 11, 2014 at 5:00 p.m. ET to discuss its fourth quarter 2013 results and 2014 financial and business outlook.

To participate in the live conference call, dial 888-333-0027 in the U.S. and Canada or 706-634-4990 for all other countries and reference conference ID# 57768148. The live conference call will also be available via webcast on the Radisys investor relations website at http://investor.radisys.com/.

A replay of the conference call will be available two hours after the call is complete until 11:59 p.m. on Tuesday, February 25, 2014. To access the replay, dial 855-859-2056 or 404-537-3406 and reference conference ID# 57768148. A replay of the webcast will be available for an extended period of time on the Radisys investor relations website at http://investor.radisys.com/.

Forward-Looking Statements

This press release contains forward-looking statements, including statements about the Company's business strategy, financial outlook and expectations for the first quarter and fiscal year 2014 and statements related to expense savings or reductions, operational and administrative efficiencies, revenue growth, margin improvement, financial performance and other attributes of the Company. These forward-looking statements are based on the Company's expectations and assumptions, as of the date such statements are made, regarding the Company's future operating performance and financial condition, the economy and other future events or circumstances. Actual results could differ materially from the outlook guidance and expectations in these forward-looking statements as a result of a number of risk factors, including, among others, (a) the Company's dependence on certain customers and high degree of customer concentration, (b) the Company's use of one contract manufacturer for a significant portion of the production of its products, including the success of transitioning contract manufacturing partners, (c) the anticipated amount and timing of revenues from design wins due to the Company's customers' product development time, cancellations or delays, (d) matters affecting the embedded system industry, including changes in industry standards, changes in customer requirements and new product introductions, (e) actions by regulatory authorities or other third parties, (f) cash generation, (g) changes in tariff and trade policies and other risks associated with foreign operations, (h) fluctuations in currency exchange rates, (i) the ability of the Company to successfully complete any restructuring, acquisition or divestiture activities, (j) the Company's ability to successfully manage the transition from 10G to 40G ATCA product technologies, and (k) other factors listed in the Company's reports filed with the Securities and Exchange Commission (SEC), including those listed under “Risk Factors” in Radisys' Annual Report on Form 10-K for the year ended December 31, 2012, copies of which may be obtained by contacting the Company at 503-615-1100, from the Company's investor relations web site at http://investor.radisys.com/, or at the SEC's website at http://www.sec.gov. Although forward-looking statements help provide additional information about Radisys, investors should keep in mind that forward-looking statements are inherently less reliable than historical information. Should one or more of these risks or uncertainties materialize (or the other consequences of such a development worsen), or should underlying assumptions prove incorrect, actual outcomes may vary materially from those forecasted or expected. The Company believes its expectations and assumptions are reasonable, but there can be no assurance that the expectations reflected herein will be achieved. All information in this press release is as of February 11, 2014. The Company undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in the Company's expectations.

Non-GAAP Financial Measures

To supplement its consolidated financial statements in accordance with generally accepted accounting principles (GAAP), the Company's earnings release contains non-GAAP financial measures that exclude certain expenses, gains and losses, such as the effects of (a) purchase accounting adjustments, (b) amortization of acquired intangible assets, (c) stock-based compensation expense, (d) restructuring and acquisition-related charges (reversals), net, (e) impairment of goodwill, (f) sale of land, and (g) non-cash income tax expense. The Company believes that the use of non-GAAP financial measures provides useful information to investors to gain an overall understanding of its current financial performance and its prospects for the future. Specifically, the Company believes the non-GAAP results provide useful information to both management and investors by excluding certain expenses, gains and losses that the Company believes are not indicative of its core operating results. In addition, non-GAAP financial measures are used by management for budgeting and forecasting as well as subsequently measuring the Company's performance, and the Company believes that it is providing investors with financial measures that most closely align to its internal measurement processes. These non-GAAP measures are considered to be reflective of the Company's core operating results as they more closely reflect the essential revenue-generating activities of the Company and direct operating expenses (resulting in cash expenditures) needed to perform these revenue-generating activities. The Company also believes, based on feedback provided to the Company during its earnings calls' Q&A sessions and discussions with the investment community, that the non-GAAP financial measures it provides are necessary to allow the investment community to construct their valuation models to better align its results and projections with its competitors and market sector, as there is significant variability and unpredictability across companies with respect to certain expenses, gains and losses.

The non-GAAP financial information is presented using a consistent methodology from quarter-to-quarter and year-to-year. These measures should be considered in addition to results prepared in accordance with GAAP. In addition, these non-GAAP financial measures are not based on any comprehensive set of accounting rules or principles. The Company believes that non-GAAP financial measures have limitations in that they do not reflect all of the amounts associated with the Company's results of operations as determined in accordance with GAAP and that these measures should only be used to evaluate the Company's results of operations in conjunction with the corresponding GAAP financial measures.

A reconciliation of non-GAAP information to GAAP information is included in the tables below. The non-GAAP financial measures disclosed by the Company should not be considered a substitute for or superior to financial measures calculated in accordance with GAAP, and reconciliations between GAAP and non-GAAP financial measures included in this earnings release should be carefully evaluated. The non-GAAP financial measures used by the Company may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies.

About Radisys

Radisys (NASDAQ: RSYS) is a market leader enabling wireless infrastructure solutions for telecom, aerospace, and defense applications. Radisys' market-leading ATCA, MRF (Media Resource Function), COM Express, and Network Appliance platforms coupled with Trillium Software and services enable customers to bring high-value products and services to market faster with lower investment and risk.

Radisys® and Trillium® are registered trademarks of Radisys.

               

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts, unaudited)

 
Three Months Ended Year Ended
December 31, December 31,
2013       2012 2013       2012
Revenues $ 50,138 $ 69,300 $ 237,863 $ 286,096
Cost of sales:
Cost of sales 37,230 46,279 165,166 188,513
Amortization of purchased technology 2,055   2,321   8,559   9,544  
Gross margin 10,853 20,700 64,138 88,039
Operating expenses:
Research and development 9,989 11,635 45,000 47,739
Selling, general and administrative 10,065 11,234 41,210 45,200
Intangible assets amortization 1,304 1,304 5,215 5,215
Impairment of goodwill 29,748
Restructuring and other charges, net 3,442   117   7,479   (117 )
Loss from operations (13,947 ) (3,590 ) (34,766 ) (39,746 )
Interest expense (307 ) (443 ) (1,220 ) (1,722 )
Other income, net 964   272   1,537   584  
Loss before income tax expense (13,290 ) (3,761 ) (34,449 ) (40,884 )
Income tax expense 12,725   1,094   14,955   2,590  
Net loss $ (26,015 ) $ (4,855 ) $ (49,404 ) $ (43,474 )
 
Net loss per share:
Basic $ (0.89 ) $ (0.18 ) $ (1.72 ) $ (1.60 )
Diluted $ (0.89 ) $ (0.18 ) $ (1.72 ) $ (1.60 )
Weighted average shares outstanding
Basic 29,150   27,738   28,805   27,174  
Diluted 29,150   27,738   28,805   27,174  
 
 
                       

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, unaudited)

 

December 31,

2013

December 31,

2012

ASSETS
Current assets:
Cash and cash equivalents $ 25,482 $ 33,182
Accounts receivable, net 41,359 51,289
Inventories and inventory deposit, net 25,409 28,907
Other current assets 8,443   12,610  
Total current assets 100,693 125,988
Property and equipment, net 14,854 17,713
Intangible assets, net 56,510 70,284
Other assets, net 4,128   18,409  
Total assets $ 176,185   $ 232,394  
 
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 35,081 $ 41,191
Deferred income 8,167 9,222
Other accrued liabilities 15,525 16,769
Convertible senior notes, net 16,919
Line of credit 15,000    
Total current liabilities 73,773 84,101
Convertible senior notes, net 18,000 18,000
Other long-term liabilities 3,276   4,851  
Total liabilities 95,049   106,952  
Shareholders' equity:
Common stock 309,370 303,724
Accumulated deficit (229,090 ) (179,686 )
Accumulated other comprehensive income 856   1,404  
Total shareholders’ equity 81,136   125,442  
Total liabilities and shareholders’ equity $ 176,185   $ 232,394  
 
 
 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands, unaudited)

 
      Three Months Ended           Year Ended
December 31, December 31,
2013       2012 2013       2012
Cash flows from operating activities:
Net loss $ (26,015 ) $ (4,855 ) $ (49,404 ) $ (43,474 )

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Depreciation and amortization 5,162 5,675 21,748 22,475
Impairment of goodwill 29,748
Stock-based compensation expense 1,537 997 5,298 1,391
Deferred tax valuation allowance 12,476 12,476
Net gain from sale of software assets (1,532 )
Net gain on sale of property held for sale (771 ) (771 )
Write off of purchased computer software 2,868
Other adjustments 4,277 1,524 4,335 4,273
Changes in operating assets and liabilities:
Accounts receivable 1,176 (364 ) 11,119 (2,082 )
Inventories and inventory deposit (1,870 ) 441 157 4,520
Accounts payable (1,153 ) (177 ) (6,013 ) 3,718
Deferred income 528 269 (1,145 ) (2,733 )
Other operating assets and liabilities (1,343 ) (528 ) (1,227 ) (12,225 )
Net cash provided by (used in) operating activities (5,996 ) 2,982   (2,091 ) 5,611  
Cash flows from investing activities:
Capital expenditures (1,704 ) (1,997 ) (6,047 ) (11,092 )
Proceeds from sale of land held for sale 1,415 1,415
Proceeds from sale of software assets 30 1,137
Other investing activities   300     (68 )
Net cash used in investing activities (259 ) (1,697 ) (3,495 ) (11,160 )
Cash flows from financing activities:
Borrowings on line of credit 15,000
Repayment of convertible senior notes (16,919 ) (10,081 )
Proceeds from issuance of common stock 180 172 806 1,272
Other financing activities, net (138 ) (73 ) (921 ) (213 )
Net cash provided by (used in) financing activities 42   99   (2,034 ) (9,022 )
Effect of exchange rate changes on cash and cash equivalents 136   (30 ) (80 ) (17 )
Net decrease in cash and cash equivalents (6,077 ) 1,354 (7,700 ) (14,588 )
Cash and cash equivalents, beginning of period 31,559   31,828   33,182   47,770  
Cash and cash equivalents, end of period $ 25,482   $ 33,182   $ 25,482   $ 33,182  
 
 
           

REVENUES BY GEOGRAPHY

(In thousands, unaudited)

 
Three Months Ended Year Ended
December 31, December 31,
2013       2012 2013       2012
North America $ 24,633       49.1 % $ 31,180   45.0 % $ 103,822       43.6 % $ 109,168       38.2 %
Asia Pacific 16,319 32.6 24,837 35.8 81,530 34.3 116,549 40.7
Europe, the Middle East and Africa 9,186   18.3   13,283 19.2   52,511   22.1   60,379   21.1  
Total $ 50,138   100.0 % $ 69,300 100.0 % $ 237,863   100.0 % $ 286,096   100.0 %
 
 
           

REVENUES BY PRODUCT GROUP

(In thousands, unaudited)

 
Three Months Ended Year Ended
December 31, December 31,
2013       2012 2013       2012
ATCA Platforms $ 22,253       44.4 % $ 34,703   50.1 % $ 116,537       49.0 % $ 136,572   47.7 %
Software-Solutions 11,110 22.2 12,919 18.6 44,934 18.9 52,666 18.4
COM Express and Rackmount Server 13,794 27.5 11,575 16.7 56,019 23.6 49,538 17.3
Other Products 2,981   5.9   10,103 14.6   20,373   8.5   47,320 16.5  
Total Revenues $ 50,138   100.0 % $ 69,300 100.0 % $ 237,863   100.0 % $ 286,096 100.0 %
 
 
           

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES AND AS A PERCENT OF REVENUES

(In thousands, except per share amounts, unaudited)

 
Three Months Ended Year Ended
December 31, December 31,
2013       2012 2013       2012
REVENUES:
GAAP revenues $ 50,138     $ 69,300     $ 237,863     $ 286,096    
(a) Purchase accounting adjustments             300    
Non-GAAP revenues $ 50,138     $ 69,300     $ 237,863     $ 286,396    
 
GROSS MARGIN:
GAAP gross margin $ 10,853   21.6 % $ 20,700   29.9 % $ 64,138   27.0 % $ 88,039   30.8 %
(a) Purchase accounting adjustments 300
(b) Amortization of acquired intangible assets 2,054 2,321 8,558 9,544
(c) Stock-based compensation 142 123 550 25
(d) Restructuring and other charges, net 217         217     62    
Non-GAAP gross margin $ 13,266   26.5 % $ 23,144   33.4 % $ 73,463   30.9 % $ 97,970   34.2 %
 
RESEARCH AND DEVELOPMENT:
GAAP research and development $ 9,989   19.9 % $ 11,635   16.8 % $ 45,000   18.9 % $ 47,739   16.7 %
(c) Stock-based compensation (327 )   (286 )   (1,170 )   (601 )  
Non-GAAP research and development $ 9,662   19.3 % $ 11,349   16.4 % $ 43,830   18.4 % $ 47,138   16.5 %
 
SELLING, GENERAL AND ADMINISTRATIVE:
GAAP selling, general and administrative $ 10,065   20.1 % $ 11,234   16.2 % $ 41,210   17.3 % $ 45,200   15.8 %

(c) Stock-based compensation

(1,068 )   (588 )   (3,578 )   (765 )  
Non-GAAP selling, general and administrative $ 8,997   17.9 % $ 10,646   15.4 % $ 37,632   15.8 % $ 44,435   15.5 %
 
INCOME (LOSS) FROM OPERATIONS:
GAAP loss from operations $ (13,947 ) (27.8 )% $ (3,590 ) (5.2 )% $ (34,766 ) (14.6 )% $ (39,746 ) (13.9 )%
(a) Purchase accounting adjustments 300
(b) Amortization of acquired intangible assets 3,358 3,625 13,773 14,759
(c) Stock-based compensation 1,537 997 5,298 1,391
(d) Restructuring and other charges, net 3,659 117 7,696 (55 )
(e) Impairment of goodwill             29,748    
Non-GAAP income (loss) from operations $ (5,393 ) (10.8 )% $ 1,149   1.7 % $ (7,999 ) (3.4 )% $ 6,397   2.2 %
 
NET INCOME (LOSS):
GAAP net loss $ (26,015 ) (51.9 )% $ (4,855 ) (7.0 )% $ (49,404 ) (20.8 )% $ (43,474 ) (15.2 )%
(a) Purchase accounting adjustments 300
(b) Amortization of acquired intangible assets 3,358 3,625 13,773 14,759
(c) Stock-based compensation 1,537 997 5,298 1,391
(d) Restructuring and other charges, net 3,659 117 7,696 (55 )
(e) Impairment of goodwill 29,748
(f) Gain of sale of land held for sale (771 ) (771 )
(g) Income taxes 12,220     1,013     13,429     1,703    
Non-GAAP net income (loss) $ (6,012 ) (12.0 )% $ 897   1.3 % $ (9,979 ) (4.2 )% $ 4,372   1.5 %
 
GAAP weighted average diluted shares 29,150 27,738 28,805 27,174
Escrow shares 672 1,028

Dilutive equity awards included in non-GAAP earnings per share

    729         776    
Non-GAAP weighted average diluted shares 29,150     29,139     28,805     28,978    
GAAP net loss per share (diluted) $ (0.89 ) $ (0.18 ) $ (1.72 ) $ (1.60 )
Non-GAAP adjustments detailed above 0.68     0.21     1.37     1.75    
Non-GAAP net income (loss) per share (diluted) $ (0.21 )   $ 0.03     $ (0.35 )   $ 0.15    
               

RECONCILIATION OF GAAP TO NON-GAAP GUIDANCE

NET INCOME (LOSS) PER SHARE

(In millions, except per share amounts, unaudited)

 
Three Months Ended For the Year Ended
March 31, 2014 December 31, 2014
Low End       High End Low End       High End
GAAP net loss $ (12.2 ) $ (8.7 ) $ (20.8 ) $ (16.3 )
(b) Amortization of acquired intangible assets 3.4 3.4 13.4 13.4
(c) Stock-based compensation 1.6 1.6 6.6 6.6
(d) Restructuring and other charges, net 1.3 1.3 3.0 3.0
(g) Income taxes 0.7   0.7   2.4   2.4  
Total adjustments 7.0   7.0   25.4   25.4  
Non-GAAP net loss $ (5.2 ) $ (1.7 ) $ 4.6   $ 9.1  
 
GAAP weighted average shares 29,350 29,350 29,600 29,600
Non-GAAP adjustments     1,000   1,000  
Non-GAAP weighted average shares (diluted) (I) 29,350   29,350   30,600   30,600  
 
GAAP net loss per share $ (0.42 ) $ (0.30 ) $ (0.70 ) $ (0.55 )
Non-GAAP adjustments detailed above 0.24   0.24   0.85   0.85  
Non-GAAP net loss per share (diluted) (I) $ (0.18 ) $ (0.06 ) $ 0.15   $ 0.30  
 
(I)     For all the periods the diluted earnings per share calculation excludes the effects of the shares underlying our convertible senior notes as the inclusion would be anti-dilutive.
 
 
               

RECONCILIATION OF GAAP TO NON-GAAP GUIDANCE

GROSS MARGIN

(unaudited)

 

Estimates at the

midpoint of the

guidance range

Three Months Ended
March 31, 2014
GAAP

28.0

%

(b) Amortization of acquired intangible assets 4.8
(c) Stock-based compensation 0.2  
Non-GAAP

33.0

%

             

RECONCILIATION OF GAAP TO NON-GAAP GUIDANCE

RESEARCH AND DEVELOPMENT EXPENSE AND

SELLING, GENERAL AND ADMINISTRATIVE EXPENSE

(In millions, unaudited)

 

Estimates at the

midpoint of the

guidance range

Three Months Ended
March 31, 2014
GAAP $ 18.9  
(c) Stock-based compensation (1.4 )
Non-GAAP $ 17.5  
 

The Company excludes the following expenses, reversals, gains and losses from its non-GAAP financial measures, when applicable:

(a) Purchase accounting adjustments: Purchase accounting adjustments consist of the impact to revenues and cost of sales associated with adjusting deferred revenue and inventories of acquired companies to fair value. For deferred revenue, as is the case with our existing business, at the time of acquisition, the acquired business recorded deferred revenue related to past transactions for which revenue would have been recognized by the acquired entity in future periods as revenue recognition criteria were satisfied. However, purchase accounting rules require us to write down a portion of this deferred revenue to its then current fair value, which is equivalent to the cost to complete the outstanding obligations required to earn the deferred revenue plus a reasonable margin. Consequently, in post-acquisition periods, we do not recognize the full amount of this deferred revenue. When measuring the performance of our business, however, we add back non-GAAP revenue associated with deferrals for which no future obligations existed as well as obligations we assumed to provide maintenance or support to customers of the acquired business that were excluded as a result of these purchase accounting adjustments. We believe that the non-GAAP revenue disclosures enhance investors' ability to conduct period-over-period analyses of our results that reflect the full impact of the acquired business's results together with the results from our pre-existing products and services.

In addition, the non-GAAP financial results exclude the impact to cost of sales from the markup of inventories required by GAAP as part of the fair value adjustments required under purchase accounting for business combinations. This results from marking the acquired company's inventory to fair value at the time of acquisition. This charge is not factored into management's evaluation of potential acquisitions or our performance after completion of acquisitions, because it is not related to our core operating performance, and the frequency and amount of this type of charge can vary significantly based on the size and timing of our acquisitions. Excluding this data provides investors with a basis to compare the company against the performance of other companies without this variability.

(b) Amortization of acquired intangible assets: Amortization of acquisition-related intangible assets primarily relate to core and existing technologies, patents, trade name and customer relationships that were acquired with the acquisitions of Continuous Computing, Convedia, MCPD and Pactolus. The Company excludes the amortization of acquisition-related intangible assets because it does not reflect the Company's ongoing business and it does not have a direct correlation to the operation of the Company's business. In addition, in accordance with GAAP, the Company generally recognizes expenses for internally-developed intangible assets as they are incurred, notwithstanding the potential future benefit such assets may provide. Unlike internally-developed intangible assets, however, and also in accordance with GAAP, the Company generally capitalizes the cost of acquired intangible assets and recognizes that cost as an expense over the useful lives of the assets acquired. As a result of their GAAP treatment, there is an inherent lack of comparability between the financial performance of internally-developed intangible assets and acquired intangible assets. Accordingly, the Company believes it is useful to provide, as a supplement to its GAAP operating results, non-GAAP financial measures that exclude the amortization of acquired intangibles in order to enhance the period-over-period comparison of its operating results, as there is significant variability and unpredictability across companies with respect to this expense.

(c) Stock-based compensation: Stock-based compensation consists of expenses recorded under GAAP, in connection with stock awards such as stock options, restricted stock awards and restricted stock units granted under the Company's equity incentive plans and shares issued pursuant to the Company's employee stock purchase plan. The Company excludes stock-based compensation from non-GAAP financial measures because it is a non-cash measurement that does not reflect the Company's ongoing business and because the Company believes that investors want to understand the impact on the Company of the adoption of the applicable GAAP surrounding share based payments; the Company believes that the provision of non-GAAP information that excludes stock-based compensation improves the ability of investors to compare its period-over-period operating results, as there is significant variability and unpredictability across companies with respect to this expense.

(d) Restructuring and other charges, net: Restructuring and other charges, net relates to costs associated with non-recurring events. These include costs incurred for employee severance, acquisition or divestiture activities, excess facility costs, certain legal costs, asset related charges and other expenses associated with business restructuring activities. Restructuring and other charges are excluded from non-GAAP financial measures because they are not considered core operating activities. Although the Company has engaged in various restructuring activities over the past several years, each has been a discrete event based on a unique set of business objectives. The Company does not engage in restructuring activities in the ordinary course of business. As such, the Company believes it is appropriate to exclude restructuring charges from its non-GAAP financial measures because it enhances the ability of investors to compare the Company's period-over-period operating results.

(e) Impairment of goodwill: The goodwill impairment charge relates to a write down of balances associated with previous acquisitions. The Company excludes the goodwill impairment charge because it is unusual in nature and does not reflect the operation of the Company's ongoing business. Additionally, its exclusion enhances the ability of investors to compare the Company’s period-over-period operating results.

(f) Sale of land: Gain realized when the Company sold a parcel of land that it owned during the three months ended December 31, 2013. This is excluded from non-GAAP results as the Company does not buy and sell land in the normal course of business. We believe this exclusion enhances the ability of investors to compare the Company's period-over-period operating results.

(g) Income taxes: Non-GAAP income tax expense is equal to the Company's projected cash tax expense. Adjustments to GAAP income tax expense are required to eliminate the recognition of tax expense from profitable entities where we utilize deferred tax assets to offset current period tax liabilities. We believe that providing this non-GAAP figure is useful to our investors as it more closely represents the true economic impact of our tax positions.

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We are reaching the end of the beginning with WebRTC, and real systems using this technology have begun to appear. One challenge that faces every WebRTC deployment (in some form or another) is identity management. For example, if you have an existing service – possibly built on a variety of different PaaS/SaaS offerings – and you want to add real-time communications you are faced with a challenge relating to user management, authentication, authorization, and validation. Service providers will w...
"Matrix is an ambitious open standard and implementation that's set up to break down the fragmentation problems that exist in IP messaging and VoIP communication," explained John Woolf, Technical Evangelist at Matrix, in this SYS-CON.tv interview at @ThingsExpo, held Nov 4–6, 2014, at the Santa Clara Convention Center in Santa Clara, CA.
Connected devices and the Internet of Things are getting significant momentum in 2014. In his session at Internet of @ThingsExpo, Jim Hunter, Chief Scientist & Technology Evangelist at Greenwave Systems, examined three key elements that together will drive mass adoption of the IoT before the end of 2015. The first element is the recent advent of robust open source protocols (like AllJoyn and WebRTC) that facilitate M2M communication. The second is broad availability of flexible, cost-effective ...
How do APIs and IoT relate? The answer is not as simple as merely adding an API on top of a dumb device, but rather about understanding the architectural patterns for implementing an IoT fabric. There are typically two or three trends: Exposing the device to a management framework Exposing that management framework to a business centric logic Exposing that business layer and data to end users. This last trend is the IoT stack, which involves a new shift in the separation of what stuff happe...
The Internet of Things will put IT to its ultimate test by creating infinite new opportunities to digitize products and services, generate and analyze new data to improve customer satisfaction, and discover new ways to gain a competitive advantage across nearly every industry. In order to help corporate business units to capitalize on the rapidly evolving IoT opportunities, IT must stand up to a new set of challenges. In his session at @ThingsExpo, Jeff Kaplan, Managing Director of THINKstrateg...
Cultural, regulatory, environmental, political and economic (CREPE) conditions over the past decade are creating cross-industry solution spaces that require processes and technologies from both the Internet of Things (IoT), and Data Management and Analytics (DMA). These solution spaces are evolving into Sensor Analytics Ecosystems (SAE) that represent significant new opportunities for organizations of all types. Public Utilities throughout the world, providing electricity, natural gas and water,...
When an enterprise builds a hybrid IaaS cloud connecting its data center to one or more public clouds, security is often a major topic along with the other challenges involved. Security is closely intertwined with the networking choices made for the hybrid cloud. Traditional networking approaches for building a hybrid cloud try to kludge together the enterprise infrastructure with the public cloud. Consequently this approach requires risky, deep "surgery" including changes to firewalls, subnets...
DevOps is all about agility. However, you don't want to be on a high-speed bus to nowhere. The right DevOps approach controls velocity with a tight feedback loop that not only consists of operational data but also incorporates business context. With a business context in the decision making, the right business priorities are incorporated, which results in a higher value creation. In his session at DevOps Summit, Todd Rader, Solutions Architect at AppDynamics, discussed key monitoring techniques...
Want to enable self-service provisioning of application environments in minutes that mirror production? Can you automatically provide rich data with code-level detail back to the developers when issues occur in production? In his session at DevOps Summit, David Tesar, Microsoft Technical Evangelist on Microsoft Azure and DevOps, will discuss how to accomplish this and more utilizing technologies such as Microsoft Azure, Visual Studio online, and Application Insights in this demo-heavy session.
The Internet of Things will greatly expand the opportunities for data collection and new business models driven off of that data. In her session at @ThingsExpo, Esmeralda Swartz, CMO of MetraTech, discussed how for this to be effective you not only need to have infrastructure and operational models capable of utilizing this new phenomenon, but increasingly service providers will need to convince a skeptical public to participate. Get ready to show them the money!
One of the biggest challenges when developing connected devices is identifying user value and delivering it through successful user experiences. In his session at Internet of @ThingsExpo, Mike Kuniavsky, Principal Scientist, Innovation Services at PARC, described an IoT-specific approach to user experience design that combines approaches from interaction design, industrial design and service design to create experiences that go beyond simple connected gadgets to create lasting, multi-device exp...
P2P RTC will impact the landscape of communications, shifting from traditional telephony style communications models to OTT (Over-The-Top) cloud assisted & PaaS (Platform as a Service) communication services. The P2P shift will impact many areas of our lives, from mobile communication, human interactive web services, RTC and telephony infrastructure, user federation, security and privacy implications, business costs, and scalability. In his session at @ThingsExpo, Robin Raymond, Chief Architect...
High-performing enterprise Software Quality Assurance (SQA) teams validate systems that are ready for use - getting most actively involved as components integrate and form complete systems. These teams catch and report on defects, making sure the customer gets the best software possible. SQA teams have leveraged automation and virtualization to execute more thorough testing in less time - bringing Dev and Ops together, ensuring production readiness. Does the emergence of DevOps mean the end of E...
Scott Jenson leads a project called The Physical Web within the Chrome team at Google. Project members are working to take the scalability and openness of the web and use it to talk to the exponentially exploding range of smart devices. Nearly every company today working on the IoT comes up with the same basic solution: use my server and you'll be fine. But if we really believe there will be trillions of these devices, that just can't scale. We need a system that is open a scalable and by using ...
The Internet of Things is tied together with a thin strand that is known as time. Coincidentally, at the core of nearly all data analytics is a timestamp. When working with time series data there are a few core principles that everyone should consider, especially across datasets where time is the common boundary. In his session at Internet of @ThingsExpo, Jim Scott, Director of Enterprise Strategy & Architecture at MapR Technologies, discussed single-value, geo-spatial, and log time series dat...