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TMCNet:  Aruba Networks Announces 17% Year-Over-Year Growth for Its Fiscal Second Quarter of 2009

[February 25, 2009]

Aruba Networks Announces 17% Year-Over-Year Growth for Its Fiscal Second Quarter of 2009

(Marketwire Via Acquire Media NewsEdge) SUNNYVALE, CA, February 25 / MARKET WIRE/ -- Aruba Networks, Inc. (NASDAQ: ARUN) -- Company adds over 500 new customers -- Generated $7.6 million in cash flow from operations -- Cash and marketable securities rise to $115.2 million with no debt Aruba Networks, Inc. (NASDAQ: ARUN), a global leader in wireless LANs and secure mobility solutions, today released financial results for its fiscal second quarter ended January 31, 2009.

Revenues for the fiscal second quarter of 2009 were $47.7 million, an increase of 17% over the $40.6 million reported in the fiscal second quarter of 2008. GAAP net loss for the fiscal second quarter of 2009 was $6.8 million, or $0.08 per share, compared to a net loss of $3.5 million, or $0.04 per share, in the fiscal second quarter of 2008. GAAP results for the fiscal second quarter of 2009 included $6.1 million of non-cash stock-based expenses, $1.2 million of amortization expense of acquired intangible assets, and $1.4 million in restructuring expenses.

Non-GAAP net income for the fiscal second quarter of 2009 increased to $2.0 million, or $0.02 per share, compared to non-GAAP net income of $0.8 million, or $0.01 per share, in the fiscal second quarter of 2008.

Non-GAAP net income for these periods excludes the impact of non-cash stock-based expenses, amortization expense of acquired intangible assets in all periods, and, for the fiscal second quarter of 2009, restructuring expenses.

"We achieved 17% year-over-year revenue growth for our second fiscal quarter, even in these tough economic times, and I believe this offers clear evidence that customers see the value and positive ROI of our products," said Dominic Orr, president and chief executive officer of Aruba. "While some projects have been pushed out, customers are being drawn to our value-based networking solutions that we believe lower operating expenses and help rightsize infrastructure investments. For example, migrating to Aruba's high-performance 802.11n wireless LANs help companies significantly scale back expenses by rightsizing their wired network infrastructure -- fewer active ports require fewer closet switches, fewer maintenance contracts, and no cabling changes as employees move.

Customers are attracted to this approach to IT infrastructure management, and I believe that is a key reason why we added over 500 new customers in the quarter. It is also why I believe we are well positioned to take advantage of our large and growing addressable market opportunity when general macroeconomic conditions improve." "Gross margin improved by more than 300 basis points over the prior quarter, contributing to our solid bottom line performance. Additionally, we reduced operating expenses by over $2.1 million from the immediately preceding quarter, in line with our cost reduction plan announced last quarter," said Steffan Tomlinson, Aruba's chief financial officer. "During the quarter, we generated $7.6 million of cash flow from operations and ended the quarter with $115.2 million of cash and short term investments, with no debt." Recent Highlights Aruba's focus on providing secure mobility solutions that integrate seamlessly with existing legacy network infrastructure enabled the Company to achieve several key objectives during the quarter. Highlights from the quarter include: -- Positioned in the Gartner Magic Quadrant as a Leader - Aruba was positioned in the Leaders quadrant in Gartner's Magic Quadrant for Wireless LAN Infrastructure. This positioning is available only to vendors that have demonstrated an ability to meet a broad variety of customer requirements, shape the market, maintain strong relationships with their channels and customers, and have no obvious gaps within their product portfolio; -- Release of AirWave Suite 6.2 Software - We introduced the AirWave Wireless Management Suite 6.2 with Payment Card Industry (PCI) Data Security Standard (DSS) compliance reporting assistance, enhanced rogue detection, RADIUS authentication for administrators, and Cisco 871 router monitoring; -- Launch of Investment Protection Program for Nortel Customers - Following Nortel's bankruptcy filing we launched the AirWave investment protection program for Nortel customers. This program is designed to extend the life of existing wireless LAN infrastructure investments and provide multi-vendor support for future network upgrades; -- Gold Star Mobile Star Awards(TM) - Aruba was awarded three Gold Star Mobile Star Awards(TM) for its AirWave Wireless Management Suite, AP-120 802.11n Access Point Family, and Remote Access Point technology; -- Wins and Deployments - Wins and deployments announced by Aruba this quarter included Giant Eagle, Inc., PETCO Animal Supplies, Inc., Wirral University Teaching Hospital NHS Foundation Trust, Taichung Veterans General Hospital, Denver Public Schools, Tamalpais Union School District, University of Cambridge, and Universidad del Valle de Mexico.

Conference Call Information Aruba will host a conference call for analysts and investors to discuss its fiscal second quarter results today at 5:00 p.m. Eastern Time (2:00 p.m.

Pacific Time). A live Webcast of the conference call will also be accessible from the "Investor Relations" section of the Company's Web site at Following the Webcast, an archived version will be available on the Web site for twelve months. To hear the replay, parties in the United States and Canada should call 800-405-2236 and enter passcode 11126226. International parties can access the replay at +1-303-590-3000 and should enter passcode 11126226.

Forward-Looking Statements This press release contains forward-looking statements, including statements relating to our expectations regarding (1) the ability of our products to lower operating expenses by, among other things, allowing our customers to decrease the size of their wired network infrastructure; (2) our ability to take advantage of large and growing addressable market opportunities when the general macroeconomic conditions improve; and (3) other statements as to our future economic performance, financial condition or results of operations.

These forward-looking statements involve risks and uncertainties, as well as assumptions which, if they do not fully materialize or prove incorrect, could cause Aruba's results to differ materially from those expressed or implied by such forward-looking statements. The risks and uncertainties that could cause our results to differ materially from those expressed or implied by such forward-looking statements include (1) our ability to react to trends and challenges in our business and the markets in which we operate; (2) business and economic conditions and growth trends in the networking industry, our vertical markets and various geographic regions; (3) reductions in overall information technology spending; (4) our ability to establish and maintain successful relationships with our distribution partners; and (5) our ability to compete in our industry, as well as those risks and uncertainties included under the captions "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations," in Aruba's report on Form 10-Q for the fiscal first quarter ended on October 31, 2008, which was filed with the SEC on December 10, 2008, and the "Risk Factors" contained in our Schedule TO filed with the SEC on February 17, 2009, both of which are available on Aruba's investor relations website at and on the SEC website at All forward-looking statements in this press release are based on information available to us as of the date hereof, and we assume no obligation to update these forward-looking statements.

Non-GAAP Financial Measures In addition to disclosing financial measures prepared in accordance with Generally Accepted Accounting Principles (GAAP), this press release and the accompanying tables contain the following non-GAAP financial measures: non-GAAP net income and non-GAAP earnings per share (EPS). The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.

Non-GAAP net income and EPS. Aruba defines non-GAAP net income as net income plus stock-based expenses, amortization expense of acquired intangible assets, restructuring expenses (for the fiscal second quarter of 2009 only), and, a benefit related to the revaluation of warrants to fair value (for the six months ended January 31, 2008 only). Aruba defines non-GAAP EPS as non-GAAP net income divided by the weighted average diluted shares outstanding. Aruba's management believes that these non-GAAP financial measures provide meaningful supplemental information regarding the company's performance by excluding certain expenses that may not be indicative of Aruba's "recurring operating results," meaning its operating performance excluding not only non-cash charges, such as stock-based expenses, but also discrete cash charges that are infrequent in nature, such as restructuring expenses. Because of varying available valuation methodologies, subjective assumptions and the variety of award types that companies can use under FAS 123R, Aruba's management believes that providing non-GAAP financial measures that exclude stock-based expenses allows investors to compare these results with those of other companies, as well as providing management with an important tool for financial and operational decision making and for evaluating the company's operating results over different periods of time. Similarly, by excluding amortization expense of acquired intangible assets, restructuring expenses and the benefit related to the revaluation of warrants to fair value, Aruba's management believes that investors can better understand and measure the Company's recurring operating results.

There are a number of limitations related to the use of non-GAAP net income and EPS versus net income and EPS calculated in accordance with GAAP.

First, these non-GAAP financial measures exclude some costs, namely, stock-based expenses, that are recurring. Stock-based expenses have been and will continue to be for the foreseeable future a significant recurring expense in Aruba's business. Second, stock-based awards are an important part of Aruba's employees' compensation and impacts their performance.

Third, the components of the costs that Aruba excludes in its calculation of non-GAAP net income may differ from the components that its peer companies exclude when they report their results of operations. Management compensates for these limitations by providing specific information regarding the GAAP amounts excluded from these non-GAAP financial measures and evaluating these non-GAAP financial measures together with their most directly comparable financial measures calculated in accordance with GAAP.

The accompanying tables have more details on these non-GAAP financial measures, including reconciliations between these financial measures and their most directly comparable GAAP equivalents.

A copy of this press release can be found on the investor relations page of Aruba Networks' Web site at

About Aruba Networks People move. Networks must follow. Aruba securely delivers networks to users, wherever they work or roam. Our mobility solutions enable the Follow-Me Enterprise that moves in lock-step with users: -- Adaptive 802.11a/b/g/n Wi-Fi networks optimize themselves to ensure that users are always within reach of mission-critical information; -- Identity-based security assigns access policies to users, enforcing those policies whenever and wherever a network is accessed; -- Remote networking solutions ensure uninterrupted access to applications as users move; -- Multi-vendor network management provides a single point of control while managing both legacy and new wireless networks from Aruba and its competitors.

The cost, convenience, and security benefits of our secure mobility solutions are fundamentally changing how and where we work. Listed on the NASDAQ and Russell 2000? Index, Aruba is based in Sunnyvale, California, and has operations throughout the Americas, Europe, Middle East, and Asia Pacific regions. To learn more, visit Aruba at

? 2009 Aruba Networks, Inc. AirWave?, Aruba Networks?, Aruba Mobility Management System?, Bluescanner, For Wireless That Works?, Mobile Edge Architecture, People Move. Networks Must Follow., RFProtect, Green Island, and The Mobile Edge Company? are trademarks of Aruba Networks, Inc. All rights reserved.

Aruba Networks, Inc.

Consolidated Balance Sheets (In thousands, except per share data) (Unaudited) January 31, July 31, 2009 2008 ----------- ----------- Assets Current assets: Cash and cash equivalents $ 38,986 $ 37,602 Short-term investments 76,183 64,130 Accounts receivable, net 23,564 32,679 Inventory 13,965 11,644 Deferred costs 3,570 4,317 Prepaids and other 1,864 3,196 ----------- ----------- Total current assets 158,132 153,568 Property and equipment, net 7,595 7,181 Goodwill 7,656 7,656 Intangible assets, net 16,559 19,027 Deferred costs 85 239 Other assets 1,027 1,130 ----------- ----------- Total other assets 32,922 35,233 ----------- ----------- Total assets $ 191,054 $ 188,801 =========== =========== Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 1,647 $ 5,844 Accrued liabilities 20,107 16,908 Income taxes payable 714 576 Deferred revenue 28,012 27,143 ----------- ----------- Total current liabilities 50,480 50,471 Deferred revenue 7,416 7,338 Other long-term liabilities 73 117 ----------- ----------- Total other liabilities 7,489 7,455 ----------- ----------- Total liabilities 57,969 57,926 ----------- ----------- Stockholders' equity Preferred Stock: $0.0001 par value; 10,000 shares authorized at January 31, 2009 and July 31, 2008; no shares issued and outstanding at January 31, 2009 and July 31, 2008 - - Common Stock: $0.0001 par value; 350,000 shares authorized at January 31, 2009 and July 31, 2008; 84,270 and 82,836 shares issued and outstanding at January 31, 2009 and July 31, 2008 8 8 Additional paid-in capital 264,355 249,131 Accumulated other comprehensive gain (loss) 95 (45) Accumulated deficit (131,373) (118,219) ----------- ----------- Total stockholders' equity 133,085 130,875 ----------- ----------- Total liabilities and stockholders' equity $ 191,054 $ 188,801 =========== =========== Aruba Networks, Inc.

Consolidated Statements of Operations (On a GAAP basis) (In thousands, except per share data) (Unaudited) Three months ended Six months ended January 31, January 31, -------------------- -------------------- 2009 2008 2009 2008 --------- --------- --------- --------- Revenues: Product $ 38,871 $ 34,170 $ 82,739 $ 72,627 Professional services and support 8,468 5,548 16,605 12,822 Ratable product and related professional services and support 342 927 783 1,926 --------- --------- --------- --------- Total revenues 47,681 40,645 100,127 87,375 Cost of revenues: Product 13,368 10,984 29,973 22,841 Professional services and support 1,838 1,386 3,771 4,203 Ratable product and related professional services and support 120 330 275 692 --------- --------- --------- --------- Total cost of revenues 15,326 12,700 34,019 27,736 --------- --------- --------- --------- Gross profit 32,355 27,945 66,108 59,639 --------- --------- --------- --------- Operating expenses: Research and development 10,250 9,086 20,673 17,386 Sales and marketing 21,607 18,826 46,268 40,525 General and administrative 6,015 4,403 11,300 8,595 Restructuring expenses 1,447 - 1,447 - --------- --------- --------- --------- Total operating expenses 39,319 32,315 79,688 66,506 --------- --------- --------- --------- Operating loss (6,964) (4,370) (13,580) (6,867) Other income (expense), net Interest income 556 1,264 1,204 2,620 Other income (expense), net (168) (144) (484) 582 --------- --------- --------- --------- Total other income (expense), net 388 1,120 720 3,202 --------- --------- --------- --------- Loss before income tax provision (6,576) (3,250) (12,860) (3,665) Income tax provision 201 228 294 452 --------- --------- --------- --------- Net loss $ (6,777) $ (3,478) $ (13,154) $ (4,117) ========= ========= ========= ========= Shares used in computing net loss per common share, basic and diluted 83,860 77,974 83,466 77,538 Net loss per common share, basic and diluted $ (0.08) $ (0.04) $ (0.16) $ (0.05) Aruba Networks, Inc.

Consolidated Statements of Operations (GAAP to Non-GAAP Reconciliation) (In thousands, except per share data) (Unaudited) Three months ended Six months ended January 31, January 31, -------------------- -------------------- 2009 2008 2009 2008 --------- --------- --------- --------- GAAP net loss $ (6,777) $ (3,478) $ (13,154) $ (4,117) Plus: a) Stock-based expenses 6,129 4,093 12,622 9,299 b) Amortization expense of acquired intangible assets 1,234 234 2,468 467 c) Revaluation of warrants to fair value - - - (715) d) Restructuring expenses 1,447 - 1,447 - --------- --------- --------- --------- Non-GAAP net income $ 2,033 $ 849 $ 3,383 $ 4,934 ========= ========= ========= ========= GAAP net loss per common share $ (0.08) $ (0.04) $ (0.16) $ (0.05) Plus: a) Stock-based expenses 0.07 0.05 0.15 0.10 b) Amortization expense of acquired intangible assets 0.01 - 0.03 0.01 c) Revaluation of warrants to fair value - - - (0.01) d) Restructuring expenses 0.02 - 0.02 - --------- --------- --------- --------- Non-GAAP net income per common share $ 0.02 $ 0.01 $ 0.04 $ 0.05 ========= ========= ========= ========= Shares used in computing diluted GAAP net loss per common share 83,860 77,974 83,466 77,538 Shares used in computing diluted Non-GAAP net income per common share 84,841 91,255 86,838 92,711 Aruba Networks, Inc.

Consolidated Statements of Operations As a Percentage of Total Revenues (On a GAAP Basis) (Unaudited) Three months ended Six months ended January 31, January 31, ------------------ ------------------ 2009 2008 2009 2008 -------- -------- -------- -------- Revenues: Product 81.5% 84.0% 82.6% 83.1% Professional services and support 17.8% 13.7% 16.6% 14.7% Ratable product and related professional services and support 0.7% 2.3% 0.8% 2.2% -------- -------- -------- -------- Total revenues 100.0% 100.0% 100.0% 100.0% Cost of revenues: Product 28.0% 27.0% 29.9% 26.2% Professional services and support 3.9% 3.4% 3.8% 4.8% Ratable product and related professional services and support 0.2% 0.8% 0.3% 0.8% -------- -------- -------- -------- Total cost of revenues 32.1% 31.2% 34.0% 31.8% -------- -------- -------- -------- Gross profit 67.9% 68.8% 66.0% 68.2% -------- -------- -------- -------- Operating expenses: Research and development 21.5% 22.4% 20.6% 19.9% Sales and marketing 45.4% 46.3% 46.2% 46.4% General and administrative 12.6% 10.9% 11.3% 9.8% Restructuring expenses 3.0% 0.0% 1.4% 0.0% -------- -------- -------- -------- Total operating expenses 82.5% 79.6% 79.5% 76.1% -------- -------- -------- -------- Operating loss (14.6%) (10.8%) (13.5%) (7.9%) Other income (expense), net Interest income 1.2% 3.1% 1.2% 3.0% Other income (expense), net (0.4%) (0.4%) (0.5%) 0.7% -------- -------- -------- -------- Total other income (expense), net 0.8% 2.7% 0.7% 3.7% -------- -------- -------- -------- Loss before income tax provision (13.8%) (8.1%) (12.8%) (4.2%) Income tax provision 0.4% 0.5% 0.3% 0.5% -------- -------- -------- -------- Net loss (14.2%) (8.6%) (13.1%) (4.7%) ======== ======== ======== ======== Aruba Networks, Inc.

Consolidated Statements of Cash Flows (In thousands) (Unaudited) Six months ended January 31, -------------------- 2009 2008 --------- --------- Cash flows from operating activities Net loss $ (13,154) $ (4,117) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 4,716 1,878 Provision for doubtful accounts 69 140 Write downs for excess and obsolete inventory 1,471 548 Compensation related to stock options and share awards 12,622 9,299 Net realized losses (gains) on short-term investments 2 (2) Accretion of purchase discounts on short-term investments (203) (1,013) Change in carrying value of preferred stock warrants - (715) Gain on disposal of fixed assets (25) - Excess tax benefits associated with stock based compensation (24) - Changes in operating assets and liabilities: Accounts receivable 9,046 (2,167) Inventory (4,131) (9,605) Prepaids and other 1,332 (541) Deferred costs 901 711 Other assets 292 (341) Accounts payable (4,229) (512) Deferred revenue 947 4,580 Other current and noncurrent liabilities 3,388 5,514 Income taxes payable 163 241 --------- --------- Net cash provided by operating activities 13,183 3,898 --------- --------- Cash flows from investing activities Purchases of short-term investments (45,675) (53,472) Proceeds from sales and maturities of short-term investments 33,774 69,225 Purchases of property and equipment (2,263) (3,320) Proceeds from sale of property and equipment 28 - --------- --------- Net cash provided by (used in) investing activities (14,136) 12,433 --------- --------- Cash flows from financing activities Proceeds from issuance of common stock 3,335 6,511 Repurchase of common stock under stock repurchase program (991) - Excess tax benefits associated with stock based compensation 24 - --------- --------- Net cash provided by financing activities 2,368 6,511 --------- --------- Effect of exchange rate changes on cash and cash equivalents (31) - --------- --------- Net increase in cash and cash equivalents 1,384 22,842 Cash and cash equivalents, beginning of period 37,602 42,570 --------- --------- Cash and cash equivalents, end of period $ 38,986 $ 65,412 ========= ========= Supplemental disclosure of cash flow information Income taxes paid $ 157 $ 236 IR Contacts Aruba Networks, Inc.

Steffan Tomlinson Chief Financial Officer The Blueshirt Group Investor Relations Chris Danne, Jill Isenstadt Copyright ? 2009 Marketwire

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