Westell Technologies Reports 2nd Quarter Results


Westell Technologies, Inc. (NASDAQ: WSTL):

              Westell Technologies 2nd Quarter Highlights

    --  Consolidated revenue for the quarter increased to $60.4
        million from $58.9 million in the previous quarter.

    --  Net loss for the second quarter decreased to $668,000 or $0.01
        per share.

    --  Westell has been awarded a supplier position to provide
        ProLine(TM) modems to AT&T's 22 state territory under its
        Hybrid DSL program.

    --  Timothy Pillow was named Chief Marketing Officer, a newly
        created position.

Westell Technologies, Inc. (NASDAQ: WSTL), a leading provider of broadband products, gateways and conferencing services, today announced that consolidated revenue for the second quarter ended September 30, 2007 increased 2.5% to $60.4 million while net loss decreased 27.1% to $668,000 or $0.01 per share.

"A relentless focus on execution continues to drive our restructuring efforts under the five-point plan I outlined earlier this year," said Thomas Mader, Westell Chief Executive Officer. "These results reflect our renewed investment in research and development, the outsourcing of Westell's manufacturing and exploration of new markets for our broadband products."

Net loss for the quarter includes pre-tax charges of $552,000 of consulting costs related to outsourcing plan implementation and $598,000 for accelerated depreciation on manufacturing equipment that will no longer be needed post outsourcing. Westell recorded a net loss of $916,000 or $0.01 per share in the first fiscal quarter, which included pre-tax charges of $3.9 million for restructuring expenses, $545,000 in consulting costs and $475,000 for accelerated depreciation on equipment related to the Company's manufacturing outsourcing plan as well as a $2.7 million net gain relating to a contract settlement.

Customer Networking Equipment (CNE) revenue increased to $32.2 million from $31.1 million in the first quarter due to an increase in unit volume, which was partially offset by price reductions. Network Service Access (NSA) equipment revenue increased to $15.1 million from $14.3 million on increased sales of network interface units. Conferencing Services revenue decreased to $13.0 million from $13.5 million primarily because of fewer business days in the quarter.

    Other Activity

    --  Westell has been selected by AT&T to provide ProLine(TM)
        modems to AT&T's 22 state region under its Hybrid DSL program.
        Shipments of product under this new agreement are anticipated
        to begin in early 2008. "Winning this business from AT&T is a
        very positive step for Westell and a validation of our
        position in the marketplace. It allows us to expand the reach
        of our core CNE business within the new AT&T, while continuing
        to develop innovative products for the next evolution of
        broadband services," said CEO Mader.

    --  In August, Westell hired Timothy R. Pillow, former executive
        vice president with Nortel Networks, as its first Chief
        Marketing Officer and Strategist in a focused effort to
        enhance Westell's current marketing capabilities and as a
        means of accelerating strategic alliances.

    --  The Company made a $2.5 million investment in Contineo
        Systems, a Plano, Texas-based software developer, for a 40%
        equity ownership position. Contineo develops communications
        security software solutions to enable broadband carriers to
        maximize revenue from existing customers. "Through this
        investment, Westell enhances its efforts to improve product
        innovation and speed time to market," said Mader.

    --  With the launch of the Ultra Line Series3 WireSpeed(TM) router
        portfolio, Westell is ideally-positioned to serve the emerging
        IPTV and Fiber-to-the-Home markets with best-in-class routing
        performance for video and high-speed internet services.

    Outlook and Q3 Guidance

"The manufacturing outsourcing strategy that was announced in May is on schedule. The CNE product line is now completely manufactured by our manufacturing outsource partners and the remaining NSA products are scheduled to be completely outsourced in the fourth fiscal quarter. The anticipated results of outsourcing are expected to reduce costs while maintaining Westell's reputation for quality products and services."

For the third fiscal quarter of 2008, Westell expects revenue to be in a range of $43 to $45 million. Westell expects EPS to be in a range of $0.06 to $0.07 loss per share. The reduction in anticipated third quarter revenue is primarily the result of transitioning the modems provided to AT&T from the former BellSouth contract, which Westell concluded shipping against in October, to the new AT&T contract. Shipments under the new contract are expected to commence in the fourth fiscal quarter.

Conference Call Information

Conference Plus, Inc. (ConferencePlus), a Westell subsidiary, will manage Westell's second quarter fiscal 2008 earnings conference call on Thursday, October 25, 9:30 AM ET using its EventManager(TM) Service.

Participants can register for the Westell conference by going to the URL:


With EventManager, participants can quickly register online in advance of the conference through a customizable web page that can be used to gather multiple pieces of information from each participant, as specified by the event arranger. After registering, participants receive dial-in numbers, a passcode, and a personal identification number (PIN) that is used to uniquely identify their presence and automatically join them into the audio conference. If a participant experiences any technical difficulties after joining the conference on October 25, simply press star 0 for support.

If you do not wish to register, you can participate in the audio portion of the call on October 25 by dialing ConferencePlus at 1-877-875-0056 no later than 9:15 AM, Eastern Time and using confirmation number 19483765. International participants may dial 1-847-585-4340. The Company's earnings press release and any related earnings information to be discussed on the earnings conference will be posted on the Investor Relations section of the Company's website at http://www.westell.com. An archive of the entire conference will be available on Westell's website or via Digital Audio Replay one hour following the conclusion of the conference. The replay of the conference can be accessed by dialing 1-888-843-8996 or 1-630-652-3044 and entering 9842363#.

About Westell

Westell Technologies, Inc., headquartered in Aurora, Illinois, is a holding company for Westell, Inc. and ConferencePlus, Inc. Westell, Inc. designs and develops broadband telecommunications access products. ConferencePlus, Inc. is a collaborative Application Service Provider that manages and hosts voice, video, IP applications and back-office services. Additional information can be obtained by visiting Westell's Web site at www.westell.com.

About ConferencePlus

ConferencePlus, a Westell Technologies, Inc. (NASDAQ: WSTL) subsidiary, is a leading global provider of audio, web, video and IP conferencing services. ConferencePlus is dedicated to providing high quality, innovative conferencing solutions to its domestic and international clients and telecommunications resellers. ConferencePlus is recognized for outstanding customer service and support to help clients meet their business objectives. The company is headquartered in Schaumburg, Illinois with an international headquarters in Dublin, Ireland. Additional information can be obtained by visiting the ConferencePlus web site at www.conferenceplus.com.

"Safe Harbor" statement under the Private Securities Litigation Reform Act 1995:

Certain statements contained herein including, without limitation, statements containing the words "believe," " on track, " "anticipate," "committed" "expect," "estimate", "await," "continue," "intend," "may," "will," "should," and similar expressions are forward looking statements that involve risks and uncertainties. These risks include, but are not limited to, product demand and market acceptance risks, need for financing, the economic downturn in the U.S. economy and telecom market, the impact of competitive products or technologies, competitive pricing pressures, product development, excess and obsolete inventory due to new product development, commercialization and technological delays or difficulties (including delays or difficulties in developing, producing, testing and selling new products and technologies), the effect of Westell's accounting policies, the need for additional capital, the effect of economic conditions and trade, legal social and economic risks (such as import, licensing and trade restrictions) and other risks more fully described in Westell's Annual Report on Form 10-K for the fiscal year ended March 31, 2007 under the section "Risk Factors". Westell undertakes no obligation to release publicly the result of any revisions to these forward looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

Financial Tables to Follow:

                      Westell Technologies, Inc.
                          Financial Results

           (Dollars in thousands except per share amounts)

                               Three Months ended   Six Months ended
                                  September 30,       September 30,
                                2007       2006     2007       2006
                               --------   -------- --------   --------

   NSA                         $15,142    $15,247  $29,402    $29,299
   CNE                          32,195     44,779   63,291     84,281
   Services                     13,026     11,773   26,573     23,595

                               --------   -------- --------   --------
Total revenues                  60,363     71,799  119,266    137,175
                               --------   -------- --------   --------

Gross profit
     Equipment                  10,796 (1) 17,916   22,220 (1) 33,729
     Services                    6,098      5,823   12,909     11,742

                               --------   -------- --------   --------
   Total gross profit           16,894     23,739   35,129     45,471
                               --------   -------- --------   --------

Gross margin
     Equipment                    22.8%(1)   29.8%    24.0%(1)   29.7%
     Services                     46.8%      49.5%    48.6%      49.8%

                               --------   -------- --------   --------
   Total gross margin             28.0%      33.1%    29.5%      33.1%
                               --------   -------- --------   --------

Operating expenses
   Sales & marketing             7,218      7,306   12,001 (2) 14,457
     Expense to revenue           12.0%      10.2%    10.1%      10.5%

   General &
    administrative               5,372 (3)  4,506   10,969 (3)  9,158
     Expense to revenue            8.9%       6.3%     9.2%       6.7%

   Research &
    development                  5,478      6,252   11,304     11,949
     Expense to revenue            9.1%       8.7%     9.5%       8.7%

   Restructuring                   286 (4)      -    4,143 (4)      -
     Expense to revenue            0.5%       0.0%     3.5%       0.0%

    amortization                   457        415      913        830
     Expense to revenue            0.8%       0.6%     0.8%       0.6%

                               --------   -------- --------   --------
   Total operating
    expenses                    18,811     18,479   39,330     36,394
                               --------   -------- --------   --------
     Expense to revenue           31.2%      25.7%    33.0%      26.5%

Operating income (loss)         (1,917)     5,260   (4,201)     9,077

Other income                       935        772    1,931      1,440
Interest expense                     -         (1)      (2)        (2)

                               --------   -------- --------   --------
Income (loss) before
 minority interest and
 taxes                            (982)     6,031   (2,272)    10,515
                               --------   -------- --------   --------

Income tax expense
 (benefit)                        (362)     2,376     (800)     4,121

Minority interest                   48         48      112        110

Net income (loss)                $(668)    $3,607  $(1,584)    $6,284
                               ========   ======== ========   ========

Income (loss) per
 common share:
                       Basic    $(0.01)     $0.05   $(0.02)     $0.09
                               --------   -------- --------   --------
                       Diluted  $(0.01)     $0.05   $(0.02)     $0.09
                               --------   -------- --------   --------

Average number of
 common shares
                       Basic    70,316     69,939   70,216     69,898
                       Diluted  70,316     70,834   70,216     71,010

(1)  Accelerated depreciation in the amount of $598,000 and $1.1
      million were recorded on manufacturing equipment in the three
      and six months periods, respectively.

(2)  The Company recorded a $3.3 million gain relating to a vendor
      settlement and $600,000 in associated expenses for a net gain of
      $2.7 million.

(3)  The Company recorded $552,000 and $1.1 million of consulting
      costs related to the implementation of the outsourcing strategy
      in the three and six months periods, respectively.

(4)  Reorganization costs are for severance and related costs
      resulting from the outsourcing strategy.
                      Westell Technologies, Inc.
                    Financial Results (continued)
                        (Dollars in thousands)

                                               September 30, March 31,
                                                   2007        2007
                                               ------------- ---------

Cash and short term investments                       68,932    72,167
Accounts receivable                                   24,375    25,700
Inventory                                             23,179    18,604
Total current assets                                 129,394   124,585
Goodwill and intangibles                              20,074    20,383
Total assets                                         211,867   207,350
Total current liabilities                             36,530    36,154
Total liabilities and minority interest               44,090    40,011
Shareholders' equity                                 167,777   167,339

Days sales outstanding                                    36        39

Source: Westell Technologies, Inc.