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Enterasys Networks Achieves Profitable Revenue Growth in Q2 2006


Company posts 4th consecutive quarter of pro-forma operating profitability

ANDOVER, MA-- August 1, 2006--Enterasys Networks Inc., the Secure Networks Company™, today announced that its financial results met expectations for the fiscal second quarter ended July 1, 2006. Enterasys’ pro-forma operating profits have increased more than three-fold in the past four quarters, excluding restructuring and costs related to the Company’s acquisition by private investors in March 2006. Gross margins remained strong at more than 50 percent.

The Company added more than 150 new customers in the quarter, with revenue from new customers contributing a significant percentage of the total. Among the new customers Enterasys acquired during the second quarter are Dow Chemical, Shell Oil, BMW China and Genzyme Europe.
“Enterasys is making steady progress in our effort to shift from a product-centric to a customer-centric culture that helps customers protect their networked environments and improve IT service quality,” said Mike Fabiaschi, president and CEO of Enterasys Networks. “Q2 was the Company’s first full quarter under private ownership, and we are executing according to plan while growing profitability.” Enterasys’ principal investors, The Gores Group and Tennenbaum Capital Partners, provide the financial backing needed to position Enterasys as a significant long-term player in the enterprise network market.

“We have instilled a philosophy that there is nothing more important than our customers, and Enterasys is rapidly evolving into a business that is sales-driven, marketing-assisted and delivers on its promises to customers,” Fabiaschi said. “The Q2 results provide a very solid foundation for future growth, and with an optimized cost structure now in place, profitability is expected to continue.”
Enterasys highlights for the second quarter of 2006 include:

* All of the Company’s switching and routing product lines grew in terms of revenue and port shipments, led by the SecureStack A2, B2 and C2 Layer 2 & Layer 3 stackables.
* Among the new products launched in Q2 was Dragon® Network Defense, an enterprise-wide network security management solution that combines multiple prevention and detection methodologies into a single platform for unmatched visibility and control. Also introduced was Enterasys Sentinel, the industry’s first federated solution for interoperable multi-vendor, multi-technology network access control (NAC).
* Enterasys had a prominent presence at key networking industry events in the quarter, including Interop Las Vegas in May and the Washington, D.C. Gartner IT Security Summit in June. The Company also held a successful EMEA partner conference in Budapest, attended by more than 80 channel partners from throughout the region.

About Enterasys Networks

Enterasys Networks--the Secure Networks Company--provides enterprises with the most integrated, up-to-date portfolio of security-enabled network infrastructure products, centralized command and control software, and advanced security applications available today. Information about the company’s award-winning line of policy-enabled switches, routers, wireless products, security software, and services is available at

About The Gores Group

Founded in 1987, The Gores Group is a private equity firm focused on acquiring controlling interests in mature and growing businesses which can benefit from the firm’s operating experience and flexible capital base. The firm combines the operational expertise and detailed due diligence capabilities of a strategic buyer with the seasoned M&A team of a traditional financial buyer. The Gores Group has become a leading investor, primarily in the technology and telecommunications sectors, having demonstrated over time a reliable track record of creating substantial value in its portfolio companies alongside management. Headquartered in Los Angeles, California, The Gores Group maintains offices in Boulder, Colorado and London. For more information, please visit

About Tennenbaum Capital Partners, LLC

Tennenbaum Capital Partners is a Santa Monica, California-based private investment firm managing over $3.8 billion in assets through private funds. The firm’s investment strategy is grounded in a long-term, value approach, and it assists - both financially and operationally - transitional middle-market companies in such industries as technology, healthcare, energy, aerospace, business services, retail and general manufacturing. Tennenbaum’s core strengths include its in-depth knowledge of equity and debt-financing vehicles in the public and private markets, as well as a thorough understanding of special situations. For more information, please visit

This news release contains forward-looking statements regarding future events, activities and financial performance, such as management’s expectations regarding future revenue and cash flow; strategic relationships and market opportunities; product development; and other business strategies and objectives. These statements may be identified with such words as “we expect,” “we believe,” “we anticipate,” or similar indications of future expectations. These statements are neither promises nor guarantees, and actual future financial performance, events and activities may differ materially. Readers are cautioned not to place undue reliance on these statements, which speak only as of the date hereof. We expressly disclaim any obligation to update such statements publicly to reflect changes in the expectations, assumptions, events or circumstances on which such statements may be based or that may affect the likelihood that actual results will differ materially.

Some risks and uncertainties that may cause actual results to differ materially from these forward-looking statements include, but are not limited to: worldwide and regional economic uncertainty and recent political and social turmoil may continue to negatively affect our business and revenue; we have a history of losses in recent years and may not operate profitably in the future; our quarterly operating results may fluctuate, which could cause us to fail to meet quarterly operating targets and result in a decline in our stock price; we earn a substantial portion of our revenue for each quarter in the last month of each quarter, which reduces our ability to accurately forecast our quarterly results and increases the risk that we will be unable to achieve previously forecasted results; we continue to introduce new products, and if our customers delay product purchases or choose alternative solutions, or if sales of new products are not sufficient to offset declines in sales of older products, our revenue could decline, we may incur excess and obsolete inventory charges, and our financial condition could be harmed; we may be unable to upgrade our indirect distribution channels or otherwise enhance our selling capabilities, which may hinder our ability to grow our customer base and increase our revenue; we have experienced significant changes in senior management and our current management team has been together for only a limited time, which could limit our ability to achieve our objectives and effectively operate our business; there is intense competition in the market for enterprise network equipment, which could prevent us from increasing our revenue and achieving profitability; a portion of the enterprises we sell to rely in whole or in part on public funding and often face significant budgetary pressure, and if these customers must delay, reduce or forego purchasing from us, our revenues could be harmed; we depend upon a limited number of contract manufacturers for substantially all of our manufacturing requirements, and the loss of any of our primary contract manufacturers would impair our ability to meet the demands of our customers; and those additional risks and uncertainties discussed in our most recent filings with the Securities and Exchange Commission, including our annual report on Form 10-Q for the quarter ended April 2, 2005.


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