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Network Equipment Technologies, Inc. (NASDAQ:NWK)

Recent Actions and Near Term Strategy Conference Call

April 02, 2012 5:30 pm ET

Executives

Leigh Salvo – Investor Relations

Dixon R. Doll – Chairman

David Wagenseller – Acting President and Chief Executive Officer

Operator

Good day, ladies and gentlemen, and welcome to the Network Equipment Technologies Comments from Acting CEO. My name is Karis and I will be your coordinator for today. At this time, all participants are in a listen-only mode and will remain muted for the duration of the call. (Operator instructions)

At this time, I would now like to hand the call over to your host for today Ms. Leigh Salvo, Investor Relations. Please proceed.

Leigh Salvo

Thank you. Welcome, everyone, to our call this afternoon, during which NET’s Acting CEO, David Wagenseller will provide some [comments] following last week’s restructuring and Executive Officer changes announcement.

In keeping with the Safe Harbor provisions of the Private Securities Litigation Reform Act, I want to remind everyone that we’ll be making some forward-looking statements and projections today, including those relating to future revenue, operating results and financial conditions. Investors are cautioned that these statements are based on current estimates and assumptions that involve risks and uncertainties that might cause actual results to differ materially from those expressed or implied in the forward-looking statements.

These risks and uncertainties include our ability to develop and commercialize new products and product enhancements, success in building new sales channels, achieving broad market acceptance for our products, the status of relations with and performance by third-party technology providers, challenges of managing inventory and production of products, certifications for new and existing products, compliance with export controls and other government regulations, federal government budget matters and procurement decisions, circumstances regarding specific sales that can affect the recognition of revenue, and other risks, including those identified in the company's filings with the SEC, including Forms 10-K and 10-Q and in other press releases and communications.

The company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise. Additionally, though an audio archive of this call will be available on the company's website for at least 60 days, the statements made on this conference call are only made as of April 2, 2012, and we disclaim any duty or intention to update forward-looking statements.

At this time, I’d like to turn the call over to NET’s Chairman of the Board, Dixon Doll. Dixon?

Dixon R. Doll

Yes, am I ready to go?

Leigh Salvo

Yes. Thank you.

Dixon R. Doll

Very well. Good afternoon, everyone. My name is Dixon Doll. I’m the Board Chairman of NET. I’ve joined the call today to give a quick introduction to David Wagenseller, who today is assuming the role of Acting President and Chief Executive Officer. In my role as Chairman, the Board and I have known and worked with David for many years here; in my case, [over the past] 15 years; and we all believe he is the right person at this time to lead NET as the company makes it a top priority to restore financial and fiscal stability to the company.

David has been a Vice President at NET for the past seven years and has served the company very capably as CFO for the past two and a half years. I can assure that he knows the NET business extremely well as a result of his years of service to the company up until now. I also wanted to assure everybody that the Board of Directors have been very actively involved in managing and executing and helping on this transition and we will continue to do everything in our power to help David and his management team to be successful in his new leadership role.

I’m pleased at this time to introduce David Wagenseller, CEO and President of NET.

David Wagenseller

Thank you, Dixon. I wanted to take this opportunity to introduce myself to you. I also want to share some views on where we are presently as a company and some near-term goals and objectives for NET as we move forward. Today begins a new fiscal year and a new chapter for NET, for its employees, shareholders and customers. I’m very grateful for the opportunity to be part of it. On this brief call today, I want to give everyone some insight on why we announced the restructure last week, how we move forward and some thoughts on our strategy and plan for the near-term.

Let me begin with some background. We now have significant relationships in place with large customers and major resellers; Microsoft, HP, Dell, BT, Orange Business Solutions, Di-Data, Distribution Central, TechLand, Q-KON and Tesas to name just a few. There are many more than these and we are regularly adding new names to the list. While we still have work to do to fulfill our channel sales strategy, much of the remaining work is more tactical, with a lot of heavy lifting now done. Platforms for our UX product are also now in place.

We invested in the development of a tremendous product and it’s a foundation for NET’s future. There are additional releases of key features still in the roadmap, but the foundation is done. Now, we must turn to financial stability and execution against our plan. Financial stability will eliminate the fear, uncertainty and doubt that might otherwise affect our ability to market and sell our products, to attract investors and to motivate employees. I want all fear, uncertainty and doubt removed as soon as possible, and financial stability is the cure.

Getting to cash flow break-even will go a long way to reaching financial stability, and that is my number one priority that I want to accomplish as soon as possible. [Those actions] along with some additional cost reduction effort, primarily from our product costs and facilities expense, should get us to cash flow break-even at our current revenue level. Financial stability ensures long-term sustainability for NET. We should become more attractive as we reach that objective, not only as an investment, but it should help us attract and retain employees, shareholders and customers, as well as other potential strategic partners.

To be clear, I do not want to stop investing in the future of NET. We simply have to become more cautious with our investments and make sure we’re getting a return on our investments. In short, we must mix our assets wisely. Of course, that’s always important, but right now it’s a priority.

As I look forward, our overall business strategy remains consistent, and that is we are committed to developing the best products in the marketplace for customers looking to implement unified communications for Lync deployment and enterprise session border controllers solution. UX product family is the future of NET and we will continue to invest in development efforts to add additional features and functionality that allows the business to grow.

The government business still plays an important role for NET. The challenge will be to sustain the current levels of business until we can again invest in new development efforts for government features and products. Of course, we have fewer resources in all functional areas in the company and so we must find ways to work smarter, simplify processes and become more efficient. This has to and will become a core strategy.

I am challenging everyone in the organization to think efficiency, more with less and how we can work smarter to succeed. This is a vision I have for NET; we are a smaller organization and we need to act and react like one. We still have a tremendous opportunity ahead of us and that has not changed.

Let me stop and summarize what I’ve said already. We have best-in-class product – UX product family. We have the highest quality partners such as Microsoft, Dell and HP. We are winning new customers and deals everyday. In summary, moving forward, our strategy is not changing dramatically, but I am focusing the company right now on efficiency; working smarter and simplifying certain areas of the business.

Let me share a few comments on the plan. The financial plan that I’m pursuing has a somewhat different look maybe than previous years, and that it is more conservative. As noted in the press release last week, the plan calls for us returning to cash flow break-even by the second quarter of fiscal 2013, which is the quarter ending September 30th. This is based on current revenue levels and includes the cost reductions we have initiated. It is a plan that we should be able to hit. Ideally, we exceed this plan, and it won’t take much more than modest top-line growth to do so. I believe this plan is very achievable.

In closing, we anticipate reporting fiscal 2012 results in early May. I will provide an update at that time. Thank you very much.

Question-and-Answer Session

[No Q&A session for this event]

Operator

And ladies and gentlemen, that concludes today’s conference. Thank you for your participation. You may now disconnect. Have a wonderful day.

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