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January 28, 1998

NCD’S GROWTH STILL HAMSTRUNG BY LACK OF HYDRA

By CBR Staff Writer

Network Computing Devices Inc (NCD), the company that co-designs and builds all of IBM Corp’s network computers, met Street expectations with its fourth quarter earnings announced yesterday. However, the Mountain View company still sees the second half of this year as the one in which its thin clients will finally take off, as that is when Microsoft Corp’s multi- user version of Windows NT, codenamed Hydra, should be out on the market. Fourth quarter net income was up 2.5% at $1.1m, or six cents a share, against a period that included a $1.1m restructuring charge, on revenues basically flat at $33.3m. NCD launched its Windows-based terminal at Comdex in November and will be shipping it in volume by the time Hydra is ready. NCD thinks the reason Federal Express postponed a decision for half a year or so back in October on whether or not to buy NCs from NCD and others is because of the lack of Windows-based terminals. That waiting game is the main reason for the company’s solid, if rather flat performance in the fourth quarter, and it does not expect anything dramatic to happen until the second half. We will not see growth or any significant earnings in the next two quarters, said chief executive Bob Gilbertson on a conference call. However, he called the potential for growth in the third and fourth quarters explosive. Although many potential customers are interested in trying out the company’s NCs, which it also sells under its own name, not many of them are rolling out just yet. Net income for the year to December 31 was $2.7m, or $0.15 per share, against losses of $5.2m previously, including the above charge, on revenues up 10.6% at $133.4m. Chief financial officer Rudy Morin said he was looking for net income of $0.45 per share for this year.

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