Cylink Reports Second Quarter Results Including Record Quarterly Sales; CEO Announces Retirement.

SUNNYVALE, Calif.--(BUSINESS WIRE)--July 25, 1996--Cylink Corporation (Nasdaq:CYLK) today reported financial results for the second quarter and six months ended June 30, 1996.

For the three months ended June 30, 1996, Cylink reported record quarterly revenues of $12.3 million versus $8.5 million in the corresponding prior-year period. Net income for the 1996 second quarter was $254,000, or $0.01 per share, compared with a net loss of $79,000 a year ago. On an operating basis, the company narrowed its loss in the 1996 second quarter to $620,000, down from $805,000 a year ago, reflecting higher gross profit, partially offset by increased research and development, and sales and marketing expenses, which are a necessary part of the company's strategy to ensure rapid penetration of the marketplace with Cylink's next-generation security products. Weighted average shares outstanding increased 39 percent, which reflected the completion of Cylink's initial public offering of 5.8 million shares on February 16, 1996.

The revenue growth in the second quarter reflected dramatic growth for Cylink's existing wireless communications products, as well as strong initial reception to Cylink's newly introduced SecureFrame, SecureLan and SecureAccess products. Overall in the second quarter, sales of information security products accounted for approximately 44 percent of total revenues, an increase of 36 percent quarter over quarter. Wireless product revenues accounted for 54 percent of total quarterly revenues.

For the six months ended June 30, 1996, Cylink's revenues rose 28 percent to $20.8 million compared with $16.2 million a year ago. On an operating basis, the company reported a loss of $2.5 million versus a loss of $2.1 million a year ago. For the same six-month period, Cylink reported a net loss of $979,000, or $0.04 per share, on 28 percent more shares outstanding. This compares with a net loss of $659,000, or $0.03 per share, for the first six months of 1995.

"We have made great progress this quarter in readying our next-generation of information security products for shipment. The strength of our infosec solutions has been validated by strong initial reception to the SecureFrame and SecureLAN family of products from major corporate network operators and commercial network providers," said Dr. Jim Omura, Cylink's acting chief executive officer and chief technology officer.

"While we are just beginning to see the benefit from our years of information security product development, Cylink's financial performance this quarter is bolstered by continuing strong international demand for our wireless products. We have achieved our technological goals of creating a complete line of enterprise-wide, fully scalable information security products -- which we believe are not available anywhere else in the marketplace. Therefore, we are now shifting Cylink's focus to evolve as a more marketing driven company with increased emphasis on expanding channel and direct sales opportunities," Omura said.

International sales in the quarter rose 64 percent from a year ago and accounted for approximately 53 percent of total revenues.

Also today, Cylink President and CEO Lewis C. Morris, who suffered a stroke in May, announced his retirement. "As a co-founder of the company, Lew has been instrumental in bringing Cylink's cutting-edge technology to the enterprise market," said Omura. Now, as we move from a very successful and intense product development cycle to a market-driven strategy, we are setting our sights on bringing on board a chief executive whose marketing acumen will lead us to the next stage in Cylink's development. It is with great appreciation that we note Lew's many years of dedicated service to Cylink," Omura said. An executive search firm has been engaged to identify new chief executive candidates. Omura remains acting chief executive officer in the interim.

Except for the historical information contained herein, matters discussed in this release are forward-looking statements that involve risks and uncertainties, and actual results may be materially different. Factors that could cause actual results to differ include: business conditions in the computer security industry; competitive factors such as the entry of large, well capitalized companies; price cutting pressures; and the possible introduction of new technologies and other risk factors listed in the company's SEC reports, including the prospectus dated February 15, 1996.

Cylink Corporation is one of the largest providers of enterprise-wide network information security solutions and wireless communications. Its security products enable secure transmission of data over networks, including local area networks (LANs), wide area networks (WANs) and public packet switched networks, such as the Internet. Headquartered in Sunnyvale, California, Cylink serves Fortune 500 companies, multinational financial institutions, and many international government agencies. -0-

                          CYLINK CORPORATION
                   Consolidated Statement of Operations
                   (In thousands, except per share data)
                              (Unaudited)

                             Three Months Ended     Six Months Ended
                                  June 30,               June 30,
                               1996       1995       1996       1995

Revenue                     $ 12,286  $   8,522    $ 20,769 $  16,213
Cost of revenue                4,954      3,622       8,831     6,437
Gross profit                   7,332      4,900      11,938     9,776

Operating expenses:
 Research and development,
   gross                       4,225      2,650       7,946     5,615
 Research and development,
   reimbursed                 (1,188)       (27)     (2,307)      (77)
 Research and development,
   net                         3,037      2,623       5,639     5,538
 Selling and marketing         3,389      2,278       6,116     4,462
 General and administrative    1,526        804       2,661     1,863
     Total operating expenses  7,952      5,705      14,416    11,863

Loss from operations            (620)      (805)     (2,478)   (2,087)

Other income (expense):
    Interest income, net         935         24       1,299        63
    Licensing and other income
        (expense), net            70        647        (304)      902

Income (loss) before income
   taxes                         385       (134)     (1,483)   (1,122)

Provision (benefit) for
   income taxes                  131        (55)       (504)     (463)

Net income (loss)           $    254 $      (79) $     (979) $   (659)

Net income (loss) per share $   0.01  $   (0.00) $    (0.04) $  (0.03)

Shares used to compute net income
    (loss) per share          26,605     19,081      24,519    19,101

                          CYLINK CORPORATION
                      Consolidated Balance Sheet
                 (In thousands, except per share data)
                              (Unaudited)

                                          June 30,      December 31,
                                            1996            1995

ASSETS
  Current assets:
        Cash and marketable securities   $ 81,912       $   6,098
     Accounts receivable, net               7,057           6,013
     Inventories                            8,087           6,096
     Deferred income taxes                  2,209           1,556
     Other current assets                     377             483

             Total current assets          99,642          20,246

  Property and equipment, net               2,574           2,295

  Other assets                                                176
    184

             Total assets                $102,392       $  22,725

LIABILITIES AND SHAREHOLDERS' EQUITY

  Current liabilities                  $    8,806      $    7,642

  Noncurrent liabilities                      499             478

  Shareholders' equity                     93,087          14,605

             Total liabilities and
             shareholders' equity        $102,392       $  22,725

CONTACT: Cylink Corporation

John H. Daws, 408/735-5800

or

Pondel Parsons & Wilkinson

Ina McGuinness/Cecilia Wilkinson, 310/207-9300

Internet: [e-mail]