Digital Microwave Corporation Announces Preliminary Fourth Quarter Results.

SAN JOSE, Calif.--(BUSINESS WIRE)--April 14, 1998--Digital Microwave Corporation (NASDAQ:DMIC) today announced that the Company expects to report diluted earnings per share between $0.14 and $0.16 for the fourth quarter of Fiscal 1998, before one-time charges and restructuring expenses associated with the merger with MAS Technology, Ltd.

While net sales of the combined entity for Fiscal 1998 are expected to be approximately 45% over those for Fiscal 1997, fourth quarter 1998 earnings will be negatively affected by lower gross margins than expected, and higher engineering expenses resulting from strategic engineering projects which were accelerated during the fourth quarter. Merger-related one-time charges, including banking and legal fees and restructuring charges including costs of closing duplicate facilities, severance costs, and charges related to disposition of inventories due to changes in product strategies, are expected to be approximately $14-$16 million before taxes in the fourth quarter of Fiscal 1998.

The Company had previously indicated a slowdown in orders from Asia-Pacific which would likely impact results for the first half of Fiscal 1999.

"Economic pressures in Asia-Pacific have slowed network buildouts as anticipated in that region," commented Charles D. Kissner, Chairman and Chief Executive Officer of Digital Microwave Corporation. "Because of quarterly variations in worldwide bookings, it was more difficult to overcome shortfalls in Asia-Pacific during Q4. In addition, some fourth quarter Asia deliveries were deferred by customers. As a result of continued improvements in manufacturing processes, the Company was largely able to rapidly book and ship replacement business within the quarter. Product margins were lower than anticipated due to increased costs and lower prices associated with the specific orders processed. While our top-line growth was significant, these unanticipated lower margins and other costs associated with expanding production capacity and ramping up further our engineering investments negatively impacted bottom line results. In order to benefit longer term results, the Company decided to accelerate strategic engineering projects, including Altium development, completion of an SNMP network management interface, and other engineering projects for key customers."

"While we remain very optimistic about the impact that the introduction of our new high capacity Altium radio platform and the merger with MAS Technology will have on results in the latter part of Fiscal 1999 and in the longer-term, we are disappointed with the anticipated quarterly results," continued Kissner. "As a result of current market conditions and near-term uncertainty in other parts of the world, we are taking a number of precautionary actions, including reducing expenses and product cost levels, accelerating the integration with MAS Technology to achieve faster merger benefits, accelerating further some ongoing distribution initiatives, and continuing to move forward quickly with the Altium product line rollout. In addition, we are closely monitoring the situation in Asia-Pacific where we believe we are positioned well for future business."

Final financial results are expected to be released on April 22 and are subject to completion of the year-end audit.

The statements in this press release that relate to future events or the Company's future performance are forward-looking. These forward-looking statements are based on current expectations and the Company assumes no obligation to update this information. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including the volume and timing of orders for the Company's products, the ability of the Company and its suppliers to respond to changes made by customers in their orders, the timing of new product introductions, competition in the microwave and access business, fluctuations in foreign currency exchange rates, the economic conditions in the Asia-Pacific region, regulatory developments and general economic conditions. For a discussion of such factors, see the "Risk Factors" section of the proxy statement/prospectus dated February 9, 1998 in connection with the MAS Technology merger.

Headquartered in San Jose, CA, Digital Microwave Corporation designs, manufactures, and markets advanced wireless solutions for worldwide telephone network interconnection and access. Transmitting and receiving multiple digital lines, Digital Microwave's high-performance systems carry voice, data, and digitized video signals across a full spectrum of frequencies and capacities.

CONTACT: Digital Microwave Corporation

Sheryl Lewis, 408/944-1740