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NETWORK SYSTEMS REPORTS SECOND-QUARTER, SIX-MONTHS 1993 RESULTS

 MINNEAPOLIS, July 29 /PRNewswire/ -- Network Systems Corporation (NASDAQ-NMS: NSCO), a manufacturer of high-performance data communications systems, today announced unaudited results for the three- and six-months ended June 30, 1993.
 Revenues for the second quarter were $49,061,000, up from $46,047,000 recorded in the first quarter of 1993, but down from $54,129,000 in the same period of the prior year. Earnings were 8 cents per share, the same as the first quarter, compared with 12 cents per share in the quarter ended June 30, 1992. Revenues for the first half totaled $95,108,000, down 7.5 percent from the prior year, and earnings were 16 cents, compared with 18 cents per share in the first half of 1992.
 "The second quarter did not meet our projections, primarily because of an unexpected drop-off in our European business," said Michael Fitzpatrick, president and CEO. "Although our business activity levels in Europe remained high throughout the quarter, we were not able to close all of the business that we had expected. This drop-off was fairly consistent over all our European operations and appears to be the result of the poor economic conditions slowing down capital investments. Our performance in the United States was encouraging, and we achieved our goal of increasing our internetworking business over the first quarter."
 "I remain confident that Network Systems is making the necessary progress in our refocusing and restructuring of the business. However, the transition period is not complete, and will continue for some time. In the meantime, I expect to see slow but steady improvement in revenues over the remainder of this year. The appointment of a new vice president of Sales for North America and Asia/Pacific will accelerate the expansion of our sales organization, and we will maintain our emphasis on controlling expenses, while continuing to invest in research and development. The aggressive development program we have implemented will produce several new products and technologies in 1994 which should enable Network Systems to experience a growth curve again."
 Network Systems Corporation, based in Minneapolis, makes high- performance data communications systems. The company's stock is traded on the NASDAQ National Market System.
 NETWORK SYSTEMS CORPORATION
 CONDENSED CONSOLIDATED STATEMENTS OF INCOME
 (In thousands except per-share amounts)
 (Unaudited)
 Three Months Ended Six Months Ended
 6/30/93 6/30/92 6/30/93 6/30/92
 Revenues
 Product $32,602 $37,332 $63,107 $70,246
 Service 16,459 16,797 32,001 32,594
 Total revenues 49,061 54,129 95,108 102,840
 Cost of revenues
 Product 14,575 14,622 27,029 27,833
 Service 10,197 10,924 20,536 21,385
 Total cost of revenues 24,772 25,546 47,565 49,218
 Gross profit 24,289 28,583 47,543 53,622
 Operating expenses
 Research and development 6,174 6,243 12,755 12,190
 Selling, general,
 and administrative 16,370 17,242 31,646 34,139
 Amortization of intangibles -- 815 -- 1,629
 Total operating expenses 22,544 24,300 44,401 47,958
 Income from operations 1,745 4,283 3,142 5,664
 Interest income, net of
 interest and other expense 1,919 1,727 4,304 3,288
 Income before income taxes 3,664 6,010 7,446 8,952
 Income taxes 1,350 2,340 2,740 3,470
 Net income $2,314 $3,670 $4,706 $5,482
 Net income per share $.08 $.12 $.16 $.18
 Common and common equivalent
 shares used in the calculation
 of net income per share 30,175 30,934 30,295 31,164
 NETWORK SYSTEMS CORPORATION
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (In thousands)
 (Unaudited)
 6/30/93 12/31/92(a)
 Assets:
 Cash and short-term investments
 and marketable securities $38,399 $58,183
 Trade receivables, net 54,745 56,519
 Other receivables 3,504 3,755
 Inventories 21,225 17,445
 Other current assets 12,022 11,989
 Total current assets 129,895 147,891
 Net property, plant, and equipment 36,378 36,847
 Marketable securities 33,136 69,711
 Income tax deposits, including interest 38,699 12,471
 Other assets 47,709 26,505
 -- $285,817 $293,425
 Liabilities and stockholders' equity:
 Current liabilities $36,865 $45,197
 Long-term debt 1,000 1,000
 Other long-term liabilities 6,675 5,451
 Deferred revenue 500 1,500
 Deferred compensation 10,841 10,328
 Total stockholders' equity 229,936 229,949
 -- $285,817 $293,425
 (a) The balance sheet at Dec. 31, 1992, has been condensed from the audited statements.
 -0- 7/29/93
 /CONTACT: M.F.G. Ashby, 612-424-4888; or J. Samsal, 612-424-1649, both of Network Systems/
 (NSCO)


CO: Network Systems Corporation ST: Minnesota IN: CPR SU: ERN

KH -- MN002 -- 7456 07/29/93 17:15 EDT
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Date:Jul 29, 1993
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