NMS Communications Announces Financial Results for the Third Quarter Ended September 30, 2006.

FRAMINGHAM, Mass. -- NMS Communications (NASDAQ: NMSS), a leading provider of communications technologies and solutions for converged and mobile networks, today announced financial results for the third quarter ended September 30, 2006.

Total revenues for the third quarter of 2006 were $20.8 million, compared to $30.3 million for the corresponding quarter in 2005. Non-GAAP net loss was $4.1 million or $(0.09) per share for the third quarter, compared to non-GAAP net income of $3.3 million or $0.07 per share in the third quarter of 2005. The non-GAAP net loss for the third quarter of 2006 excludes $1.8 million in non-cash charges, comprised of $365 thousand in amortization of purchased intangible assets and $1.4 million in stock-based compensation expense. GAAP net loss for the third quarter was $5.9 million or $(0.12) per share, compared to net income of $3.3 million or $0.07 per share for the third quarter of 2005 and a net loss of $2.6 million or $(0.05) per share for the second quarter of 2006.

Total revenues for the first nine months of 2006 were $77.9 million, compared to $77.8 million for the first nine months of 2005. Non-GAAP net loss was $2.4 million or ($0.05) per share for the first nine months of 2006, compared to non-GAAP net income of $1.3 million or $0.03 per share for the first nine months of 2005. The non-GAAP net loss for the first nine months of 2006 excludes $4.5 million in non-cash charges, comprised of $850 thousand in amortization of purchased intangible assets and $3.6 million in stock-based compensation expense. GAAP net loss for the first nine months of 2006 was $6.8 million or $(0.14) per share, compared to net income of $1.3 million or $0.03 per share for the first nine months of 2005.

Included in both the third quarter and 2006 nine month GAAP and non-GAAP results is a $1.3 million charge, or $(0.03) per share, related to the closing of our Red Bank, NJ facility. There were no such charges for the same periods in 2005.

The cash and cash equivalents balance on September 30, 2006 was $35.9 million compared to $57.9 million on June 30, 2006. This decrease reflects in part the company's repurchase of $20 million of its common stock under the previously announced stock repurchase programs.

Business Perspective

"Our third quarter performance was negatively impacted by softness in our Platforms products, particularly in sales through channel partners in the US and Europe. We are taking decisive cost-cutting actions to position ourselves for a return to profitability in the mid-2007 timeframe," said Bob Schechter, NMS Communications' chairman and CEO. "In the third quarter we closed our Red Bank, NJ facility, and during the fourth quarter we have initiated additional cost reductions. These steps are designed to reduce our G&A costs, streamline product development and leverage lower costs in our Bangalore, India facility. We expect these changes, which will largely be completed in the fourth quarter, to result in annualized cost savings of approximately $10 million."

"During the quarter we had a number of positive achievements," Schechter added. "Notably, our MyCaller[TM] business saw 78% growth from a year ago and we have continued to see increasing subscriber uptake. AccessGate[TM] revenue of almost $1 million was up from $12,000 a year ago. And our Vision server and OpenAccess[TM] products have a healthy global pipeline of opportunities. The global value-added services market is now at an important inflection point as 3G network deployments enable a new range of rich media content and communications based services for which NMS's offerings are a perfect fit."

"In summary, with the third quarter now behind us, we are focused on restoring growth and improving our financial performance and market position through a combination of the cost reduction measures we are implementing and increasing sales of all of our offerings. In doing so, we believe we can accelerate our leadership position in the value-added services market enabling and delivering mobile and next-generation applications and services," Schechter concluded.

Guidance

The Company currently expects Q4 revenue to be approximately in line with Q3 revenue and operating expenses to increase in the fourth quarter due to additional restructuring costs that we expect will range from $1.2 million to $1.5 million. The Company cautions investors not to rely on prior Company guidance concerning estimated earnings (loss) per share for 2006.

NMS Conference Call Web Cast

NMS Communications issues web casts for its conference calls to assure the broad dissemination of information in real time. The Third Quarter 2006 conference call, which is scheduled for 5:00 p.m. ET today, November 8, 2006, will be available live via the Internet by accessing the NMS web site at http://www.nmscommunications.com under the Investor Relations section. Please go to the web site at least fifteen minutes prior to the call to register, download and install any necessary audio software. The webcast is also being distributed using CCBN's Investor Distribution Network to both institutional investors at StreetEvents (www.streetevents.com) and individual investors at www.companyboardroom.com.

A replay will be available on the website at http://ir.nmscommunications.com/events.cfm. You may also listen to the replay by calling 719-457-0820 and entering the pass code 8507443. The replay will be available from 8:00 p.m. ET, November 8, 2006 through 12:00 midnight, November 15, 2006.

About NMS Communications

NMS Communications (NASDAQ:NMSS) is a leading provider of communications technologies and solutions for converged and mobile networks. Visit www.nmscommunications.com for more information.

Statements in this document expressing the beliefs, estimates and expectations of management regarding future performance may be construed as "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, including without limitation the Company's guidance with respect to fourth quarter 2006 revenues and restructuring costs. These statements are based on management's expectations as of the date of this release and are subject to uncertainty and changes in circumstances. Actual results may differ materially from these expectations due to risks and uncertainties including, but not limited to, uncertainty in communications spending, the implementation of the Company's strategic repositioning and market acceptance of the Company's new solutions strategy, quarterly fluctuations in financial results, the Company's ability to exploit fully the value of its technology and its strategic partnerships and alliances, the availability of products from the Company's contract manufacturer and product component vendors and other risks. These and other risks are detailed from time to time in the Company's filings with the Securities and Exchange Commission, including the Company's annual report on Form 10-K for the year ended December 31, 2005. In addition, while management may elect to update forward-looking statements at some point in the future, management specifically disclaims any obligation to do so, even if its estimates change. Any reference to our website in this press release is not intended to incorporate the contents thereof into this press release or any other public announcement.

Use of Non-GAAP Financial Measures

In addition to reporting its financial results in accordance with generally accepted accounting principles, or GAAP, the Company has also provided in this release non-GAAP net loss and non-GAAP loss per share figures, which are non-GAAP financial measures adjusted to exclude certain non-cash expenses. The Company believes that these non-GAAP financial measures are useful to help investors better understand and assess its past financial performance and prospects for the future and facilitates comparisons with the performance of others in our industry. Management uses these non-GAAP financial measures when evaluating the Company's financial results, as well as for internal planning and forecasting purposes. Specifically, in addition to the reasons stated above, the Company has excluded stock-based compensation from its non-GAAP financial measures because the accounting treatment for stock-based compensation has changed with the adoption of SFAS 123R. Therefore, management believes that excluding stock-based compensation from its non-GAAP financial measures is useful in order to offer consistent information that is comparable to previous information that the Company has publicly disclosed with respect to prior periods for which stock-based compensation was not expensed in accordance with the accounting rules applicable to such periods. Additionally, the Company has excluded the effects of amortization of acquired intangible assets from its non-GAAP financial measures because, in the period prior to the recent Openera acquisition, it did not incur amortization expense of this nature, and the exclusion of this amount helps investors compare operating expenses with prior periods. The non-GAAP financial measures disclosed by the Company, however, should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and the expected results calculated in accordance with GAAP and reconciliations to those expected results should be carefully evaluated. The non-GAAP financial measures used by the Company may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies.

NMS Communications, MyCaller, AccessGate and OpenAccess are trademarks of NMS Communications Corporation. All other brand or product names may be trademarks or registered trademarks of their respective holders.

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