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ZITEL REPORTS THIRD QUARTER

 FREMONT, Calif., July 21 /PRNewswire/ -- Zitel Corp. (NASDAQ-NMS: ZITL) today announced net sales of $3,726,000 for the third quarter of fiscal year 1993 ended June 30 versus net sales of $11,645,000 for the same quarter of the prior year. The net loss for the quarter was $2,608,000 (42 cents per share) versus net income of $370,000 (6 cents per share) for the same quarter of the prior year. Fiscal 1992 financial information has been restated to reflect the acquisition of CHI Systems Inc., which was accounted for as a pooling of interest transaction.
 For the nine months ended June 30, 1993, the company reported net sales of $18,168,000 versus $36,351,000 for the first nine months of the prior year and a net loss of $5,623,000 (91 cents per share) versus net income of $946,000 (14 cents per share) for the prior year.
 Jack H. King, president and chief executive officer, said, "Results for the
quarter were very disappointing As previously indicated, certain market geographies and segments continued to remain sluggish and have resulted in customers reducing their budgets and delaying purchases. Accordingly, the company has again downsized and has brought spending levels in line with expected revenues. The company expects improved performance as a result of reduced expenses and increasing revenue as new product and market entries recently announced build momentum."
 King continued, "Though the balance sheet remains strong, we are arranging the placement of a debt transaction which we expect to close shortly. This transaction should insure that the company has adequate working capital during these difficult times."
 Zitel Corp. specializes in the design, manufacture and marketing of high-performance storage subsystems and high-speed data communications products for varied applications across a range of UNIX file-servers, mainframes and proprietary systems. These products are offered through systems integrators, value-added resellers and distributors, OEMs and directly to Unisys mainframe end-users. The company is headquartered at 47211 Bayside Parkway, Fremont, CA 94538. Telephone: 510-440-9600 or 800-622-5020 (outside Calif.). Fax: 510-440-9666.
 ZITEL CORP.
 CONSOLIDATED SUMMARY OF FINANCIAL STATEMENTS
 (Unaudited, in thousands except per share amounts)
 Consolidated Statements of Operations
 Three Months Ended Nine Months Ended
 6/30/93 6/30/92(A) 6/30/93 6/30/92(A)
 Net sales 3,726 11,645 18,168 36,351
 Cost of goods sold 2,433 4,502 9,959 12,839
 Research & development
 expenses 2,315 1,412 6,390 4,946
 Selling, general
 and administrative
 expenses 2,672 5,402 8,809 17,463
 Operating income (loss) (3,694) 329 (6,990) 1,103
 Other (income) expense 28 (106) 408 (167)
 Income (loss) before
 income taxes (3,722) 435 (7,398) 1,270
 Provision for income
 taxes (1,114) 65 (1,775) 324
 Net income (loss) (2,608) 370 (5,623) 946
 Net income (loss) per
 share (0.42) 0.06 (0.91) 0.14
 Number of shares used in per
 share calculation 6,197 6,580 6,162 6,553
 Consolidated Balance Sheets
 (Unaudited, In thousands)
 June 30, Sept. 30,
 Assets 1993 1992(A)
 Current Assets
 Cash and cash equivalents $ 1,120 $ 7,067
 Accounts receivable 7,744 11,703
 Inventories 8,980 6,834
 Deferred and refundable taxes 2,233 458
 Other current assets 909 647
 Total current assets 20,986 26,709
 Fixed assets, net 4,203 4,283
 Other assets, net 1,354 1,450
 Total assets $ 26,543 $ 32,442
 Liabilities and Shareholders' equity
 Current liabilities
 Notes payable to bank $ 1,600 $ 250
 Current portion of long-term debt 526 643
 Accounts payable 3,633 3,336
 Accrued liabilities 1,249 3,412
 Income taxes payable 373 694
 Total current liabilities 7,381 8,335
 Long-term debt 228 197
 Deferred lease liability 9 ---
 Deferred income taxes 108 108
 Shareholders' equity:
 Common stock 14,687 14,049
 Retained earnings 4,130 9,753
 Total shareholders' equity 18,817 23,802
 Total liabilities and shareholders'
 equity $ 26,543 $ 32,442
 (A) Restated to reflect the acquisition of CHI Systems Inc. completed on Oct. 30, 1992, which is being accounted for as a pooling of interest transaction.
 -0- 7/21/93
 /CONTACT: Henry C. Harris, vice president of finance of Zitel, 510-440-9600, or outside Calif., 800-622-5020/
 (ZITL)


CO: Zitel Corp. ST: California IN: CPR SU: ERN

LH-SG -- SJ003 -- 3732 07/21/93 08:03 EDT
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Date:Jul 21, 1993
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