Ixia (XXIA) 8-K Ixia Announces 2007 Third Quarter Results

Exhibit 99.1

For more information, contact:
Tom Miller	Michael Attar
Chief Financial Officer	Director Investor Relations
(818) 444-2325	(818)444-2330
tmiller@ixiacom.com	mattar@ixiacom.com

Ixia Announces 2007 Third Quarter Results

CALABASAS, CA— October 25, 2007— Ixia (Nasdaq: XXIA) today reported its financial results for the third quarter ended September 30, 2007.

Total revenues for the third quarter of 2007 were $44.0 million, which represents a sequential increase of 2% over the second quarter of 2007 and compares to $55.2 million in the third quarter of 2006. Third quarter 2007 revenues do not include any amounts from the reversal of deferred revenue related to the cessation of implied post contract customer support (“PCS”) obligations. Third quarter 2006 revenues include approximately $15.5 million from the reversal of deferred revenue related to the cessation of implied PCS obligations. GAAP net income for the third quarter of 2007 was $1.9 million, or $0.03 per diluted share, compared to net income of $8.1 million, or $0.12 per diluted share, for the third quarter of 2006.

Ixia’s 2007 third quarter GAAP results include non-cash charges of $3.8 million related to stock-based compensation, $1.7 million for the amortization of acquired intangible assets, and a net tax benefit of $1.6 million related to these items. Excluding the effects of these items, Ixia’s non-GAAP net income for the third quarter of 2007 was $5.8 million, or $0.08 per diluted share, compared to non-GAAP net income of $14.1 million, or $0.21 per diluted share, for the comparable period in 2006. Third quarter 2006 non-

GAAP results exclude non-cash charges of $4.9 million related to stock-based compensation, $1.7 million for the amortization of acquired intangible assets, and a net tax benefit of $612,000 related to these items.

“Our results in the third quarter were strong, as overall bookings were a record and non-Cisco bookings were a near record,” commented Errol Ginsberg, Chief Executive Officer of Ixia. “Our Cisco business was healthy, exceeding our expectations, with revenues increasing almost 20% sequentially. Our business continues to generate strong cash flow, and during the quarter we began to buy back shares under our previously announced stock repurchase program. We also significantly strengthened our executive management team with the addition of Atul Bhatnagar as our new President and Chief Operating Officer. Even in the brief time Atul has been with us, his knowledge, passion and commitment have made a substantial contribution to both this quarter’s results and to the organization in general.”

“The positive business trends we saw this quarter demonstrate that we are making progress in areas that are important for our future growth,” added Mr. Ginsberg. “We had record software revenues, led by IxLoad, our Layer 4 to 7 testing application, which is used to test advanced services like IPTV, while 10 Gigabit Ethernet sales remained strong. From a customer perspective, our government and carrier businesses increased substantially. Internationally, we saw strong demand in the Asia Pacific region, with business in China and India continuing to grow nicely, which is encouraging for Ixia’s outlook given the long-term importance of these countries to the networking industry.”

“I am enormously enthusiastic about the opportunities that we have in front of us,” commented Atul Bhatnagar, President and Chief Operating Officer of Ixia. “Having joined the organization about seven weeks ago, I have traveled extensively within the United States and internationally, meeting both with Ixia’s employees and with many of our global customers. I believe our customers value and greatly appreciate the quality and technological sophistication of Ixia’s products and Ixia’s commitment to its customers. Many of our customers are experiencing extraordinary challenges as IP

technologies and the roll-out of advanced triple play networks revolutionize the communications world. These customers are very interested in partnering with Ixia to solve their communications infrastructure testing needs.”

Under the $50 million share repurchase program announced in mid-August, Ixia has through the end of the third quarter repurchased approximately 135,000 shares of its common stock at an average purchase price of $9.21 per share, or approximately $1.3 million. After taking the repurchases into account, as of the end of the third quarter ended September 30, 2007, Ixia had cash, cash equivalents and investments of $249 million and no debt.

Ixia will host a conference call today for analysts and investors to discuss its 2007 third quarter results at 5:00 p.m. Eastern Time. Open to the public, a live Web cast of the conference call, along with supplemental financial information, will be accessible from the “Investors” section of Ixia’s Web site (www.ixiacom.com). Following the live Web cast, an archived version will be available in the “Investors” section on the Ixia Web site for 90 days.

Non-GAAP Information

To supplement our consolidated financial results prepared in accordance with Generally Accepted Accounting Principles (“GAAP”), we have included certain non-GAAP financial measures in this press release and in the attachments hereto. Specifically, we have provided non-GAAP financial measures (e.g., non-GAAP cost of revenues, non-GAAP operating expenses, non-GAAP operating income, non-GAAP net income, and non-GAAP diluted earnings per share) that exclude certain non-cash expenses such as the amortization or impairment of acquisition-related intangible assets and stock-based compensation, as well as the related income tax effects of such items. The amortization or impairment of acquisition-related intangible assets and stock-based compensation represent non-cash charges that may be difficult to estimate from period to period and that are not directly attributable to the underlying performance of our business operations. These non-GAAP financial measures are provided to enhance the user’s overall understanding of our financial performance. We believe that by excluding certain non-cash charges, as well as the related income tax effects, our non-GAAP measures provide supplemental information to both management and investors that is useful in assessing our core operating performance, in evaluating our ongoing business operations and in comparing our results of operations on a consistent basis from period to period. These

non-GAAP financial measures are also used by management to plan and forecast future periods and to assist in making operating and strategic decisions. The presentation of this additional information is not prepared in accordance with GAAP. The information therefore may not necessarily be comparable to that of other companies and should be considered as a supplement to, not a substitute for, or superior to, the corresponding measures calculated in accordance with GAAP. Investors are encouraged to review the reconciliations of GAAP to non-GAAP financial measures which are included below in this press release.

About Ixia

We are a leading provider of performance test systems for IP-based infrastructure and services. Our test systems are used by network and telephony equipment manufacturers, semiconductor manufacturers, service providers, governments and enterprises to validate the performance and reliability of complex IP networks, devices and applications. Our triple-play test systems address the growing need to test voice, video, and data services and network capability under real-world conditions.

For more information, contact Ixia at 26601 W. Agoura Road, Calabasas, CA 91302; (818) 871-1800, Fax: (818) 871-1805; Email: info@ixiacom.com or visit our Web Site at http://www.ixiacom.com.

Ixia, the Ixia four petal logo and IxLoad are trademarks and/or registered trademarks of Ixia. Other trademarks are the property of their respective owners.

Safe Harbor Under the Private Securities Litigation Reform Act of 1995:

Certain statements made in this press release are forward-looking statements, including, without limitation, statements regarding possible future revenues, growth and profitability and future business and market share. In some cases, such forward-looking statements can be identified by terms such as “may,” “will,” “expect,” “plan,” “believe,” “estimate,” “predict” or the like. Such statements reflect our current intent, belief and expectations and are subject to risks and uncertainties that could cause our actual results to differ materially from those expressed or implied in the forward-looking statements. Factors that may cause future results to differ materially from our current expectations include those identified in our Annual Report on Form 10-K for the year ended December 31, 2006 and in our other filings with the Securities and Exchange Commission. We undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

IXIA
Condensed Consolidated Balance Sheets
(in thousands)

	September 30,		December 31,
	2007		2006
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	178,155	$	64,644
Short-term investments in marketable securities		23,998		152,703
Accounts receivable, net		30,296		36,221
Inventories		10,950		11,604
Deferred income taxes		5,965		6,382
Prepaid expenses and other current assets		2,648		4,182
Total current assets		252,012		275,736
Investments in marketable securities		46,668		4,354
Property and equipment, net		21,665		22,044
Deferred income taxes		11,555		9,486
Intangible assets, net		15,634		20,224
Goodwill		16,728		16,728
Other assets		932		487
Total assets	$	365,194	$	349,059
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	1,400	$	2,195
Accrued expenses		18,037		15,873
Deferred revenues		17,441		17,346
Income taxes payable		301		5,154
Total current liabilities		37,179		40,568
Deferred revenues		7,234		7,202
Other liabilities		4,218		500
Total liabilities		48,631		48,270
Shareholders’ equity:
Common stock, without par value; 200,000 shares authorized at September 30, 2007 and December 31, 2006; 68,271 and 67,351 shares issued and outstanding as of September 30, 2007 and December 31, 2006, respectively		136,248		132,413
Additional paid-in capital		95,677		86,305
Retained earnings		84,638		82,071
Total shareholders’ equity		316,563		300,789
Total liabilities and shareholders’ equity	$	365,194	$	349,059

IXIA
Condensed Consolidated Statements of Income
(in thousands, except per share data)
(unaudited)

	Three months ended				Nine months ended
	September 30,				September 30,
	2007		2006		2007			2006
Revenues:
Products	$	37,247	$	49,696	$	108,826		$	114,339
Services		6,787		5,532		18,910			18,426
Total revenues		44,034		55,228		127,736			132,765
Costs and operating expenses:(1)
Cost of revenues — products		8,523		7,694		24,757			21,783
Cost of revenues — amortization of purchased technology		1,220		1,256		3,976			3,449
Cost of revenues — services		865		629		2,925			1,723
Research and development		12,767		11,097		35,377			32,720
Sales and marketing		13,944		15,317		42,253			45,163
General and administrative		6,109		5,824		18,440			16,627
Amortization of intangible assets		430		464		1,575			1,287
Impairment of purchased technology and intangible assets		—		—		3,263			—
Total costs and operating expenses		43,858		42,281		132,566			122,752
Income (loss) from operations		176		12,947		(4,830	)		10,013
Interest and other income, net		2,818		2,431		8,429			6,741
Income before income taxes		2,994		15,378		3,599			16,754
Income tax expense		1,068		7,278		1,032			7,774
Net income	$	1,926	$	8,100	$	2,567		$	8,980
Earnings per share:
Basic	$	0.03	$	0.12	$	0.04		$	0.13
Diluted	$	0.03	$	0.12	$	0.04		$	0.13
Weighted average number of common and common equivalent shares outstanding:
Basic		68,192		67,129		67,805			66,907
Diluted		69,572		68,636		69,298			68,804
(1) Stock-based compensation included in:
Cost of revenues — products	$	157	$	144	$	383		$	452
Cost of revenues — services		60		55		146			172
Research and development		1,590		1,695		3,850			5,130
Sales and marketing		1,130		2,126		3,496			6,154
General and administrative		861		869		1,821			2,346

IXIA
Non-GAAP Information and Reconciliation to Most Directly Comparable GAAP Financial Measures
(in thousands, except percentages and per share data)
(unaudited)

	Three months ended September 30,
	2007						2006
				% Total						% Total
	Amount ($)			Revenues			Amount ($)			Revenues
Total cost of revenues — GAAP	$	10,608			24.1	%	$	9,579			17.3	%
Amortization of purchased technology(a)		(1,220	)		-2.8	%		(1,256	)		-2.3	%
Stock-based compensation(b)		(217	)		-0.5	%		(199	)		-0.3	%
Total cost of revenues — Non-GAAP	$	9,171			20.8	%	$	8,124			14.7	%
Operating expenses — GAAP	$	33,250			75.5	%	$	32,702			59.2	%
Amortization of intangible assets(a)		(430	)		-1.0	%		(464	)		-0.8	%
Stock-based compensation(b)		(3,581	)		-8.1	%		(4,690	)		-8.5	%
Operating expenses — Non-GAAP	$	29,239			66.4	%	$	27,548			49.9	%
Income from operations — GAAP	$	176			0.4	%	$	12,947			23.4	%
Effect of reconciling items(c)		5,448			12.4	%		6,609			12.0	%
Income from operations — Non-GAAP	$	5,624			12.8	%	$	19,556			35.4	%
Income tax expense — GAAP	$	1,068			2.4	%	$	7,278			13.2	%
Effect of reconciling items(d)		1,588			3.6	%		612			1.1	%
Income tax expense — Non-GAAP	$	2,656			6.0	%	$	7,890			14.3	%
Net income — GAAP	$	1,926			4.4	%	$	8,100			14.7	%
Effect of reconciling items(e)		3,860			8.7	%		5,997			10.8	%
Net income — Non-GAAP	$	5,786			13.1	%	$	14,097			25.5	%
Diluted earnings per share — GAAP	$	0.03					$	0.12
Effect of reconciling items(f)		0.05						0.09
Diluted earnings per share — Non-GAAP	$	0.08					$	0.21

(a)	This reconciling item represents the amortization of intangible assets related to the acquisitions of various businesses and technologies such as the acquisition of the ANVLTM product line from Empirix, Inc., the acquisition of certain rights associated with the Chariot® product line from NetIQ Corporation and the acquisition of G3 Nova Technologies, Inc. As the amortization expense represents a non-cash charge that is not directly attributable to the underlying performance of our business operations, we believe that by excluding the amortization of acquisition-related intangible assets, investors are provided with supplemental information that is useful in evaluating our ongoing operations and performance. While the amortization of acquisition-related intangible assets is expected to continue in the future, management also excludes this expense when evaluating current performance, forecasting future results, measuring core operating results, and making operating and strategic decisions.
(b)	This reconciling item represents stock-based compensation expense recognized under Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment” (“FAS 123R”). As stock-based compensation represents a non-cash charge that is not directly attributable to the underlying performance of our business operations, we believe that by excluding stock-based compensation, investors are provided with supplemental information that is useful in comparing our operating results from period to period and in evaluating our core operations and performance. While we expect to continue to recognize stock-based compensation expense in the future, management also excludes this expense when evaluating current performance, forecasting future results, measuring core operating results, and making operating and strategic decisions.
(c)	This adjustment represents the effects of the reconciling items noted in footnotes (a) and (b).
(d)	This adjustment represents the income tax effects of the reconciling items noted in footnotes (a) and (b).
(e)	This adjustment represents the effects of the reconciling items noted in footnotes (a) and (b), net of tax.
(f)	This adjustment represents the effects of the reconciling items noted in footnotes (a) and (b), net of tax, on a diluted per share basis.

IXIA
Non-GAAP Information and Reconciliation to Most Directly Comparable GAAP Financial Measures
(in thousands, except percentages and per share data)
(unaudited)

	Nine months ended September 30,
	2007						2006
				% Total						% Total
	Amount ($)			Revenues			Amount ($)			Revenues
Total cost of revenues — GAAP	$	33,161			26.0	%	$	26,955			20.3	%
Amortization of purchased technology(a)		(3,976	)		-3.1	%		(3,449	)		-2.6	%
Impairment of purchased technology(b)		(1,503	)		-1.2	%		—			—
Stock-based compensation(c)		(529	)		-0.4	%		(624	)		-0.4	%
Total cost of revenues — Non-GAAP	$	27,153			21.3	%	$	22,882			17.3	%
Operating expenses — GAAP	$	99,405			77.8	%	$	95,797			72.2	%
Amortization of intangible assets(a)		(1,575	)		-1.2	%		(1,287	)		-1.0	%
Impairment of intangible assets(b)		(1,760	)		-1.4	%		—			—
Stock-based compensation(c)		(9,167	)		-7.2	%		(13,630	)		-10.3	%
Operating expenses — Non-GAAP	$	86,903			68.0	%	$	80,880			60.9	%
(Loss) income from operations — GAAP	$	(4,830	)		-3.8	%	$	10,013			7.5	%
Effect of reconciling items(d)		18,510			14.5	%		18,990			14.3	%
Income from operations — Non-GAAP	$	13,680			10.7	%	$	29,003			21.8	%
Income tax expense — GAAP	$	1,032			0.8	%	$	7,774			5.9	%
Effect of reconciling items(e)		6,563			5.1	%		5,273			3.9	%
Income tax expense — Non-GAAP	$	7,595			5.9	%	$	13,047			9.8	%
Net income — GAAP	$	2,567			2.0	%	$	8,980			6.8	%
Effect of reconciling items(f)		11,947			9.4	%		13,717			10.3	%
Net income — Non-GAAP	$	14,514			11.4	%	$	22,697			17.1	%
Diluted earnings per share — GAAP	$	0.04					$	0.13
Effect of reconciling items(g)		0.17						0.20
Diluted earnings per share — Non-GAAP	$	0.21					$	0.33

(a)	This reconciling item represents the amortization of intangible assets related to the acquisitions of various businesses and technologies such as the acquisition of the ANVLTM product line from Empirix, Inc., the acquisition of certain rights associated with the Chariot® product line from NetIQ Corporation and the acquisition of G3 Nova Technologies, Inc. As the amortization expense represents a non-cash charge that is not directly attributable to the underlying performance of our business operations, we believe that by excluding the amortization of acquisition-related intangible assets, investors are provided with supplemental information that is useful in evaluating our ongoing operations and performance. While the amortization of acquisition-related intangible assets is expected to continue in the future, management also excludes this expense when evaluating current performance, forecasting future results, measuring core operating results, and making operating and strategic decisions.
(b)	This reconciling item represents the impairment of purchased technology of $1.5 million and the impairment of certain intangible assets of $1.8 million related to the acquisition of Communication Machinery Corporation in July 2005 and to the acquisition of the mobile video test product line from Dilithium Networks in January 2006.
(c)	This reconciling item represents stock-based compensation expense recognized under Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment” (“FAS 123R”). As stock-based compensation represents a non-cash charge that is not directly attributable to the underlying performance of our business operations, we believe that by excluding stock-based compensation, investors are provided with supplemental information that is useful in comparing our operating results from period to period and in evaluating our core operations and performance. While we expect to continue to recognize stock-based compensation expense in the future, management also excludes this expense when evaluating current performance, forecasting future results, measuring core operating results, and making operating and strategic decisions.
(d)	This adjustment represents the effects of the reconciling items noted in footnotes (a), (b) and (c).

(e)	This adjustment represents the income tax effects of the reconciling items noted in footnotes (a), (b) and (c).
(f)	This adjustment represents the effects of the reconciling items noted in footnotes (a), (b) and (c), net of tax.
(g)	This adjustment represents the effects of the reconciling items noted in footnotes (a), (b) and (c), net of tax, on a diluted per share basis.