Ixia 8K Announces Fourth Quarter and Full Year 2005 Results | XXIA 6 Feb 06

Exhibit 99.1


For more information, contact:
Tom Miller		The Blueshirt Group
Chief Financial Officer		Chris Danne, Rakesh Mehta
(818) 444-2325		(415)217-7722
tmiller@ixiacom.com		chris or rakesh@blueshirtgroup.com

Ixia Announces Fourth Quarter and Full Year 2005 Results

CALABASAS, CA— February 6, 2006—Ixia (Nasdaq: XXIA) today reported financial results for the fourth quarter and year ended December 31, 2005.

Net revenues for the fourth quarter of 2005 were $37.5 million, which represents a year-over-year increase of 6.5% from the fourth quarter of last year. Net income on a GAAP basis for the fourth quarter of 2005 was $5.5 million, or $0.08 per diluted share, compared to net income of $7.6 million, or $0.11 per diluted share, for the fourth quarter of 2004.

Net revenues for the full year of 2005 were $159.3 million, which represents a year-over-year increase of 36% from the full year of 2004. Net income on a GAAP basis for the full year of 2005 was $33.7 million, or $0.49 per diluted share, compared to net income of $18.9 million, or $0.29 per diluted share, for the full year of 2004.

Ixia’s fourth quarter of 2005 GAAP results included $1.3 million of non-cash charges related to the amortization of acquired intangible assets and income tax benefits of $580,000 related to the tax effects of the amortization of the acquired intangible assets and tax benefits related to previously recognized stock-based compensation. Excluding the effects of these items, non-GAAP net income for the fourth quarter of 2005 was $6.3 million, or $0.09 per diluted share, compared to $7.4 million, or $0.11 per diluted share, for the comparable period in 2004 after excluding the effects of similar items.

Ixia’s full year of 2005 GAAP results included $5.2 million of non-cash charges related to the amortization of acquired intangible assets and income tax benefits of $4.1 million related to the tax effects of the amortization of the acquired intangible assets and tax benefits related to previously recognized stock-based compensation. Excluding the effects of these items, non-GAAP net income for the full year of 2005 was $34.7 million, or $0.50 per diluted share, compared to $20.8 million, or $0.32 per diluted share, for the comparable period in 2004 after excluding the effects of similar items.

“In a challenging quarter, with sales impacted by a sequential decrease in orders from our largest customer and a softer than anticipated quarter in Japan, Ixia continued to position itself for long-term growth,” commented Errol Ginsberg, President and Chief Executive Officer of Ixia. “During the quarter, we added over 60 new customers and had strong results in key international markets, notably Europe, China and India. Additionally, we had our second highest revenue quarter for 10 Gigabit Ethernet and a promising performance by many of our software products, including record quarterly sales of our IxLoad software. Our business model remains solid with continuing strong gross margins and our 31^st consecutive quarter of profitability.”

“Looking forward, we expect to grow both through internal development and by making targeted acquisitions,” added Mr. Ginsberg. “Over the past year, we have substantially increased our engineering team, mostly in our offshore engineering operations, as well as our sales and marketing capabilities. We expect these additions to lead to an increase in the number of new products introduced and heightened customer interest in 2006. Complementing this effort, we intend to make one or more strategic acquisitions in 2006, similar to our acquisition last week of the mobile video and multimedia testing product line of Dilithium Networks.”

During the fourth quarter ended December 31, 2005, Ixia increased cash, cash equivalents and investments by over $9 million to approximately $202 million.

Ixia will host a conference call today for analysts and investors to discuss its fourth quarter and full year 2005 results at 5:00 p.m. Eastern Time. Open to the public, a live Web cast of the conference call 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

Certain non-GAAP financial measures are included in this press release. These non-GAAP financial measures are provided to enhance the user’s overall understanding of our financial performance. By excluding certain non-cash charges, as well as the related tax effects, our non-GAAP results provide information to both management and investors that is useful in assessing Ixia’s core operating performance and in evaluating and comparing our results of operations on a consistent basis from period to period. These non-GAAP financial measures are also used by management to evaluate financial results and to plan and forecast future periods. The presentation of this additional information is not meant to be considered a substitute for the corresponding financial measures prepared in accordance with generally accepted accounting principles. Investors are encouraged to review the reconciliations of GAAP to non-GAAP financial measures which are included below.

About Ixia

Ixia is a leading provider of performance test systems for IP-based infrastructure and services. Its highly scalable solutions generate, capture, characterize, and emulate network and application traffic, establishing definitive performance and conformance metrics of network devices or systems under test. Ixia’s test systems are used by network and telephony equipment manufacturers, semiconductor manufacturers, service providers, governments, and enterprises to validate the functionality and reliability of complex IP networks, devices, and applications. Ixia’s Triple Play test systems address the growing need to test voice, video, and data services and network capability under real-world conditions. Ixia’s vision is to be the world’s pre-eminent provider of solutions to enable testing of next generation IP Triple Play networks. Ixia’s test systems utilize a wide range of industry-standard interfaces, including Ethernet, SONET, ATM, and wireless connectivity, and are distinguished by their performance, accuracy, reliability, and adaptability to the industry’s constant evolution.

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 and the Ixia four petal logo are registered trademarks of Ixia. IxLoad is a trademark 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 the Company’s current intent, belief and expectations and are subject to risks and uncertainties that could cause the Company’s 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 the Company’s current expectations include, among other things: consistency of orders from significant customers, our success in developing and producing new products, and market acceptance of our products. These and other risk factors that may affect Ixia’s financial results in the future are discussed in Ixia’s periodic SEC filings, including its Annual Report on Form 10-K for the year ended December 31, 2004. Ixia undertakes 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)


	December 31,		December 31,
	2005		2004
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	51,837	$	16,383
Short-term investments in marketable securities		124,456		81,757
Accounts receivable, net		31,565		22,069
Inventories		9,846		6,669
Deferred income taxes		4,401		3,756
Income taxes receivable		9		1,696
Prepaid expenses and other current assets		3,510		2,878

Total current assets		225,624		135,208

Investments in marketable securities		25,392		49,015
Property and equipment, net		19,750		12,268
Deferred income taxes		11,746		4,798
Goodwill		13,468		11,377
Other intangible assets, net		20,462		23,031
Other assets		315		612

Total assets	$	316,757	$	236,309


Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	2,872	$	1,556
Accrued expenses		12,399		13,181
Deferred revenues		8,338		7,032
Income taxes payable		4,131		4,203

Total current liabilities		27,740		25,972

Deferred revenues		528		—
Deferred income taxes		6,393		3,411

Total liabilities		34,661		29,383


Shareholders’ equity:
Common stock, without par value; 200,000 shares authorized, 66,580 and 62,459 shares issued and outstanding as of December 31, 2005 and December 31, 2004, respectively		126,792		100,144
Additional paid-in capital		68,098		53,247
Retained earnings		87,206		53,535

Total shareholders’ equity		282,096		206,926

Total liabilities and shareholders’ equity	$	316,757	$	236,309

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


	Three months ended				Twelve months ended
	December 31,				December 31,
	2005		2004		2005		2004
	(unaudited)				(unaudited)
Net revenues	$	37,459	$	35,162	$	159,333	$	116,978
Cost of revenues⁽¹⁾		5,921		6,072		24,800		20,716
Amortization of purchased technology		1,015		837		3,891		3,044

Gross profit		30,523		28,253		130,642		93,218


Operating expenses:
Research and development		8,890		6,963		32,404		24,689
Sales and marketing		11,325		8,538		41,014		31,785
General and administrative		4,498		4,081		16,438		12,441
Amortization of intangible assets		334		371		1,278		1,532
Stock-based compensation⁽²⁾		—		—		—		389

Total operating expenses		25,047		19,953		91,134		70,836


Income from operations		5,476		8,300		39,508		22,382
Interest and other, net		1,569		1,030		5,055		2,960

Income before income taxes		7,045		9,330		44,563		25,342
Income tax expense		1,539		1,758		10,892		6,463

Net income	$	5,506	$	7,572	$	33,671	$	18,879


Earnings per share:
Basic	$	0.08	$	0.12	$	0.52	$	0.31
Diluted	$	0.08	$	0.11	$	0.49	$	0.29

Weighted average number of common and common equivalent shares outstanding:
Basic		66,397		61,692		65,168		60,687
Diluted		68,954		66,288		69,227		64,745


⁽¹⁾Stock-based compensation included in:
Cost of revenues	$	—	$	—	$	—	$	30

⁽²⁾Stock-based compensation related to:
Research and development	$	—	$	—	$	—	$	271
Sales and marketing		—		—		—		80
General and administrative		—		—		—		38

	$	—	$	—	$	—	$	389

IXIA
Impact of Non-GAAP Adjustments on Net Income
(in thousands, except percentages and per share data)
(unaudited)


	Three months ended December 31, 2005
	GAAP			Adjustments			Non-GAAP
Net revenues	$	37,459		$	—		$	37,459
Cost of revenues		5,921			—			5,921
Amortization of purchased technology		1,015			(1,015	)⁽¹⁾		—

Gross profit		30,523			1,015			31,538

		81.5	%					84.2	%
Operating expenses:
Research and development		8,890			—			8,890
Sales and marketing		11,325			—			11,325
General and administrative		4,498			—			4,498
Amortization of intangible assets		334			(334	)⁽¹⁾		—

Total operating expenses		25,047			(334	)		24,713

		66.9	%					66.0	%

Income from operations		5,476			1,349			6,825
Interest and other, net		1,569			—			1,569

Income before income taxes		7,045			1,349			8,394
Income tax expense		1,539			580	⁽²⁾		2,119

Net income	$	5,506		$	769		$	6,275


Earnings per share:
Basic	$	0.08		$	0.01	⁽³⁾		$0.09
Diluted	$	0.08		$	0.01	⁽³⁾		$0.09

Weighted average number of common and common equivalent shares outstanding:
Basic		66,397			—			66,397
Diluted		68,954			—			68,954


(1)		The adjustment represents the amortization of intangible assets related to the acquisition of the ANVL^TM product line from Empirix, Inc., the acquisition of certain rights associated with the Chariot^{^®} product line from NetIQ Corporation, and the acquisitions of G3 Nova Technologies, Inc. and Communication Machinery Corporation.

(2)		The adjustment represents the income tax effects of the adjustments noted in footnote (1) and the elimination of tax benefits related to previously recognized stock-based compensation.

(3)		The adjustment represents the earnings per share effect of the adjustments noted in footnotes (1) and (2).

IXIA
Impact of Non-GAAP Adjustments on Net Income
(in thousands, except percentages and per share data)
(unaudited)


	Three months ended December 31, 2004
	GAAP			Adjustments			Non-GAAP
Net revenues	$	35,162		$	—		$	35,162
Cost of revenues		6,072			—			6,072
Amortization of purchased technology		837			(837	)⁽¹⁾		—

Gross profit		28,253			837			29,090

		80.4	%					82.7	%
Operating expenses:
Research and development		6,963			—			6,963
Sales and marketing		8,538			—			8,538
General and administrative		4,081			—			4,081
Amortization of intangible assets		371			(371	)⁽¹⁾		—

Total operating expenses		19,953			(371	)		19,582

		56.7	%					55.7	%

Income from operations		8,300			1,208			9,508
Interest and other, net		1,030			—			1,030

Income before income taxes		9,330			1,208			10,538
Income tax expense		1,758			1,409	⁽²⁾		3,167

Net income	$	7,572		$	(201	)	$	7,371


Earnings per share:
Basic	$	0.12		$	0.00	⁽³⁾	$	0.12
Diluted	$	0.11		$	0.00	⁽³⁾	$	0.11

Weighted average number of common and common equivalent shares outstanding:
Basic		61,692			—			61,692
Diluted		66,288			—			66,288

(1)		The adjustment represents the amortization of intangible assets related to the acquisition of the ANVL^TM 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.

(2)		The adjustment represents the income tax effects of the adjustments noted in footnote (1) and the elimination of tax benefits related to previously recognized stock-based compensation.

(3)		The adjustment represents the earnings per share effect of the adjustments noted in footnotes (1) and (2).

IXIA
Impact of Non-GAAP Adjustments on Net Income
(in thousands, except percentages and per share data)
(unaudited)


	Twelve months ended December 31, 2005
	GAAP			Adjustments			Non-GAAP
Net revenues	$	159,333		$	—		$	159,333
Cost of revenues		24,800			—			24,800
Amortization of purchased technology		3,891			(3,891	)⁽¹⁾		—

Gross profit		130,642			3,891			134,533

		82.0	%					84.4	%
Operating expenses:
Research and development		32,404			—			32,404
Sales and marketing		41,014			—			41,014
General and administrative		16,438			—			16,438
Amortization of intangible assets		1,278			(1,278	)⁽¹⁾		—

Total operating expenses		91,134			(1,278	)		89,856

		57.2	%					56.4	%

Income from operations		39,508			5,169			44,677
Interest and other, net		5,055			—			5,055

Income before income taxes		44,563			5,169			49,732
Income tax expense		10,892			4,149	⁽²⁾		15,041

Net income	$	33,671		$	1,020		$	34,691


Earnings per share:
Basic	$	0.52		$	0.01	⁽³⁾	$	0.53
Diluted	$	0.49		$	0.01		$	0.50

Weighted average number of common and common equivalent shares outstanding:
Basic		65,168			—			65,168
Diluted		69,227			—			69,227

(1)		The adjustment represents the amortization of intangible assets related to the acquisition of the ANVL^TM product line from Empirix, Inc., the acquisition of certain rights associated with the Chariot^{^®} product line from NetIQ Corporation, and the acquisitions of G3 Nova Technologies, Inc. and Communication Machinery Corporation.

(2)		The adjustment represents the income tax effects of the adjustments noted in footnote (1) and the elimination of tax benefits related to previously recognized stock-based compensation.

(3)		The adjustment represents the earnings per share effect of the adjustments noted in footnotes (1) and (2).

IXIA
Impact of Non-GAAP Adjustments on Net Income
(in thousands, except percentages and per share data)
(unaudited)


	Twelve months ended December 31, 2004
	GAAP			Adjustments			Non-GAAP
Net revenues	$	116,978		$	—		$	116,978
Cost of revenues		20,716			(30	)⁽¹⁾		20,686
Amortization of purchased technology		3,044			(3,044	) ⁽²⁾		—

Gross profit		93,218			3,074			96,292

		79.7	%					82.3	%
Operating expenses:
Research and development		24,689			—			24,689
Sales and marketing		31,785			—			31,785
General and administrative		12,441			—			12,441
Amortization of intangible assets		1,532			(1,532	)⁽²⁾		—
Stock-based compensation		389			(389	)⁽¹⁾		—

Total operating expenses		70,836			(1,921	)		68,915

		60.6	%					58.9	%

Income from operations		22,382			4,995			27,377
Interest and other, net		2,960			—			2,960

Income before income taxes		25,342			4,995			30,337
Income tax expense		6,463			3,066	⁽³⁾		9,529

Net income	$	18,879		$	1,929		$	20,808


Earnings per share:
Basic	$	0.31		$	0.03	⁽⁴⁾	$	0.34
Diluted	$	0.29		$	0.03	⁽⁴⁾	$	0.32

Weighted average number of common and common equivalent shares outstanding:
Basic		60,687			—			60,687
Diluted		64,745			—			64,745

(1)		The adjustment represents the amortization of stock-based compensation related to stock options granted prior to our IPO in October 2000.

(2)		The adjustment represents the amortization of intangible assets related to the acquisition of the ANVL^TM 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.

(3)		The adjustment represents the income tax effects of the adjustments noted in footnotes (1) and (2), and the elimination of tax benefits related to previously recognized stock-based compensation.

(4)		The adjustment represents the earnings per share effect of the adjustments noted in footnotes (1), (2) and (3).

Ixia (XXIA) Inactive 8-KIxia Announces Fourth Quarter and Full Year 2005 Results