Echelon 8-K Financial statements and exhibits

EXHIBIT 99.1

550 Meridian Avenue

San Jose, CA 95126

Phone: +1-408-938-5200

Fax: +1-408-790-3800

lonworks@echelon.com

www.echelon.com

News Information For Immediate Release

Press Contacts		Investor Relations Contact
Steve Nguyen Echelon Corporation +1-408-938-5272 qnguyen@echelon.com	Tina Wilmott McQUERTER +1-858-450-0030 x140 twilmott@mcquerter.com	Chris Stanfield Echelon Corporation +1-408-938-5243 cstanfield@echelon.com

Echelon Corporation Reports Third Quarter Earnings

SAN JOSE, CA—October 14^th, 2003—Echelon Corporation (NASDAQ: ELON) today announced financial results for the third quarter ended September 30, 2003 of $0.11 earnings per share, exceeding company EPS guidance of $0.07 to $0.09.

For the quarter ended September 30, 2003, revenues were $30.7 million, compared to $33.4 million for the same period in 2002. GAAP net income for the quarter ended September 30, 2003 was $4.5 million, or $0.11 per share on a fully diluted basis, based on a weighted average of 41,305,000 common shares outstanding, compared to net income of $5.3 million, or $0.13 per share, based on a weighted average of 40,619,000 common shares outstanding for the third quarter of 2002. Excluding certain charges associated with acquisitions completed in prior periods, non-GAAP net income for the quarter was $5.8 million, or $0.14 per share, compared to non-GAAP net income of $5.4 million, or $0.13 per share for the same period in 2002. All non-GAAP information in this release is reconciled in the “Non-GAAP Consolidated Condensed Statements of Operations” table below. Gross margin for the quarter was 64.9%, compared with 51.0% for the same period in 2002 and total operating expenses were $14.5 million, compared to $12.2 million for the same period in 2002.

Echelon Corporation Reports 3rd Quarter 2003 Results 2 of 8

“We are very pleased with the results of this quarter,” said M. Kenneth Oshman, Echelon’s chairman and chief executive officer. “We saw healthy activity in all regions of the world. Europe, which is historically slow in the third quarter due to summer holidays, performed quite well. While one quarter does not make a trend, we were pleased to see our performance in Asia recover from a very weak second quarter to be more in line with expected growth. In North America, we believe that the cumulative effect of a number of important design wins for our LONWORKS^® platform in the building industry has started to yield results. In June, the City of Chicago released a request for proposal specifying LONMARK^® certified devices for new and retrofit properties. In August the Army Corps of Engineers passed the last major hurdle to finalizing an open systems specification for all their construction projects that includes significant Echelon infrastructure content including our LNS^® operating system. Subsequently TAC, one of our leading OEM customers, was accepted as an integrator and solutions provider for Corps projects. And finally, we received our GSA Federal Supply Schedule Contract, making it easier for government agencies to purchase products directly from Echelon. In our utility industry business, our deployment with the Italian utility Enel and our new pilot project with the Dutch grid operator Continuon remain on track. While we continue to see economic tightness around the world, we are excited about the activity we see in our OEM business and the opportunities that we are pursuing in the utility industry.”

For the nine-month period ended September 30, 2003, revenues were $94.6 million compared to revenues of $92.3 million for the same period one year ago. GAAP net income for the nine-month period ended September 30, 2003 was $2.4 million, or $0.06 per share on a fully diluted basis, based on a weighted average of 40,767,000 common shares outstanding, compared to net income of $13.1 million, or $0.32 per share, based on a weighted average of 40,769,000 common shares outstanding for the same period in 2002. For the same period, non-GAAP net income was $13.5 million, or $0.33 per share, compared to non-GAAP net income of $13.7 million, or $0.34 per share for the same period in 2002. Gross margin for the nine-month period was 56.1%, compared with 51.5% for the same period in 2002 and total operating expenses were $51.2 million, compared to $36.2 million for the same period in 2002.

Highlights from the third quarter may be found athttp://www.echelon.com/about/press/. These include:

Echelon Corporation Reports 3rd Quarter 2003 Results 3 of 8

• An announcement of an agreement with the Dutch Grid Operator Continuon for a pre-deployment trial of Echelon’s networked energy services (NES) intelligent metering system;

• Continued growth within Echelon’s Open Systems Alliance program with the addition of Distech Controls as a Master Logo Partner;

• The important commitment of Mori Building, Japan’s largest real estate developer and operator, to LONWORKS based open systems and Echelon’s open systems infrastructure products for many of their most important building projects, including the new Shanghai Financial Center, which will be the world’s tallest building when completed;

• News that the United States Army Corps of Engineers is nearing finalization of a building specification that includes LONMARK certified products and Echelon’s LNS network operating system; and

• Expanded worldwide training with a new training partnership with Italy’s ViaBus S.R.L.

For those interested in further discussion regarding this release, Echelon’s management will participate in a conference call today at 8:00 am Eastern Time. To access the conference call, dial 1-800-388-8975 (callers outside the US please use +1-973-694-2225) any time after 7:50 am ET. Echelon is hosting the earnings call at an earlier time to accommodate both market hours and the call hosts, who will be in Munich, Germany attending the LonWorld^® 2003 Exhibition. The call will be available live today, and for playback on the Investor Relations section of Echelon’s web site (www.echelon.com) through October 21, 2003.

Use of Non-GAAP Financial Information

Echelon provides non-GAAP net income and non-GAAP net income per share data as additional information for its operating results. These measures are not in accordance with, or an alternative for, generally accepted accounting principles and may be different from non-GAAP measures used by other companies. Echelon believes that this presentation of non-GAAP net income and non-GAAP net income per share provides useful information relating to its financial condition and results of operations, which provides management and investors with a more complete understanding of Echelon’s past performance and certain additional financial and business trends. The presentation of this additional information is not meant to be considered in isolation or as a substitute for net income or net income per share prepared in accordance with generally accepted accounting principles.

Echelon Corporation Reports 3rd Quarter 2003 Results 4 of 8

About Echelon Corporation

Echelon Corporation is the creator of the LONWORKS platform, the world’s most widely used standard for connecting everyday devices such as appliances, thermostats, air conditioners, electric meters, and lighting systems to each other and to the Internet. Echelon’s hardware and software products enable manufacturers and integrators to create smart devices and systems that lower cost, increase convenience, improve service, and enhance productivity, quality, and safety. Thousands of companies have developed and installed LONWORKS products and more than 30 million LONWORKS enabled processors have been shipped for use in homes, buildings, factories, trains, and other systems worldwide.

Further information regarding Echelon can be found at http://www.echelon.com.

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Echelon, LONWORKS, LNS, LonWorld, LONMARK, and the Echelon logo are trademarks of Echelon Corporation registered in the United States and other countries. Other marks belong to their respective holders.

This press release may contain statements relating to future plans, events or performance. Such statements may involve risks and uncertainties, including risks associated with uncertainties pertaining to the timing and level of customer orders, demand for products and services, risks that the R&D activities or subsequent product deployment activities with Enel are not successful, do not meet their target dates, or are terminated, or that the contemplated transactions are challenged by third parties, risks that our development projects with other parties are not successful, risks relating to the development and growth of markets for Echelon’s products and services and the ability of those products and services to meet customer and consumer expectations, and other risks identified in Echelon’s SEC filings. Actual results, events and performance may differ materially. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Echelon undertakes no obligation to release publicly the result of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

The financial statements that follow should be read in conjunction with the notes set forth in Echelon’s Form 10-Q when filed with the Securities and Exchange Commission.

Echelon Corporation Reports 3rd Quarter 2003 Results 5 of 8

ECHELON CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

	September 30, 2003		December 31, 2002
ASSETS
Current Assets:
Cash, cash equivalents and short-term investments	$	147,256	$	134,489
Accounts receivable, net		18,848		22,930
Inventories		5,372		7,991
Other current assets		2,926		3,217
Total current assets		174,402		168,627
Property and equipment, net		18,491		16,677
Other long-term assets		21,510		22,188
	$	214,403	$	207,492
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	7,458	$	5,993
Accrued liabilities		5,229		3,773
Current portion of deferred revenues		1,151		2,541
Total current liabilities		13,838		12,307
Deferred rent		397		167
Total stockholders’ equity		200,168		195,018
	$	214,403	$	207,492

Echelon Corporation Reports 3rd Quarter 2003 Results 6 of 8

ECHELON CORPORATION

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2003		2002		2003		2002
Revenues:
Product	$	30,447	$	33,073	$	93,819	$	91,159
Service		285		277		807		1,094
Total revenues		30,732		33,350		94,626		92,253
Cost of revenues:
Cost of product		10,179		15,630		39,621		42,576
Cost of service		597		699		1,939		2,150
Total cost of revenues		10,776		16,329		41,560		44,726
Gross profit		19,956		17,021		53,066		47,527
Operating expenses:
Product development		6,753		5,405		28,034		16,401
Sales and marketing		4,662		4,354		13,965		12,933
General and administrative		3,093		2,394		9,154		6,872
Total operating expenses		14,508		12,153		51,153		36,206
Income from operations		5,448		4,868		1,913		11,321
Interest and other income, net		537		922		1,820		2,933
Income before provision for income taxes		5,985		5,790		3,733		14,254
Income tax expense		1,496		463		1,316		1,140
Net income	$	4,489	$	5,327	$	2,417	$	13,114
Net income per share:
Basic	$	0.11	$	0.13	$	0.06	$	0.33
Diluted	$	0.11	$	0.13	$	0.06	$	0.32
Shares used in computing net income per share:
Basic		40,186		39,658		39,980		39,388
Diluted		41,305		40,619		40,767		40,769

Echelon Corporation Reports 3rd Quarter 2003 Results 7 of 8

ECHELON CORPORATION

NON-GAAP CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

Excluding adjustments itemized below

(In thousands, except per share amounts)

(Unaudited)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2003		2002		2003		2002
Revenues	$	30,732	$	33,350	$	94,626	$	92,253
Cost of revenues		10,776		16,329		41,560		44,726
Gross profit		19,956		17,021		53,066		47,527
Operating Expenses:
Product development		6,414		5,314		17,450		15,748
Sales and marketing		4,662		4,354		13,965		12,933
General and administrative		3,093		2,394		8,824		6,872
Total operating expenses		14,169		12,062		40,239		35,553
Non-GAAP income from operations		5,787		4,959		12,827		11,974
Interest and other income, net		537		922		1,820		2,933
Non-GAAP income before taxes		6,324		5,881		14,647		14,907
Income tax expense		506		470		1,172		1,192
Non-GAAP net income	$	5,818	$	5,411	$	13,475	$	13,715
Non-GAAP net income per share:
Diluted	$	0.14	$	0.13	$	0.33	$	0.34
Shares used in computing net income per share:
Diluted		41,305		40,619		40,767		40,769

An itemized reconciliation between net earnings on a GAAP basis and non-GAAP basis is as follows:

GAAP net income	$	4,489	$	5,327		$	2,417	$	13,114
In-process research and development		—		—			9,808		400
Amortization of purchased intangible assets		339		91			776		253
Third party acquisition related costs		—		—			330		—
Total non-GAAP adjustments to earnings from operations		339		91			10,914		653
Income tax effect of reconciling items		990		(7	)		144		(52	)
Non-GAAP net income	$	5,818	$	5,411		$	13,475	$	13,715

Echelon Corporation Reports 3rd Quarter 2003 Results 8 of 8

ECHELON CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Nine Months Ended September 30,
	2003			2002
Cash flows provided by (used in) operating activities:
Net income	$	2,417		$	13,114
Adjustments to reconcile net income to net cash provided by (used for) operating activities:
Depreciation and amortization		3,921			2,893
In-process research and development		9,808			400
Provision for doubtful accounts		6			66
Deferred compensation expense		—			31
Change in operating assets and liabilities:
Accounts receivable		4,076			(3,028	)
Inventories		2,619			308
Other current assets		291			3,702
Accounts payable		1,465			(409	)
Accrued liabilities		1,456			913
Deferred revenues		(1,390	)		207
Deferred rent		230			93
Net cash provided by operating activities		24,899			18,290
Cash flows used in investing activities:
Purchase of available-for-sale short-term investments		(122,994	)		(57,850	)
Proceeds from maturities and sales of available-for-sale short-term investments		109,800			49,536
Unrealized gains (losses) on securities		(328	)		(104	)
Purchase of assets of Metering Technology Corporation		(11,000	)		—
Purchase of BeAtHome.com, Inc.		—			(5,811	)
Purchase of restricted investments		(306	)		(10,696	)
Change in other long-term assets		1,053			380
Capital expenditures		(4,612	)		(2,477	)
Net cash used in investing activities		(28,387	)		(27,022	)
Cash flows provided by financing activities:
Proceeds from issuance of common stock.		2,635			2,782
Net cash provided by financing activities		2,635			2,782
Effect of exchange rates on cash:		426			405
Net decrease in cash and cash equivalents		(427	)		(5,545	)
Cash and cash equivalents:
Beginning of period		34,941			23,232
End of period	$	34,514		$	17,687