Aspect Communications (ASPT) 8-K Aspect Communications Reports Third Quarter 2004 Financial Results

Exhibit 99.1

ASPECT COMMUNICATIONS REPORTS THIRD QUARTER 2004
FINANCIAL RESULTS

SAN JOSE, Calif., October 19, 2004— Aspect Communications Corporation (Nasdaq: ASPT), a leading provider of enterprise customer contact solutions, today reported financial results for the third quarter ended September 30, 2004.

THIRD QUARTER FINANCIAL RESULTS:

Revenues for the third quarter of 2004 totaled $91.2 million compared to $92.6 million for the third quarter last year and $91.0 million for the second quarter of 2004. Product revenue in the third quarter of 2004 was $30.8 million compared to $30.3 million for the third quarter last year and $29.8 million for the second quarter of 2004. Services revenue totaled $60.4 million in the third quarter compared to $62.3 million for the third quarter last year and $61.1 million for the second quarter of 2004.

Net income attributable to common shareholders for the third quarter was $11.3 million or a profit of $0.14 per share on a basic and fully diluted basis. This compares with a net income attributable to common shareholders of $8.2 million or a profit of $0.11 per share for the third quarter of 2003 and a net income attributable to common shareholders of $12.2 million or a profit of $0.15 per share for the second quarter of 2004.

“We are encouraged by our continued development of customer loyalty and financial strength,” said Gary Barnett, Aspect President and CEO. “We are also excited about the September availability of Aspect Uniphi Suite, our next-generation contact center platform that truly converges and leverages the best of ourbest-in-class products, extending what Aspect has been delivering for nearly 20 years. Our customers will experience this new offering at our annual customer conference, eBiz 2004, in New Orleans next week.”

For the third quarter of 2004, gross margins were 59%. This compares to 57% for the third quarter of 2003 and 60% for the second quarter of 2004. Operating expenses were $39.0 million for the third quarter of 2004 compared to $39.1 million for the same period last year and $38.4 million in the second quarter of 2004.

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Aspect Communications Announces Financial Results for the Quarter ended September 30, 2004, page 2

Cash, cash equivalents, and short-term investments totaled $183.3 million as of September 30, 2004. This compares to $212.4 million as of June 30, 2004. During the third quarter the company repaid the remaining $40 million in debt outstanding under its $100 million credit facility. The company generated $12.9 million in cash from operations during the third quarter. Accounts receivable at quarter-end totaled $41.2 million and days sales outstanding were 32 days compared to 30 days at June 30, 2004.

THIRD QUARTER OPERATIONAL HIGHLIGHTS:

During the third quarter Aspect sold to customers across a variety of industry segments. Some of these customers included: APAC Customer Services, Alltel, Aviva Canada, BSC Group, CCC Competence Call Center, DaimlerChrysler, UK Inland Revenue, Royal Bank of Scotland, StarTek and Vivento.

BUSINESS OUTLOOK:

The following statements are forward-looking, and actual results may differ materially:

• The company is planning for fourth quarter total revenue to be in a range of $91 million to $93 million.

• Earnings per share for the fourth quarter are expected to be in a range of $0.13 to $0.15.

The company will host a conference call and web-cast today at 2:00 pm Pacific Time to discuss third quarter 2004 results. A replay of the conference call will be available from October 19, 2004 at 5:00 pm Pacific Time through October 26, 2004 at 8:59 pm Pacific Time by calling 800-388-9064 or 402-220-1116. The web-cast and replay of the conference call may be accessed from the company’s home page atwww.aspect.com.

About Aspect Communications

Aspect Communications Corporation is a leading provider of contact center solutions and services that enable businesses to manage and optimize customer communications. Aspect’s global customer base includes more than two-thirds of theFortune50 and leading

Aspect Communications Announces Financial Results for the Quarter ended September 30, 2004, page 3

corporations in a range of industries, including transportation, financial services, insurance, telecommunications, retail and outsourcing, as well as large government agencies. The company’s leadership is based on 19 years of expertise. Aspect is headquartered in San Jose, Calif., with offices in countries around the world.

Notes on financial presentation:Actual financial results are prepared in accordance with U.S. generally accepted accounting principles.

Certain statements contained in this press release, including but not limited to, statements relating to expected fourth quarter total revenue and earnings per share are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities and Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995, and are made under its safe-harbor provisions. Such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. Specific factors that may cause actual revenue and earnings per share results to differ include: the significant percentage of Aspect’s quarterly sales consummated in the last few days of the quarter and the potential for delays in closing of sales or product deliveries make financial predictions especially difficult and raise a substantial risk of variance in actual results; changes in the overall mix and volume of product line revenues can have a significant impact on gross margin and profitability; the loss of support customers or if one or more support contracts is delayed, reduced or cancelled; fluctuations in our North American and International business levels and/or economic conditions, the hiring and retention of key employees, insufficient, excess or obsolete inventory and variations in valuation, and foreign exchange rate fluctuations can all cause revenues and income to fall significantly short of anticipated levels. The economic, political and other uncertainties caused in the United States and throughout other regions of the world add to these challenges. Additional risks that could cause actual results to differ materially from those projected are discussed in Aspect’s Form 10-K/A for the year ended December 31, 2003 and Form 10-Q for the quarters ended March 31, 2004 and June 30, 2004, as filed with the Securities and Exchange Commission. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management’s analysis only as of the date hereof. Aspect undertakes no obligation to publicly release the results of any revision 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.

Aspect, the Aspect logo and the phrases and marks relating to other Aspect products and services discussed in this press release constitute one or both of the following: (1) registered trademarks and/or service marks of Aspect Communications Corporation in the United States and/or other countries or (2) intellectual property subject to protection under common law principles. All other names and marks mentioned in this document are properties of their respective owners.

Aspect Communications Announces Financial Results for the Quarter ended September 30, 2004, page 4

Carrie Kovac
Director, Investor Relations
Aspect Communications
(408) 325-2437
carrie.kovac@aspect.com

ASPECT COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts - unaudited)

	Three months ended						Three months ended						Nine months ended
	September 30,						June 30,						September 30,
	2004			2003			2004			2003			2004			2003
Net revenues:
Software license	$	17,753		$	18,710		$	18,961		$	16,329		$	53,319		$	49,992
Hardware		13,040			11,582			10,885			11,159			35,455			31,905
Software license updates and product support		52,178			54,558			52,566			53,656			159,001			160,518
Professional services and education		8,243			7,779			8,573			8,281			25,911			24,047
Services		60,421			62,337			61,139			61,937			184,912			184,565
Total net revenues		91,214			92,629			90,985			89,425			273,686			266,462
Cost of revenues:
Cost of software license revenues		2,188			1,663			2,299			2,416			6,043			6,472
Cost of hardware revenues		8,849			9,314			8,252			10,074			25,431			28,365
Cost of services revenues		25,316			25,328			25,273			25,218			75,828			77,570
Amortization of intangible assets and stock-based compensation		724			1,238			725			1,211			2,174			3,692
Impairment of intangible assets		—			2,000			—			—			—			2,000
Total cost of revenues		37,077			39,543			36,549			38,919			109,476			118,099
Gross margin		54,137			53,086			54,436			50,506			164,210			148,363
Operating expenses:
Research and development		11,314			12,189			11,169			12,414			33,826			37,491
Sales and marketing		19,863			19,598			19,517			20,269			58,978			60,222
General and administrative		7,744			7,091			7,221			5,524			21,907			16,930
Restructuring charges		—			—			—			2,997			—			2,997
Amortization of intangible assets and stock-based compensation		95			205			523			211			634			562
Total operating expenses		39,016			39,083			38,430			41,415			115,345			118,202
Income from operations		15,121			14,003			16,006			9,091			48,865			30,161
Interest and other income (expense), net		184			(1,182	)		377			(1,373	)		508			(4,322	)
Net income before income taxes		15,305			12,821			16,383			7,718			49,373			25,839
Provision for income taxes		1,821			2,575			1,955			1,250			5,887			5,072
Net income before cumulative effect of change in accounting principle		13,484			10,246			14,428			6,468			43,486			20,767
Cumulative effect of change in accounting principle		—			—			—			—			—			(777	)
Net income		13,484			10,246			14,428			6,468			43,486			19,990
Less preferred stock dividend, accretion, and amortization		(2,223	)		(2,053	)		(2,180	)		(2,013	)		(6,539	)		(5,605	)
Net income attributable to common shareholders	$	11,261		$	8,193		$	12,248		$	4,455		$	36,947		$	14,385
Earnings per share before cumulative effect of change in accounting principle	$	0.14		$	0.11		$	0.15		$	0.06		$	0.46		$	0.20
Cumulative effect of change in accounting principle		—			—			—			—			—			(0.01	)
Basic earnings per share(1)	$	0.14		$	0.11		$	0.15		$	0.06		$	0.46		$	0.19
Basic weighted average shares outstanding		59,373			54,612			58,756			53,576			58,623			53,834
Diluted earnings per share	$	0.14		$	0.11		$	0.15		$	0.06		$	0.46		$	0.19
Diluted weighted average shares outstanding		85,117			81,967			85,792			54,914			85,697			56,347

(1) Pursuant to GAAP, the Company is required to present earnings per share “as if” all earnings were distributed to Common and Preferred Shareholders. Under this “two class” method, earnings are allocated to Common and Preferred Shareholders in proportion to their respective ownership interests. This calculation for the three months ended September 30, 2004 would allocate approximately 73% of the current earnings to Common Shareholders and yield $0.14 earnings per share per Common Shareholder, as shown above. The calculation for the nine months ended September 30, 2004 would allocate approximately 73% of the current earnings to Common Shareholders and yield $0.46 earnings per share per Common Shareholder, as shown above. However, the Company has not in the past, and does not currently intend to, declare a distribution of earnings. Absent this “as if” apportionment, diluted earnings per Common share would be $0.16 for the three months ended September 30, 2004 and $0.51 for the nine months ended September 30, 2004.

ASPECT COMMUNICATIONS CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands - unaudited)

	September 30,		June 30,		December 31,		September 30,
	2004		2004		2003		2003
Assets
Current assets:
Cash, cash equivalents and short-term investments	$	183,277	$	212,409	$	163,992	$	126,730
Accounts receivable, net		41,168		37,252		39,561		45,569
Inventories		3,981		5,931		6,176		7,964
Other current assets		15,008		17,982		19,145		14,761
Total current assets		243,434		273,574		228,874		195,024
Property and equipment, net		65,306		65,364		68,599		71,953
Intangible assets, net		5,739		6,463		7,930		8,687
Other assets		4,935		5,401		5,182		7,962
Total assets	$	319,414	$	350,802	$	310,585	$	283,626
Liabilities, redeemable convertible preferred stock and shareholders’ equity
Current liabilities:
Short-term borrowings	$	181	$	123	$	1,732	$	7,038
Accounts payable		7,309		6,273		4,936		6,753
Accrued compensation and related benefits		20,788		19,503		17,773		16,338
Other accrued liabilities		59,187		56,032		64,790		61,744
Deferred revenues		49,132		61,448		50,200		50,449
Convertible subordinated debentures		—		—		—		956
Total current liabilities		136,597		143,379		139,431		143,278
Long term borrowings		180		40,037		39,436		35,902
Other long-term liabilities		5,200		7,538		11,021		12,263
Total liabilities		141,977		190,954		189,888		191,443
Redeemable convertible preferred stock		40,222		37,998		33,681		32,726
Shareholders’ equity		137,215		121,850		87,016		59,457
Total liabilities, redeemable convertible preferred stock and shareholders’ equity	$	319,414	$	350,802	$	310,585	$	283,626

ASPECT COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands - unaudited)

	Three months ended						Nine months ended
	September 30,						September 30,
	2004			2003			2004			2003
Cash flows from operating activities:
Net income	$	13,484		$	10,246		$	43,486		$	19,990
Reconciliation of net income to cash provided by operating activities:
Depreciation		5,682			5,816			17,528			18,549
Amortization of intangible assets		724			1,267			2,191			3,810
Non-cash compensation and services expenses		95			173			618			446
Loss on disposal of property		11			273			30			297
Loss on extinguishment of debt		—			—			—			17
Loss on short-term investments, net		487			—			1,285			—
Cumulative effect of change in accounting principle		—			—			—			777
Impairment of intangible assets		—			2,000			—			2,000
Non-cash interest expense on debentures		—			802			—			4,409
Deferred taxes		—			(141	)		—			—
Changes in operating assets and liabilities:
Accounts receivable		(3,849	)		(155	)		(1,762	)		7,645
Inventories		1,982			1,118			2,156			(882	)
Other current assets and other assets		3,412			1,128			5,568			(1,869	)
Accounts payable		1,036			(582	)		2,358			1,066
Accrued compensation and related benefits		1,282			602			3,007			138
Other accrued liabilities		836			3,179			(11,634	)		(7,429	)
Deferred revenues		(12,325	)		(1,167	)		(1,292	)		19,581
Net cash provided by operating activities		12,857			24,559			63,539			68,545
Cash flows from investing activities:
Short-term investments purchases		(51,470	)		(30,871	)		(161,971	)		(134,215	)
Short-term investments sales and maturities		66,206			32,797			131,624			145,484
Property and equipment purchases		(5,319	)		(1,185	)		(13,937	)		(3,145	)
Net cash provided by (used in) investing activities		9,417			741			(44,284	)		8,124
Cash flows from financing activities:
Proceeds from issuance of common stock, net		2,964			5,273			12,726			6,393
Proceeds from issuance of preferred stock, net		—			—			—			43,564
Payments on capital lease obligations		(89	)		(31	)		(157	)		(342	)
Proceeds from borrowings		—			—			40,000			—
Payments on borrowings		(40,000	)		(1,734	)		(80,979	)		(5,147	)
Payments on financing costs		—			—			(1,096	)		—
Payments on repurchase of convertible subordinated debentures		—			(122,827	)		—			(128,439	)
Net cash used in financing activities		(37,125	)		(119,319	)		(29,506	)		(83,971	)
Effect of exchange rate changes on cash and cash equivalents		393			(427	)		953			(281	)
Net decrease in cash and cash equivalents		(14,458	)		(94,446	)		(9,298	)		(7,583	)
Cash and cash equivalents:
Beginning of period		80,813			152,914			75,653			66,051
End of period		66,355			58,468			66,355			58,468
Short-term investments at the end of period		116,922			68,262			116,922			68,262
Cash, cash equivalents and short-term investments	$	183,277		$	126,730		$	183,277		$	126,730
Supplemental disclosure of cash flow information:
Cash paid for interest	$	441		$	675		$	1,457		$	2,195
Cash paid for income taxes	$	1,010		$	40		$	4,892		$	396
Supplemental schedule of noncash investing and financing activities
Accrued preferred stock dividend and amortization of redemption premium	$	1,856		$	1,704		$	5,453		$	4,647
Amortization of beneficial conversion feature	$	367		$	349		$	1,086		$	958
Beneficial conversion feature	$	—		$	—		$	—		$	17,583
Issuance (cancellation) of restricted stock	$	—		$	—		$	408		$	(56	)