Stratex Networks (STXN) 8-K Third Quarter Fiscal 2005 Financial Results

Exhibit 99.1

Contact:

Mary McGowan

Summit IR Group Inc.

(408) 404-5401

mary@summitirgroup.com

STRATEX NETWORKS ANNOUNCES

THIRD QUARTER FISCAL 2005 FINANCIAL RESULTS

SAN JOSE, Calif., Jan. 27, 2005 –Stratex Networks, Inc. (Nasdaq: STXN), a leading provider of wireless transmission solutions, today reported financial results for the third quarter of fiscal year 2005, ended December 31, 2004.

Net sales in the third quarter of fiscal 2005 were $49.5 million, up 23 percent compared with $40.3 million in the year ago period. In accordance with generally accepted accounting principles (GAAP), the net loss in the third quarter of fiscal 2005 was $17.9 million, or a loss per share of $0.19, based on 94.7 million shares outstanding. This compares to a GAAP net loss of $9.9 million, or $0.12 per share in the third quarter of fiscal 2004 based on 83.8 million shares outstanding. On a non-GAAP basis, the net loss in the third quarter of fiscal 2005 was $7.9 million or $0.08 per share. The non-GAAP net loss excludes charges totaling $10.0 million associated with severance, the write-off of certain inventory and fixed assets, accruals related to vacated facilities and related charges as a result of the restructuring announced in December.

Stratex Networks recorded $54.4 million in new orders during the third fiscal quarter, including more than $22 million of orders for the new Eclipse^™ product line, representing an 83 percent sequential increase in Eclipse orders. The backlog for all product lines totaled $58.9 million as of December 31, 2004.

“We are pleased with the continued rollout of Eclipse, our innovative wireless platform, and especially with the strong orders for Eclipse, which we expect will help drive the sales ramp for next quarter and beyond. We are also pleased with the continuation of gross margin improvements resulting from Eclipse,” said Chuck Kissner, Chairman and CEO of Stratex Networks, Inc. “We remain on schedule to introduce our new, lower-cost version of Eclipse in our fiscal fourth quarter ending in March. This new product offering will expand our sales opportunities by enabling additional penetration of Eclipse into the lower speed portion of the wireless transmission market.”

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“In December, as announced, we implemented a significant streamlining of our infrastructure, and expect to realize annualized savings of between $7 million and $8 million by mid-2005. We believe this reduced cost structure, combined with the continued successful ramp of Eclipse, will help us reach our financial goals.”

Conference Call

Stratex Networks management will hold a conference call to discuss the company’s financial results today, at 5:00 p.m. Eastern Time. Those wishing to join should dial 303-262-2130 (password: Stratex) at approximately 4:50 p.m. A replay of the call will be available starting one hour after the completion of the call until January 30, 2005. To access the replay, dial 303-590-3000 (pass code: 11021239 #). A live and an archived webcast of the conference call will also be available via the company’s Web site atwww.stratexnet.com

About Stratex Networks

With headquarters in San Jose, California, Stratex Networks, Inc. is one of the world’s leading providers of high-speed wireless transmission solutions. Since it was founded in 1984, Stratex Networks has achieved international recognition for quality, innovation, and technical superiority in delivering data, voice, and video communication systems, including comprehensive service and support. Stratex Networks, with its broad product offering and worldwide sales and support organization, is strategically positioned to serve its customers’ needs in wireless high-capacity transmission technology. Additional information is available atwww.stratexnet.com.

Use of Non-GAAP Financial Information

To supplement the company’s consolidated financial statements presented in accordance with GAAP, Stratex Networks, Inc. uses non-GAAP measures of certain components of financial performance, including operating income (loss), net income (loss) and per share data, which are adjusted from results based on GAAP to exclude certain expenses, gains and losses. These non-GAAP measures are provided to enhance investors’ overall understanding of the company’s current financial performance and the company’s prospects for the future. Specifically, the company believes the non-GAAP results provide useful information to both management and investors by excluding certain expenses, gains and losses that may not be indicative of its core operating results. These measures should be considered in addition to results prepared in accordance with generally accepted accounting principles, but should not be considered a substitute for, or superior to, GAAP results. These non-GAAP measures included in this press release have been reconciled to the nearest GAAP measure.

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STRATEX NETWORKS, INC. REPORTS THIRD QUARTER

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Safe Harbor Statement

This press release contains statements that qualify as “forward-looking statements” under the Private Securities Litigation Reform Act of 1995, including statements relating to the Company’s expectations regarding the continued rollout, orders and future sales and revenues resulting from, Eclipse; revenues and gross margins including gross margin improvements resulting from Eclipse; expected timing of the introduction of the Company’s new, lower-cost version of Eclipse; the expectation that the new, lower-cost version of Eclipse will expand the Company’s sales opportunities; the expectation that as a result of efforts to streamline the Company’s infrastructure, the Company will realize annualized savings of between $7 million and $8 million by mid-2005; and the Company’s future financial performance. These forward-looking statements are based on current expectations and the Company assumes no obligation to update this information. The Company’s actual results could differ materially from those anticipated in these forward-looking statements as a result of significant risks and uncertainties including unexpected delays in the schedule for shipments of Eclipse, negative trends in the general economic condition of the worldwide economy, order cancellations, postponements in product deliveries resulting in delayed revenue recognition, increased competition, downward pressures on the price of the Company’s products and services and the introduction of competing products and technologies. In addition, orders and backlog are not necessarily indicative of revenue in any future period. For a further discussion of these and other factors that impact the Company’s business in general, see the information provided under the heading “Factors That May Affect Future Financial Results” in the Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2004, on file with the Securities and Exchange Commission.

– Financial Tables Follow –

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STRATEX NETWORKS, INC. REPORTS THIRD QUARTER

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CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

(unaudited)

	December 31, 2004		March 31, 2004
Assets
Cash and short-term investments	$	52,344	$	49,963
Accounts receivable, net		40,945		34,295
Inventories		36,340		33,101
Other current assets		11,157		10,932
Total current assets		140,786		128,291
Property & equipment, net		29,744		31,175
Other assets		1,042		3,778
Total assets	$	171,572	$	163,244
Liabilities and Stockholders’ Equity
Accounts payable	$	31,030	$	40,033
Short-term debt		6,250		—
Other current liabilities		27,020		21,718
Total current liabilities		64,300		61,751
Long-term debt		15,104		—
Other long-term liabilities		19,692		20,311
Total liabilities		99,096		82,062
Stockholders’ equity		72,476		81,182
Total liabilities and stockholders’ equity	$	171,572	$	163,244

—continued—

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STRATEX NETWORKS, INC. REPORTS THIRD QUARTER

FISCAL YEAR 2005 FINANCIAL RESULTS

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

(unaudited)

	Three Months Ended December 31,						Nine Months Ended December 31,
	2004			2003			2004			2003
Net sales	$	49,519		$	40,250		$	139,175		$	113,099
Cost of sales		39,434			34,151			113,736			92,591
Inventory valuation charges		2,581			—			2,581			—
Gross profit		7,504			6,099			22,858			20,508
Operating expenses:
Research and development		4,363			4,396			12,915			12,264
Selling, general and administrative		12,219			10,873			32,105			31,318
Amortization of intangible assets		791			407			1,581			407
Restructuring and other charges (credit)		7,423			—			7,147			(3,550	)
Total operating expenses		24,796			15,676			53,748			40,439
Operating loss		(17,292	)		(9,577	)		(30,890	)		(19,931	)
Other income (expense)		(523	)		(196	)		(1,333	)		(7	)
Loss before income taxes		(17,815	)		(9,773	)		(32,223	)		(19,938	)
Provision for income taxes		119			128			473			340
Net loss	$	(17,934	)	$	(9,901	)	$	(32,696	)	$	(20,278	)
Basic and diluted net loss per share	$	(0.19	)	$	(0.12	)	$	(0.37	)	$	(0.24	)
Basic and diluted weighted average shares outstanding		94,706			83,801			87,933			83,151

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STRATEX NETWORKS, INC. REPORTS THIRD QUARTER

FISCAL YEAR 2005 FINANCIAL RESULTS

UNAUDITED NON-GAAP CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share amounts)

	Three Months Ended December 31, 2004								Three Months Ended December 31, 2003
	GAAP (As Reported)			Adjust- ments		Non-GAAP			GAAP (As Reported)			Adjust- ments	Non-GAAP
Net sales	$	49,519				$	49,519		$	40,250			$	40,250
Cost of sales		39,434					39,434			34,151				34,151
Inventory Valuation Charges		2,581		(2,581	)		—			—				—
Gross profit		7,504		2,581			10,085			6,099				6,099
Operating expenses:
Research and development		4,363					4,363			4,396				4,396
Selling, general and administrative		12,219					12,219			10,873				10,873
Amortization of Intangible assets		791					791			407				407
Restructuring charges		7,423		(7,423	)		—			—				—
Total operating expenses		24,796		(7,423	)	��	17,373			15,676				15,676
Operating loss		(17,292	)	10,004			(7,288	)		(9,577	)			(9,577	)
Other income (expense)		(523	)				(523	)		(196	)			(196	)
Loss before income taxes		(17,815	)	10,004			(7,811	)		(9,773	)			(9,773	)
Provision for income taxes		119					119			128				128
Net loss	$	(17,934	)	10,004		$	(7,930	)	$	(9,901	)		$	(9,901	)
Basic and diluted loss per share	$	(0.19	)			$	(0.08	)	$	(0.12	)		$	(0.12	)
Basic and diluted weighted average shares outstanding		94,706					94,706			83,801				83,801

The above non-GAAP amounts have been adjusted to eliminate restructuring charges for severance, write-off of certain inventory and fixed assets, accruals related to vacated facilities and related charges.

To supplement the company’s consolidated financial statements presented in accordance with GAAP, Stratex Networks, Inc. uses non-GAAP measures of certain components of financial performance, including operating income (loss), net income (loss) and per share data, which are adjusted from results based on GAAP to exclude certain expenses, gains and losses. These non-GAAP measures are provided to enhance investors’ overall understanding of the company’s current financial performance and the company’s prospects for the future. Specifically, the company believes the non-GAAP results provide useful information to both management and investors by excluding certain expenses, gains and losses that may not be indicative of its core operating results. These measures should be considered in addition to results prepared in accordance with generally accepted accounting principles, but should not be considered a substitute for, or superior to, GAAP results. These non-GAAP measures included in this press release have been reconciled to the nearest GAAP measure.

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STRATEX NETWORKS, INC. REPORTS THIRD QUARTER

FISCAL YEAR 2005 FINANCIAL RESULTS

UNAUDITED NON-GAAP CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share amounts)

	Nine Months Ended December 31, 2004								Nine Months Ended December 31, 2003
	GAAP (As Reported)			Adjust- ments		Non- GAAP			GAAP (As Reported)			Adjust- ments		Non- GAAP
Net sales	$	139,175				$	139,175		$	113,099				$	113,099
Cost of sales		113,736					113,736			92,591					92,591
Inventory valuation charges		2,581		(2,581	)		—			—					—
Gross profit		22,858		2,581			25,439			20,508					20,508
Operating expenses:
Research and development		12,915					12,915			12,264					12,264
Selling, general and administrative		32,105					32,105			31,318					31,318
Amortization of Intangible assets		1,581					1,581			407					407
Restructuring charges		7,147		(7,147	)		—			(3,550	)	3,550			—
Total operating expenses		53,748		(7,147	)		46,601			40,439		3,550			43,989
Operating loss		(30,890	)	9,728			(21,162	)		(19,931	)	(3,550	)		(23,481	)
Other income (expense)		(1,333	)				(1,333	)		(7	)				(7	)
Loss before income taxes		(32,223	)	9,728			(22,495	)		(19,938	)	(3,550	)		(23,488	)
Provision for income taxes		473					473			340					340
Net loss	$	(32,696	)	9,728		$	(22,968	)	$	(20,278	)			$	(23,828	)
Basic and diluted loss per share	$	(0.37	)			$	(0.26	)	$	(0.24	)			$	(0.29	)
Basic and diluted weighted average shares outstanding		87,933					87,933			83,151					83,151

The above non-GAAP amounts for the nine months ended December 31, 2004 have been adjusted to eliminate restructuring charges for severance, write-off of certain inventory and fixed assets, accruals related to vacated facilities and related charges. The above non-GAAP amounts for the nine months ended December 31, 2003 have been adjusted to reflect reserves related to an accrual for legal claims.

To supplement the company’s consolidated financial statements presented in accordance with GAAP, Stratex Networks, Inc. uses non-GAAP measures of certain components of financial performance, including operating income (loss), net income (loss) and per share data, which are adjusted from results based on GAAP to exclude certain expenses, gains and losses. These non-GAAP measures are provided to enhance investors’ overall understanding of the company’s current financial performance and the company’s prospects for the future. Specifically, the company believes the non-GAAP results provide useful information to both management and investors by excluding certain expenses, gains and losses that may not be indicative of its core operating results. These measures should be considered in addition to results prepared in accordance with generally accepted accounting principles, but should not be considered a substitute for, or superior to, GAAP results. These non-GAAP measures included in this press release have been reconciled to the nearest GAAP measure.

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