EXHIBIT 99
[CROSSROADS(TM) LOGO]
For more information on Crossroads Systems, please contact:
Andrea C. Wenholz
Crossroads Systems, Inc.
512.928.6897
info@crossroads.com
CROSSROADS SYSTEMS REPORTS SECOND QUARTER RESULTS
COMPANY REPORTS POSITIVE OPERATING CASH FLOW AND HIGHER GROSS MARGIN
AUSTIN, Texas - May 21, 2003 - Crossroads Systems, Inc. (Nasdaq: CRDS), a
leading global provider of storage networking solutions, today reported results
for its fiscal second quarter ended April 30, 2003 (Q2'03). Achieving one of the
company's key goals this year, Crossroads reported positive operating cash flow
of approximately $100,000. Operating cash flow excludes $740,000 the company
used to buy back 616,500 shares of its own stock.
Total revenue for Q2'03 was $8.6 million compared with $9.7 million for the
fiscal first quarter of 2003 (Q1'03) and $9.1 million for the fiscal second
quarter of 2002 (Q2'02). Gross margin percentage improved to 40 percent in Q2'03
from 34 percent in Q1'03 and 34 percent in Q2'02. Net loss for Q2'03 was $1.8
million, or $0.08 per share, compared with a net loss for Q1'03 of $2.6 million,
or $0.10 per share, and a net loss for Q2'02 of $5.5 million, or $0.20 per
share.
"During the quarter, we completed the transition to the royalty-based model for
embedded products with our largest customer, Hewlett-Packard," said Brian R.
Smith, chairman and chief executive officer. "As we anticipated, this royalty
model has delivered higher gross margin on lower revenue. We are encouraged by
our positive operating cash flow, improved gross margin and our ability to
manage expenses."
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PAGE 2/CROSSROADS REPORTS FQ2'03 RESULTS
RECENT HIGHLIGHTS:
o Q2'03 OPERATIONAL PERFORMANCE
o Reported positive operating cash flow of
approximately $100,000 in Q2'03.
o Improved gross margin percentage to 40 percent from
34 percent in Q1'03.
o Reported higher gross margin of $3.4 million in Q2'03
compared with $3.2 million in Q1'03.
o Reduced operating expenses to $5.4 million in Q2'03
from $6.0 million in Q1'03.
o Reported day sales outstanding in accounts receivable
of 35 days in Q2'03 compared with 51 days in Q1'03.
o VICE PRESIDENT OF SALES AND BUSINESS DEVELOPMENT ANNOUNCED -
Crossroads recently named John Cummings its new vice president
of sales and business development. Mr. Cummings brings more
than 24 years of sales, operations, and business development
experience from companies including Sun Microsystems Inc.,
SunGard Business Integration and ProvisionSoft Inc., a leading
provider of application-driven automated storage and server
provisioning software.
o SERVERATTACH(TM) SA20 DEBUTS- During the quarter, Crossroads
announced the general availability of the Crossroads
ServerAttach(TM) SA20. The SA20 is designed to connect
mid-range SCSI servers to Fibre Channel storage architectures,
such as Storage Area Networks (SANs), and is well suited for
the small/medium business market. It complements the
enterprise-class ServerAttach SA40 to give customers a wider
range of options for ServerAttach solutions.
o XIOTECH BECOMES RESELLER - During the quarter, XIOtech
Corporation, a networked storage pioneer, became a worldwide
reseller for the Crossroads ServerAttach(TM) family of
products. XIOtech focuses on enterprise-level customers in the
healthcare and government markets, which have thousands of
installed servers that currently have limited Fibre Channel
options available.
o QUANTUM BECOMES PARTNER - Crossroads and Quantum Corp., a
leading provider of data protection systems, announced a new
channel program that bundles Crossroads 2Gb Fibre Channel
storage routers with Quantum ATL P-Series tape libraries to
authorized solution providers. The combination of technologies
increases SAN performance and is part of the Crossroads
strategy to expand its market share in storage routing.
o ISCSI DEMONSTRATED - At Storage Networking World, Crossroads
demonstrated its latest iSCSI technology by showing
interoperability between disk-based storage and Microsoft's
Windows(R) Server 2003, featuring Microsoft's current beta
iSCSI initiator drivers.
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PAGE 3/CROSSROADS REPORTS FQ2'03 RESULTS
CONFERENCE CALL: Crossroads will hold a conference call (773-756-4624, passcode:
Crossroads) and simultaneous Webcast (www.crossroads.com) at 3:30 p.m. (CDT)
today. An audio replay of the call will be available from May 22-31 by calling
402-998-0787 or by visiting the Crossroads website.
ABOUT CROSSROADS SYSTEMS, INC.
With headquarters in Austin, Texas, Crossroads Systems, Inc. (Nasdaq:CRDS) is a
leading global provider of data routing solutions for Storage Area Networks
(SANs). Crossroads solutions serve the growing storage connectivity and data
storage markets, and are designed to help companies store, manage and ensure the
integrity and availability of their data. Crossroads' products are in solutions
from companies such as Fujitsu-Siemens, Hewlett-Packard and StorageTek, and are
distributed through partners such as ACAL, ARROW, XIOtech and Tidal Wire.
Crossroads is a voting member of the Storage Networking Industry Association
(SNIA). For more information about Crossroads Systems, please visit
www.crossroads.com or call 800-643-7148.
FORWARD-LOOKING STATEMENTS
This release may include forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. The words "believe," "expect,"
"intend," "plan," "project," "will" and similar phrases as they relate to
Crossroads are intended to identify such forward-looking statements. These
statements reflect the current views and assumptions of Crossroads, and are
subject to various risks and uncertainties that could cause actual results to
differ materially from expectations. Among the important factors that could
cause actual results to differ materially from those in the forward-looking
statements are: the quarterly fluctuations of Crossroads' operating results and
Crossroads' inability to accurately predict revenue and budget for expenses for
future periods; the extent to which Crossroads will maintain positive operating
cash flow; the company's ability to maintain its operating margins; the
deteriorating economic environment, including, in particular, related expense
reductions by organizations affecting their IT spending and budget; the
dependence of Crossroads' business on the storage area network market which is
evolving and unpredictable; the possibility that the pending shareholder class
action lawsuits could result in an adverse outcome to the company; Crossroads'
ability to develop new and enhanced products that achieve market acceptance, in
particular with respect to the launch of the ServerAttach product; the effect of
competition; the effect of undetected software or hardware errors, which may
affect the company's results or reduce demand for Crossroads' products in the
long term; Crossroads' inability to protect its intellectual property rights,
including any adverse outcome in the company's pending patent litigation with
certain of its competitors; the continuation of Crossroads' successful
relationships with its limited number of OEM customers, including its ability to
replace revenue from ADIC; any adverse effect of the acquisition of Compaq by
Hewlett-Packard, resulting in a combination of two of the company's principal
OEMs, including the risks due to an increase in customer concentration, and any
change in product focus or strategy which adversely affects anticipated revenue
or margins or Crossroads' overall relationship with the newly combined
companies; Crossroads' ability to successfully transition the manufacturing of
its embedded router products to Hewlett-Packard; Crossroads' ability to retain
and recruit key personnel to manage its business successfully; any negative
effect which may result from the reduction in staff and changes to executive
management; Crossroads' ability to successfully achieve the benefits of any
subsequent acquisition or strategic relationship; and that Crossroads' stock
price could be volatile regardless of Crossroads' actual financial performance
and other factors detailed in Crossroads' filings with the Securities and
Exchange Commission. Crossroads expressly disclaims any obligation to release
publicly any updates or revisions to any forward-looking statements to reflect
any changes in expectations, or any change in events or circumstances on which
those statements are based, unless otherwise required by law.
--TABLES ATTACHED--
CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In Thousands)
<Table>
<Caption>
JANUARY 31, APRIL 30,
2003 2003
------------- -------------
ASSETS
Current assets:
Cash, cash equivalents and short-term investments ............... $ 32,200 $ 31,557
Accounts receivable, net ........................................ 5,363 3,408
Inventories, net ................................................ 2,605 3,060
Prepaids and other current assets ............................... 1,528 1,275
------------- -------------
Total current assets ...................................... 41,696 39,300
Notes receivable from related party, net ............................. 65 67
Property and equipment, net .......................................... 5,365 4,663
Other assets ......................................................... 362 344
------------- -------------
Total assets .............................................. $ 47,488 $ 44,374
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ................................................ $ 3,964 $ 3,975
Accrued expenses ................................................ 3,559 2,852
Accrued warranty costs .......................................... 787 821
Deferred revenue ................................................ 640 472
------------- -------------
Total current liabilities ................................. 8,950 8,120
Stockholders' equity ................................................. 38,538 36,254
------------- -------------
Total liabilities and stockholders' equity ................ $ 47,488 $ 44,374
============= =============
</Table>
CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In Thousands, Except Share and Per Share Data)
<Table>
<Caption>
THREE MONTHS ENDED SIX MONTHS ENDED
APRIL 30, APRIL 30,
---------------------------- ----------------------------
2002 2003 2002 2003
------------ ------------ ------------ ------------
Revenue:
Product revenue ............... $ 8,963 $ 8,142 $ 17,997 $ 17,703
Royalty and other revenue ..... 101 437 264 548
------------ ------------ ------------ ------------
Total revenue .......... 9,064 8,579 18,261 18,251
Cost of revenue (1) ................... 5,985 5,188 11,861 11,617
------------ ------------ ------------ ------------
Gross profit .......................... 3,079 3,391 6,400 6,634
------------ ------------ ------------ ------------
Operating expenses (1):
Sales and marketing ........... 1,673 990 3,983 2,015
Research and development ...... 4,573 2,999 9,757 6,138
General and administrative .... 2,473 1,503 4,942 3,147
Business restructuring expense -- (140) -- (140)
Amortization of intangibles ... 70 -- 140 173
------------ ------------ ------------ ------------
Total operating expenses 8,789 5,352 18,822 11,333
------------ ------------ ------------ ------------
Loss from operations .................. (5,710) (1,961) (12,422) (4,699)
Other income, net ...... 231 143 549 304
------------ ------------ ------------ ------------
Net loss .............................. $ (5,479) $ (1,818) $ (11,873) $ (4,395)
============ ============ ============ ============
Basic and diluted net loss per share .. $ (0.20) $ (0.08) $ (0.44) $ (0.18)
============ ============ ============ ============
Shares used in computing basic and
diluted net loss per share .... 27,269,731 24,147,186 27,272,360 # 24,625,775
============ ============ ============ ============
</Table>
- ----------
(1) The Company allocates stock-based compensation to specific line items
within the statement of operations based on the classification of the
employees who received the benefit. Stock-based compensation for the
periods indicated was allocated as follows:
<Table>
<Caption>
THREE MONTHS ENDED SIX MONTHS ENDED
APRIL 30, APRIL 30,
----------------------------- -----------------------------
2002 2003 2002 2003
------------- ------------- ------------- -------------
Cost of revenue .................................. $ 23 $ 8 $ 47 $ 20
Sales and marketing .............................. 102 33 291 110
Research and development ......................... 96 78 175 172
General and administrative ....................... 765 147 1,720 456
------------- ------------- ------------- -------------
Total stock-based compensation ........ $ 986 $ 266 $ 2,233 $ 758
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</Table>