Exhibit 99
Press Release of Crossroads Systems, Inc.
(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 THIRD QUARTER RESULTS
AUSTIN, Texas - Aug. 21, 2003 - Crossroads Systems, Inc. (Nasdaq:
CRDS), a leading provider of connectivity for storage networking
solutions, today reported results for its fiscal third quarter ended
July 31, 2003 (Q3'03). Crossroads reduced its net loss to $0.07 per
share from $0.08 per share in the fiscal second quarter of 2003 (Q2'03)
and $0.31 per share in the fiscal third quarter of 2002 (Q3'02).
Total revenue for Q3'03 was $5.6 million, compared with $8.6 million
for Q2'03 and $7.5 million for Q3'02. Gross margin percentage increased
to 53 percent in Q3'03 from 40 percent in Q2'03 and 32 percent in
Q3'02. Net loss for Q3'03 was $1.7 million, or $0.07 per share,
compared with $1.8 million, or $0.08 per share in Q2'03, and a net loss
of $8.2 million, or $0.31 per share in Q3'02.
"Our team has executed well during the transition to our new business
model that emphasizes royalty and IP license revenue in addition to our
core product offerings," said Brian R. Smith, Crossroads chairman and
chief executive officer. "Going forward, we have confidence in our
business model, our partners, our technology and our ability to expand
our business and improve the bottom line."
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PAGE 2/CROSSROADS REPORTS Q3'03 RESULTS
RECENT HIGHLIGHTS:
o Q3'03 Operational Performance
o Improved gross margin percentage to 53 percent from
40 percent in Q2'03 resulting primarily from the
royalty model and IP license revenue.
o Reduced operating expenses to $4.9 million from $5.4
million in Q2'03.
o Repurchased approximately 90,000 Crossroads shares at
an average price of $1.50 per share. Since the
company's share repurchase program began, Crossroads
has repurchased nearly 15 percent of the company.
o DELIVERING NEXT-GENERATION CONNECTIVITY FOR HP:
Crossroads began delivering next-generation Fibre
Channel connectivity options for HP StorageWorks
enterprise and mid-range tape libraries. These new
Crossroads embedded storage routers feature increased
performance throughput, added support for SCSI Ultra
160, and twice the port density for enterprise-class
solutions. Designed for HP StorageWorks ESL and MSL
tape library families, these solutions enable
improved scalability and utilization of the newest
tape drive technologies.
o QUANTUM SELECTS CROSSROADS: Quantum selected
Crossroads to provide 2-Gigabit Fibre Channel
connectivity for its ATL P-Series tape libraries. The
new embedded storage routers allow customers to
retain their tape drive investments while providing
greater flexibility when upgrading drives to new
technologies.
o XIOTECH LICENSES ACCESS CONTROLS: XIOtech became the
most recent addition to the portfolio of companies
that license Crossroads' patented technology.
XIOtech, a networked storage pioneer, is licensing
the technology to be incorporated in its Magnitude
storage solution to protect data in shared storage
from unauthorized access and overwrites by multiple
hosts.
o CROSSROADS ANNOUNCES ISCSI INTEROPERABILITY:
Crossroads is participating with Microsoft and the
University of New Hampshire InterOperability
Laboratory (UNH-IOL) in the development of
interoperable iSCSI solutions. The UNH-IOL is a
vendor neutral organization dedicated to testing
multi-vendor solutions. Crossroads' participation
enhances its reputation for both interoperability and
compliance with iSCSI specifications.
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PAGE 3/CROSSROADS REPORTS Q3'03 RESULTS
o SERVERATTACH(TM) SA40 EARNS IBM TOTALSTORAGE(TM) PROVEN
STATUS: With IBM TotalStorage Proven Status, the Crossroads
ServerAttach SA40 becomes part of IBM's extensive
interoperability efforts to develop and deliver products and
solutions that work together with third-party products. The
ServerAttach SA40 is a storage networking appliance that
enables IT and data center managers to connect mid-range SCSI
servers into Fibre Channel storage architectures used in most
Storage Area Networks today.
CONFERENCE CALL: Crossroads will hold a conference call (773-756-4623
(passcode: CROSSROADS) and simultaneous webcast (www.crossroads.com) at
3:30 (CDT) today. An audio replay of the call will be available from
Aug. 22 - 31 by calling 402-220-4708 or by visiting the Crossroads
website.
ABOUT CROSSROADS SYSTEMS, INC.
With headquarters in Austin, Texas, Crossroads Systems (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, HP and StorageTek, and are distributed through
partners such as ACAL, ARROW, Tech Data, TidalWire and XIOtech.
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; 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>
APRIL 30, JULY 31,
2003 2003
---------- ----------
ASSETS
Current assets:
Total cash, cash equivalents and short-term investments .... $ 31,557 $ 30,022
Accounts receivable, net ................................... 3,408 2,728
Inventories, net ........................................... 3,060 2,209
Prepaids and other current assets .......................... 1,275 919
---------- ----------
Total current assets ................................... 39,300 35,878
Notes receivable from related party, net ....................... 67 68
Property and equipment, net .................................... 4,663 3,886
Other assets ................................................... 344 345
---------- ----------
Total assets ........................................... $ 44,374 $ 40,177
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ........................................... $ 3,975 $ 1,591
Accrued expenses ........................................... 2,852 2,356
Accrued warranty costs ..................................... 821 802
Deferred revenue ........................................... 472 500
---------- ----------
Total current liabilities .............................. 8,120 5,249
Stockholders' equity ........................................... 36,254 34,928
---------- ----------
Total liabilities and stockholders' equity ............. $ 44,374 $ 40,177
========== ==========
</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 NINE MONTHS ENDED
JULY 31, JULY 31,
---------------------------- ----------------------------
2002 2003 2002 2003
------------ ------------ ------------ ------------
Revenue:
Product revenue ................... $ 7,341 $ 3,741 $ 25,338 $ 21,444
Royalty and other revenue ......... 154 1,876 418 2,424
------------ ------------ ------------ ------------
Total revenue ................ 7,495 5,617 25,756 23,868
Cost of revenue ......................... 5,090 2,638 16,951 14,255
------------ ------------ ------------ ------------
Gross profit ............................ 2,405 2,979 8,805 9,613
------------ ------------ ------------ ------------
Operating expenses:
Sales and marketing ............... 1,090 1,018 5,073 3,033
Research and development .......... 3,629 2,925 13,386 9,063
General and administrative ........ 1,202 1,136 6,144 4,283
Impairment of assets .............. 1,208 -- 1,208 --
Business restructuring expense .... 3,667 (201) 3,667 (341)
Amortization of intangibles ....... 70 -- 210 173
------------ ------------ ------------ ------------
Total operating expenses ..... 10,866 4,878 29,688 16,211
------------ ------------ ------------ ------------
Loss from operations .................... (8,461) (1,899) (20,883) (6,598)
Other income, net ............ 232 164 781 468
------------ ------------ ------------ ------------
Net loss ................................ $ (8,229) $ (1,735) $ (20,102) $ (6,130)
============ ============ ============ ============
Basic and diluted net loss per share .... $ (0.31) $ (0.07) $ (0.74) $ (0.25)
============ ============ ============ ============
Shares used in computing basic and
diluted net loss per share ........ 26,901,218 24,190,122 27,147,287 24,478,962
============ ============ ============ ============
</Table>