EXHIBIT 99.1 Record Fourth Quarter and Year for Avocent HUNTSVILLE, Ala.--(BUSINESS WIRE)--Jan. 25, 2007--Avocent Corporation (NASDAQ: AVCT) today reported record revenues for the fourth quarter and year ended December 31, 2006. Net sales for the fourth quarter increased 58% to $168.9 million compared with $106.8 million in the fourth quarter of 2005. Net sales for the year increased to $523.7 million in 2006 from $369.9 million in 2005. "Avocent reported record fourth quarter revenues as a result of continued growth from our core KVM products, including digital and embedded technologies, and the contribution from the Cyclades and LANDesk acquisitions," stated John R. Cooper, chairman and chief executive officer of Avocent Corporation. "In our first full quarter of operations with LANDesk it added approximately $29.7 million to fourth quarter revenues and was a primary factor in our gross margin rising to a record 66.7%." Fourth Quarter Earnings Summary Fourth quarter 2006 operational income, which is income prior to intangible amortization and stock compensation expenses, rose 32% to $32 million, or $0.62 per diluted share, compared with operational income of $24.6 million, or $0.49 per diluted share, in the fourth quarter of 2005. (See "Use of Non-GAAP Financial Measures" discussion below.) GAAP net income for the fourth quarter of 2006 was $17.1 million, or $0.33 per diluted share, compared to GAAP net income of $19.1 million, or $0.38 per diluted share, in the fourth quarter of 2005. Net adjustments to reconcile operational income to GAAP net income were $15.3 million in the fourth quarter of 2006, including $11.9 million in intangible amortization and $6.4 million in stock compensation expenses. Net adjustments to reconcile to GAAP net income were $5.5 million in the fourth quarter of 2005, including $2.5 million in intangible amortization and $3.8 million in tax on repatriated earnings. Sales Increase 58% to a Record $168.9 Million Branded sales increased 91.8% from the fourth quarter of 2005 and accounted for 64.9% of total fourth quarter 2006 sales. The significant growth in branded sales benefited from the addition of Cyclades and LANDesk products, most of which are included in Avocent's branded product sales. Sales of Avocent's branded KVM products also enjoyed continued growth due to contributions from newer products. OEM sales increased 19.3% from the fourth quarter of 2005 and accounted for 35.1% of total fourth quarter 2006 sales. Digital product sales accounted for 50.3% of total sales and embedded product revenues climbed to $9.4 million, an increase of 35% compared with the fourth quarter of 2005. U.S. sales increased 57% to $94.6 million and international sales rose 59% to $74.3 million compared with the fourth quarter of 2005. "The acquisitions of Cyclades and LANDesk in 2006 contributed to a significant change in our product mix," continued Mr. Cooper. "As a result, our core KVM products accounted for 58% of fourth quarter 2006 sales compared with 84% in the fourth quarter of last year. We expect this trend to continue in 2007 due to the fast growing markets for Cyclades and LANDesk products. We are expanding Cyclades penetration of the Linux server and networking infrastructure markets with complimentary technology provided by Avocent. LANDesk provides a new market for Avocent with their suite of IT management software products and we expect to leverage our joint markets to accelerate their growth opportunities," stated Mr. Cooper. Operating Results Gross profit for the fourth quarter of 2006 increased 70% to $112.6 million ($108.2 million on a GAAP basis) compared with $65.1 million in the fourth quarter of 2005. Gross margin was a record 66.7% (64.5% on a GAAP basis) in the fourth quarter of 2006 compared with 60.9% in the fourth quarter of 2005. The addition of LANDesk's software revenues was a major contributor to the growth in gross profit and margins. In addition, margin benefited from increased sales and improved product mix of Avocent products, including higher sales of digital products and embedded products. Research and development expenses were $18.2 million ($20.3 million on a GAAP basis, which includes stock-based compensation of $2.1 million), or 10.8% of sales, compared with $13.1 million, or 12.3% of sales, in the fourth quarter of 2005. "We benefited from improved leverage of our R&D investments due to our larger sales base and a full quarter of cost savings from the Cyclades integration activities," continued Mr. Cooper. "We remain focused on bringing new technologies to market while improving the performance of existing products and services. During the fourth quarter, we introduced new products through our emerging technologies divisions, including our first desktop/extension over IP product from our Desktop Solutions Division and our first wired and wireless media extender, the Emerge(TM) MPX1000, for managing AV extension networks from our Connectivity and Control Division. We also integrated our mobile device technology with LANDesk's management suite to expand this solution set to include mobile devices." Selling, general and administrative expenses increased to $50.2 million ($54.2 million on a GAAP basis, which includes stock-based compensation of $3.8 million), or 29.7% of sales, compared with $22.9 million in the fourth quarter of 2005. Avocent had higher expenses in the fourth quarter of 2006 related to the increase in sales, the addition of Cyclades and LANDesk, and additional marketing expenditures for recently introduced products. The acquisitions added approximately 800 employees to Avocent's headcount. Interest expense related to debt incurred with the acquisition of LANDesk was $2.3 million in the fourth quarter of 2006. There was no interest expense in the fourth quarter of 2005. Weighted average shares outstanding increased 5% over the prior year to 52.1 million in the fourth quarter of 2006 due to the issuance of shares to LANDesk shareholders in the third quarter, offset by Avocent's repurchase of shares under its previously-announced stock repurchase programs. Fourth Quarter Division Results Revenues from the Management Systems Division advanced 31% to $124.3 million in the fourth quarter of 2006 from $95.0 million in the fourth quarter of 2005, while operating income from this division increased to $40.2 million in the fourth quarter of 2006 from $33.5 million in the fourth quarter of 2005. The Management Systems Division benefited from growth in the Company's core KVM product line, the addition of Cyclades and the increase in revenues from the digital product lines. The LANDesk Division produced revenues of $29.7 million in the fourth quarter of 2006 and had an operating loss of $1.2 million for the quarter. LANDesk, acquired on August 31, 2006, reported sales of $24.8 million for their fourth quarter of 2005. Revenues for the Embedded Software and Solutions Division grew 35% to $9.4 million in the fourth quarter of 2006 from $7.0 million in the fourth quarter of 2005, while operating income increased to $3.6 million in the fourth quarter of 2006 from $635,000 in the fourth quarter of 2005. Revenues from the three emerging businesses increased to $4.7 million in the fourth quarter of 2006 from $3.7 million in the fourth quarter of 2005, while operating losses from these divisions decreased to $3.8 million in the fourth quarter of 2006 from $4.0 million in the fourth quarter of 2005. After the fourth quarter the operations of the Mobile Solutions Division were integrated into the LANDesk division. Balance Sheet The Company's cash flow from operations was approximately $13 million for the fourth quarter of 2006 with approximately $108 million in cash, cash equivalents and investments at the quarter's end. At the end of the quarter Avocent had $150 million of debt outstanding. Use of Non-GAAP Financial Measures Income prior to intangible amortization, stock compensation and in-process research and development expenses, or operational income as used in the attached financial statement schedules, is not a measure of financial performance under generally accepted accounting principles (GAAP) and should not be considered a substitute for or superior to GAAP. Avocent's management uses operational income as a financial measure to evaluate performance and allocate resources within the Company. Management believes this measure presents the Company's results on a more comparable operational basis by excluding non-cash amortization expenses, non-operational expenses associated with acquisitions, and non-cash stock-based compensation expense. Avocent believes that operational income is a measure of performance used by many investment banks, analysts, investors and others to make informed investment decisions. Other companies may calculate operational income in a different manner so this measure may not be comparable to similar measures presented by other companies. A reconciliation of Avocent's results using operational measures and GAAP is set forth in the condensed consolidated statements of operations included in this press release. Conference Call and Additional Information Avocent will provide an on-line, real-time webcast and rebroadcast of its fourth quarter results conference call to be held January 25, 2007. The live broadcast will be available on-line at www.avocent.com as well as www.investorcalendar.com beginning at 10:00 a.m. Central time. The on-line replay will follow immediately and continue for 30 days. Avocent has also furnished additional commentary on the fourth quarter results simultaneously with this release on a Form 8-K filed with the SEC and on its website. About Avocent Corporation Avocent delivers IT operations and infrastructure management solutions for enterprises worldwide, helping customers to reduce costs and simplify complex IT environments via integrated, centralized in-band and out-of-band hardware and software. Through LANDesk, Avocent also is a leading provider of systems, security, and process management solutions. Additional information is available at: www.avocent.com. Forward-Looking Statements This press release contains statements that are forward-looking statements as defined within the Private Securities Litigation Reform Act of 1995. These include statements regarding the new markets and accelerated growth opportunities (including the penetration of the Linux server and networking infrastructure markets) resulting from the integration of Avocent technology into Cyclades products and LANDesk's management suite into Avocent products, the changing nature of our product mix due to the fast growing markets for Cyclades and LANDesk products, and our continued focus on bringing new technologies to market and improving the performance of our existing products and technologies. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from the statements made, including the risks associated with general economic conditions, risks attributable to future product demand, sales, and expenses, risks associated with reliance on a limited number of customers, component suppliers, and single source components, risks associated with acquisitions and acquisition integration, risks associated with product design efforts and the introduction of new products and technologies, and risks associated with obtaining and protecting intellectual property rights. Other factors that could cause operating and financial results to differ are described in our annual report on Form 10-K filed with the Securities and Exchange Commission on March 6, 2006 and our quarterly reports on Form 10-Q filed with the SEC on May 10, 2006, August 4, 2006 and November 7, 2006. Other risks may be detailed from time to time in reports to be filed with the SEC. Avocent does not undertake any obligation to publicly update its forward-looking statements based on events or circumstances after the date hereof. AVOCENT CORPORATION Condensed Consolidated Statements of Income (Unaudited, in thousands, except per share data) For the Quarter Ended December 31, 2006 Operational Stock Adjustments GAAP Compensation (b) (a) ----------- ------------- ----------- --------- Net sales $168,904 $(1,206) $167,698 Cost of sales 56,292 $475 2,683 59,450 ----------- ------------- ----------- --------- Gross profit 112,612 (475) (3,889) 108,248 Research and development expenses 18,203 2,130 - 20,333 Selling, general and administrative expenses 50,227 3,823 151 54,201 Acquisition integration expenses 331 - - 331 Amortization of intangible assets - - 9,207 9,207 ----------- ------------- ----------- --------- Operating income 43,851 (6,428) (13,247) 24,176 Other income (expense), net (1,283) - - (1,283) ----------- ------------- ----------- --------- Income before income taxes 42,568 (6,428) (13,247) 22,893 Provision for income taxes 10,083 (1,340) (2,995) 5,748 ----------- ------------- ----------- --------- Net income $32,485 $(5,088) $(10,252) $17,145 =========== ============= =========== ========= Earnings per share: Basic $0.64 $0.34 Diluted $0.62 $0.33 Weighted average shares and common equivalents outstanding: Basic 50,826 - - 50,826 Diluted 52,110 - - 52,110 For the Quarter Ended December 31, 2005 Operational Stock Adjustments GAAP Compensation (b) (a) ----------- ------------- ----------- --------- Net sales $106,837 $106,837 Cost of sales 41,721 41,721 ----------- ------------- ----------- --------- Gross profit 65,116 - - 65,116 Research and development expenses 13,123 $266 - 13,389 Selling, general and administrative expenses 22,916 219 $151 23,286 Amortization of intangible assets - - 2,533 2,533 ----------- ------------- ----------- --------- Operating income 29,077 (485) (2,684) 25,908 Other income (expense), net 2,316 - 727 3,043 ----------- ------------- ----------- --------- Income before income taxes 31,393 (485) (1,957) 28,951 Provision for income taxes 6,818 - 3,082 9,900 ----------- ------------- ----------- --------- Net income $24,575 $(485) $(5,039) $19,051 =========== ============= =========== ========= Earnings per share: Basic $0.50 $0.39 Diluted $0.49 $0.38 Weighted average shares and common equivalents outstanding: Basic 48,917 - - 48,917 Diluted 49,771 (8) - 49,763 (a) Stock Compensation relates to expensing of stock options, restricted stock units and performance shares and amortization of deferred compensation (from the value of stock options assumed in acquisitions). Avocent adopted SFAS 123R effective January 1, 2006 and began recording expense related to outstanding unvested stock options on that date as well as on subsequent equity compensation grants. The calculation of weighted average shares and common equivalents outstanding differs due to excluding the average unamortized deferred compensation expense in calculating the operational diluted shares outstanding in 2005. (b) Adjustments relate to depreciation and amortization of the purchase accounting adjustment to deferred revenue and intangibles recorded as the result of acquisitions. AVOCENT CORPORATION Condensed Consolidated Statements of Income (Unaudited, in thousands, except per share data) For the Year Ended December 31, 2006 Operational Stock Adjustments GAAP Compensation (b) (a) ----------- ------------- ----------- --------- Net sales $523,715 $(1,686) $522,029 Cost of sales 192,869 $977 3,577 197,423 ----------- ------------- ----------- --------- Gross profit 330,846 (977) (5,263) 324,606 Research and development expenses 59,564 4,302 - 63,866 Acquired in-process research and development expenses - 20,700 20,700 Selling, general and administrative expenses 138,707 9,307 603 148,617 Acquisition integration expenses 3,904 - - 3,904 Amortization of intangible assets - - 23,049 23,049 ----------- ------------- ----------- --------- Operating income 128,671 (14,586) (49,615) 64,470 Other income (expense), net 3,784 - - 3,784 ----------- ------------- ----------- --------- Income before income taxes 132,455 (14,586) (49,615) 68,254 Provision for income taxes 33,427 (3,656) (7,726) 22,045 ----------- ------------- ----------- --------- Net income $99,028 $(10,930) $(41,889) $46,209 =========== ============= =========== ========= Earnings per share: Basic $2.04 $0.95 Diluted $2.00 $0.93 Weighted average shares and common equivalents outstanding: Basic 48,548 - - 48,548 Diluted 49,475 - - 49,475 For the Year Ended December 31, 2005 Operational Stock Adjustments GAAP Compensation (b) (a) ----------- ------------- ----------- --------- Net sales $369,888 $369,888 Cost of sales 151,043 151,043 ----------- ------------- ----------- --------- Gross profit 218,845 - - 218,845 Research and development expenses 55,747 1,138 - 56,885 Selling, general and administrative expenses 88,861 876 $617 90,354 Amortization of intangible assets - - 18,509 18,509 ----------- ------------- ----------- --------- Operating income 74,237 (2,014) (19,126) 53,097 Income from settlement of lawsuit 5,000 - - 5,000 Other income (expense), net 8,307 - 682 8,989 ----------- ------------- ----------- --------- Income before income taxes 87,544 (2,014) (18,444) 67,086 Provision for income taxes 21,743 - (3,006) 18,737 ----------- ------------- ----------- --------- Net income $65,801 $(2,014) $(15,438) $48,349 =========== ============= =========== ========= Earnings per share: Basic $1.33 $0.98 Diluted $1.31 $0.96 Weighted average shares and common equivalents outstanding: Basic 49,318 - - 49,318 Diluted 50,287 (33) - 50,254 (a) Stock Compensation relates to expensing of stock options, restricted stock units and performance shares and amortization of deferred compensation (from value of stock options assumed in acquisitions). Avocent adopted SFAS 123R effective January 1, 2006 and began recording expense related to outstanding unvested stock options on that date as well as on subsequent equity compensation grants. The calculation of weighted average shares and common equivalents outstanding differs due to excluding the average unamortized deferred compensation expense in calculating the operational diluted shares outstanding in 2005. (b) Adjustments related to acquired in-process research and development expense from the Cyclades and LANDesk acquisitions, depreciation and amortization of the purchase accounting adjustment to deferred revenue and intangibles recorded as the result of acquisitions. AVOCENT CORPORATION Condensed Consolidated Balance Sheets (Unaudited, in thousands) December 31, 2006 December 31, 2005 ----------------- ----------------- Cash, cash equivalents and short-term investments $107,165 $293,903 Accounts receivable, net 127,457 68,712 Inventories, net 41,765 21,178 Other current assets 17,990 10,524 Deferred income tax 2,299 4,054 ----------------- ----------------- Total current assets 296,676 398,371 Investments 987 51,939 Property and equipment, net 38,004 36,801 Goodwill 633,185 269,992 Other intangible assets, net 209,673 15,763 Other assets 2,676 885 ----------------- ----------------- Total assets $1,181,201 $773,751 ================= ================= Accounts payable and other accrued expenses $42,043 $23,569 Payable to former LANDesk shareholders 27,013 - Income tax payable 19,249 11,270 Deferred revenue 43,444 - Other current liabilities 28,783 18,908 ----------------- ----------------- Total current liabilities 160,532 53,747 Line of credit obligation 150,000 - Deferred income taxes 24,708 - Deferred revenue, net of current portion 10,070 - Other non-current liabilities 1,371 4,682 ----------------- ----------------- Total liabilities 346,681 58,429 Total stockholders' equity 834,520 715,322 ----------------- ----------------- Total liabilities and stockholders' equity $1,181,201 $773,751 ================= ================= AVOCENT CORPORATION Additional Financial Information (Unaudited, in thousands) Quarter Ended Year Ended December December December December 31, 31, 31, 31, 2006 2005 2006 2005 --------- --------- --------- --------- Revenue by Distribution Channel - ------------------------------- Branded $109,590 $57,139 $315,107 $191,900 OEM 59,314 49,698 208,608 177,988 --------- --------- --------- --------- Total $168,904 $106,837 $523,715 $369,888 ========= ========= ========= ========= Revenue by Division - ------------------------------- Management Systems $124,259 $95,027 $426,412 $330,213 LANDesk 29,680 - 43,202 - Embedded Software and Solutions 9,437 6,983 33,766 21,882 Other business units 4,704 3,727 16,658 14,532 Corporate and unallocated 824 1,100 3,677 3,261 --------- --------- --------- --------- Total $168,904 $106,837 $523,715 $369,888 ========= ========= ========= ========= Management Systems Division Revenue by Product Line - ------------------------------- KVM $98,797 $90,107 $351,298 $311,734 Serial Management 15,844 1,423 46,533 4,124 Other 9,618 3,497 28,581 14,355 --------- --------- --------- --------- Total $124,259 $95,027 $426,412 $330,213 ========= ========= ========= ========= LANDesk Division Revenues by Type - ------------------------------- Licenses and royalties $19,443 $- $29,700 $- Maintenance and services 10,237 - 13,502 - --------- --------- --------- --------- Total $29,680 $- $43,202 $- ========= ========= ========= ========= Operating Profit (Loss) by Division (includes stock-based compensation expense) - ------------------------------- Management Systems $40,162 $33,477 $124,969 $94,382 LANDesk (1,156) - 4,379 - Embedded Software and Solutions 3,634 635 11,673 26 Other business units (3,788) (4,036) (14,706) (11,340) Corporate and unallocated (1,429) (1,484) (12,230) (10,845) --------- --------- --------- --------- Total $37,423 $28,592 $114,085 $72,223 ========= ========= ========= ========= Cash Flow Highlights - ------------------------------- Cash provided by operations $12,935 $18,255 $65,666 $70,986 Depreciation expense 2,693 1,224 8,506 7,037 Capital expenditures 2,671 1,719 4,750 3,798 Purchase of treasury shares 30,701 10,188 188,318 76,279 CONTACT: Avocent Corporation Senior Vice President of Finance and Chief Financial Officer: Edward H. Blankenship, 256-217-1301