Interphase Announces Second Quarter 2011 Financial Results

Interphase Corporation (NASDAQ: INPH), a leading global provider of solutions for converged communications networks, today reported financial results for its second quarter ended June 30, 2011.

Revenues for the second quarter of 2011 increased approximately 60% to $6.2 million when compared to $3.9 million for the second quarter of 2010. Revenues in the quarter were primarily derived from telecommunications product revenues, which increased to $5.3 million in the second quarter of 2011 compared to $3.2 million for the second quarter of 2010. Services revenues increased to $497,000 compared to $264,000 on a year to year basis, and enterprise product revenues increased slightly to $361,000 for the second quarter of 2011 compared to $346,000 for the second quarter of 2010. Gross margin for the second quarter of 2011 was 53% compared to 46% for the second quarter of 2010. The increase in gross margin percentage was primarily due to increased utilization of our manufacturing facility partially offset by a shift in product mix toward lower margin products. The company reported a net income of $317,000, or $0.04 per fully diluted share in the second quarter of 2011 compared to a net loss of $2.2 million, or ($0.32) per share in the second quarter of 2010. On June 30, 2011, the company’s working capital position was $14.5 million, including cash and marketable securities of $11.2 million.

"We are pleased with our second quarter results as we were able to achieve revenue growth of 60% year over year,” said Gregory B. Kalush, CEO and President of Interphase. "Revenues were poised to continue to grow sequentially as well; however, we experienced a few unanticipated parts shortages that impacted sequential revenue growth for the quarter. Recovery plans within the supply chain have been put in place and we believe that these issues have been mitigated going forward. Despite this challenge, we were able to improve our net income position by 37% over the first quarter of 2011.”

For the first six months of 2011, revenues increased approximately 69% to $12.9 million, compared to $7.6 million for the first six months of 2010. Gross margin increased to 51% for the six months ended June 30, 2011, compared to 48% for the same period in 2010. The Company reported a net income of $548,000, or $0.08 per fully diluted share for the first six months of 2011 compared to a net loss for the first six months of 2010 of $4.6 million, or ($0.67) per share.

About Interphase Corporation

Interphase Corporation (NASDAQ: INPH) delivers solutions for LTE and WiMAX, interworking gateways, packet processing, network connectivity, and security for key applications for the communications and enterprise markets. The company also offers a comprehensive portfolio of desktop virtualization solutions. Founded in 1974, Interphase provides expert engineering design and electronics manufacturing services, in addition to its commercial-off-the-shelf (COTS) product portfolio. Interphase is headquartered in Plano, Texas, with sales offices in the United States and Europe. Clients include Alcatel-Lucent, Emerson Network Power, Fujitsu Ltd., Genband, Hewlett Packard, ip.access, Samsung, and Sun Microsystems. Visit www.iphase.com.

Forward-Looking Statements

This press release contains forward-looking statements about the business, financial condition and prospects of the Company. These statements are made under the "safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. The actual results of the Company could differ materially from those indicated by the forward-looking statements because of various risks and uncertainties, including (without limitation) effects of the ongoing issues in global credit and financial markets, our reliance on a limited number of customers, failure to see spending improvements in the telecommunications and computer networking industries, significant changes in product demand, the development and introduction of new products and services, changes in competition, various inventory risks due to changes in market conditions and other risks and uncertainties indicated in the Company’s filings and reports with the Securities and Exchange Commission. All of the foregoing risks and uncertainties are beyond the ability of the Company to control, and in many cases, the Company cannot predict the risks and uncertainties that could cause its actual results to differ materially from those indicated by the forward-looking statements. When used in this press release, the words "believes,” "plans,” "expects,” "will,” "intends,” and "anticipates” and similar expressions as they relate to the Company or its management are intended to identify forward-looking statements.

Interphase and the Interphase logo are trademarks or registered trademarks of Interphase Corporation. All other trademarks are the property of their respective owners.

Condensed Consolidated Financial Statements