21.10.2008

Aastra Reports Third Quarter 2008 Financial Results

TORONTO, ONTARIO (October 21, 2008) -- Aastra Technologies Limited - (TSX: “AAH”) today announced its unaudited financial results for the third quarter ended September 30, 2008. Net earnings for the three months ended September 30, 2008 were $2.6 million or $0.17 diluted earnings per share compared to $7.1 million or $0.43 diluted earnings per share in the same period in 2007. The financial results for the third quarter include a loss before income taxes of approximately $10.0 million from the acquired Ericsson business. Excluding the impact of this acquisition, net earnings would have been approximately $11.3 million or $0.73 diluted earnings per share due to stable revenue, improved gross margins and strong cost control. In order to address the disappointing results from the acquired Ericsson business, the Company has initiated a restructuring program that is expected to be completed in the fourth quarter of this year.

Sales for the three months ended September 30, 2008 were $224.5 million compared to $141.1 million for the same quarter in 2007, an increase of 59.0%. Sales in European Enterprise Communication segment increased 50.6% from $117.1 million in the three months ended September 30, 2007 to $176.5 million in the same period of 2008. Sales in American Enterprise Communication segment increased to $34.3 million in the three months ended September 30, 2008 from $23.0 million in the same period of 2007. Sales in other regions increased from $1.0 million in the third quarter of last year to $13.7 million. The Company experienced a significant increase in sales in all regions as a result of the Ericsson acquisition which closed on April 30, 2008. Excluding the impact of this acquisition, sales would have increased by 6.6%.

Gross margin increased to 45.1% of sales for the three months ended September 30, 2008 compared to 42.5% during the same period last year. Gross margins were aided by a positive product mix as well as the impact of a weaker U.S. dollar compared to the Euro in the quarter. Research and development expenses in the third quarter of 2008 were $29.7 million or 13.2% of sales, compared to $12.9 million or 9.2% of sales in the same quarter of 2007. The increase in research and development expenses is mainly a result of the Ericsson acquisition. Selling, general and administrative expenses were $58.8 million or 26.2% of sales in the quarter compared to $34.7 million or 24.6% of sales in the third quarter of 2007. The increase was also driven by the impact of the Ericsson acquisition.

Losses from foreign exchange were $1.3 million in the third quarter of 2008 compared with losses of $0.8 million in the same period last year as the Euro and Swiss franc weakened against the Canadian dollar during the quarter. In the three months ended September 30, 2008, the Company recognized a further loss on the change in fair value of its investment in asset-backed commercial paper of $0.4 million, resulting in an accumulated discount from face value of approximately 32.0%.
The Company recorded investment income of $0.5 million in the third quarter of 2008 compared to $1.0 million for the third quarter of 2007. Income tax expense was $0.7 million in the third quarter or 21.7% of pre-tax profits compared to $2.2 million or 23.7% of pre-tax profits in the third quarter of 2007.

On September 30, 2008, Aastra’s balance of cash and short-term investments was $82.4 million compared to $133.2 million on December 31, 2007. Cash provided in operations for the three months ended September 30, 2008 was $6.9 million whereas operations provided cash of $20.6 million for the same period of 2007. The Company will continue to focus closely on managing its working capital in light of the recent conditions in the financial markets.

As previously reported, on April 30, 2008, the Company acquired all of the shares and certain assets of the Enterprise Communication Business from Telefonaktiebolaget LM Ericsson and its subsidiaries (“Ericsson”). Subsequently, on October 6, 2008 the Company completed the acquisition of Ericsson’s Enterprise Communications Business operations in South Africa. The aggregate purchase price for the total acquisition, now including operations in South Africa, is $107.7 million for goodwill and intangible assets, of which approximately $58.9 million was financed through a three year term loan. On April 30, 2008, $38.5 million (net of acquired cash of $7.1 million) was settled from the cash and short-term investments on hand. The final purchase price is subject to adjustment upon the completion of the ongoing negotiation of the closing balance sheet of the acquired business.
As previously announced, Aastra expected to file the Business Acquisition Report (“BAR”) in connection with the completion of the Ericsson acquisition in October 2008. Aastra is taking all necessary steps to file the BAR as soon as possible and now anticipates filing the BAR by the end of November 2008.

About Aastra Technologies Limited

Aastra Technologies Limited (TSX: “AAH”), is a global company at the forefront of the Enterprise Communication market. Headquartered in Concord, Ontario, Canada, Aastra develops and delivers innovative and integrated solutions that address the communication needs of businesses small and large around the world. Aastra enables Enterprises to communicate and collaborate more efficiently and effectively by offering customers a full range of open standard IP-based and traditional communications networking products, including terminals, systems, and applications. For additional information on Aastra, visit our website at http://www.aastra.com/ .

Our expectations that we will file our BAR by the end of November 2008 and complete our restructuring program in the fourth quarter of 2008 constitute forward-looking statements within the meaning of applicable Canadian securities legislation. By their very nature, forward-looking statements involve numerous factors and assumptions, and are subject to inherent risks and uncertainties, both general and specific, which give rise to the possibility that predictions, forecasts and projections will not be achieved.

We caution readers not to place undue reliance on these forward-looking statements as a number of important factors could cause our actual results to differ materially from the expectations expressed herein. The material factors that could cause our actual filing date for the BAR to differ materially from the forward-looking statement made herein include: the complexity of the carve-out of the related assets and liabilities of Ericsson’s Enterprise Communications Business from numerous Ericsson affiliates, including, but not limited to, that the acquired business is global in nature but did not comprise a stand-alone business unit within Ericsson and, as such, did not prepare its own audited financial statements; Ericsson providing reasonable access to the books and records and necessary staff of Ericsson and its affiliates in order for us to prepare the BAR; and Ericsson ensuring that its auditors provide us and our auditors with access to necessary audit papers to complete the BAR. The material factors that could cause our completion of our restructuring program to differ materially from the forward-looking statement made herein include: the complexity of the negotiations with the applicable employee union representatives in Sweden and the magnitude and scope of the proposed restructuring.

We caution that the foregoing list of important factors that may affect future results is not exhaustive. When relying on the forward-looking statements made herein to make decisions with respect to us, investors and others should carefully consider the foregoing factors as well as other uncertainties and potential events as further described in detail under the heading “Risk Factors” in our 2007 Annual Information Form filed on www.sedar.com .

For further information contact:
Kathy Ristic, V.P. Finance,
(905) 760-6704
investors@aastra.com