Press Release

Tandberg Data announces Results for 3rd Quarter of 2007

October 26, 2007

Highlights

• Revenue for the third quarter was USD 49.0 million, a revenue growth of 68.0 per cent compared with the third quarter 2006.

• The gross margin decreased to 25.0 per cent, from 29.2 per cent in the previous quarter, due to increased sales of products with lower margins.

• Growth in RDX QuikStor sales in the channel continues and is 12.5 per cent from previous quarter.

• Increase in LTO tape drives business to major OEM customer.

Operational Review

Sales through distributors
Sales through distributors amounted to USD 26.2 million the third quarter, which is an increase of USD 8.1 million compared with the corresponding quarter in 2006, but down from the USD 28.3 million reported in the second quarter this year.

Sales in the Americas increased by USD 9.1 million from third quarter 2006, primarily explained by the acquisition of the former Exabyte business. Compared with the second quarter, sales in the Americas are down with USD 2.0 million or 14.4 per cent, mainly due to a strategy change preventing quarter-end inventory build-up at discounted prices at distributors'.

In Europe, Middle East and Africa (EMEA), revenues decreased with USD 0.6 million or

6.1 per cent compared with the third quarter last year, but increased with 3.1 per cent compared with the previous quarter. The main reason for the decrease is lower sales to OEM customers.

For the Asia Pacific (APAC) region, sales revenues are down with USD 0.3 million compared with the third quarter in 2006, and with 10.9 per cent from the second quarter this year.

RDX® QuikStor was launched at the end of third quarter last year and the product has been well received in the sales channel. Compared with the previous quarter RDX sales is up 12.5 per cent.

Sales to OEM's
Sales to Original Equipment Manufacturers (OEM's), or companies that acquire Tandberg Data products to embed or sell under own brand, amounted to USD 22.8 million in the quarter, which is an increase of USD 11.7 million compared with the corresponding quarter last year, and an increase of USD 5.8 million from the previous quarter.

The OEM sales' relative share of the total revenue of 46.5 per cent this quarter is higher than the 38.0 per cent share third quarter last year, and up from the 37.4 per cent share in the previous quarter.

The OEM sales in Americas increased by USD 10.9 million, or 158.0 per cent compared with corresponding quarter in 2006 due to the acquisition of the former Exabyte business. Compared with the previous quarter, the OEM sales in Americas are up by 41.3 per cent primarily due to increased sales to a major OEM player.

Automation sales are up by 53.8 per cent compared with the third quarter last year primarily due to the acquisition of the former Exabyte business. Compared to the previous quarter, sales are down 23.1 per cent, mainly due to reduced delivery of products to distributors to prevent quarter-end inventory build-up at discounted prices and due to vacation in the Northern Europe in the quarter.

At USD 26.3 million, sales from tape drives are up from the USD 18.3 and USD 19.3 million reported in the third quarter 2006 and the second quarter 2007 respectively. The increase from previous quarter is due to material shipments according to a contract with a major OEM player.

Financial Review

Revenues and operating profit
Tandberg Data generated sales revenues of USD 49.0 million in the third quarter of 2007, an increase of 68.0 per cent compared with the USD 45.2 reported in the corresponding quarter in 2006, mainly due to the acquisition of Exabyte. Compared with the previous quarter, revenues are up by 8.4 per cent.

The operating loss before depreciation was USD 2.4 million in the quarter, compared with a loss of USD 1.4 million in the third quarter 2006 and a loss of USD 0.5 million second quarter this year.

Gross margin
The gross margin is up from 22.5 per cent in third quarter 2006 to 25.0 per cent this quarter. Compared with previous quarter the margin is down from 29.2 percent. This is primarily due to major shipments of LTO drives to a large OEM player and also due to reduced delivery of products to distributors to prevent quarter-end inventory build-up at discounted prices as previously communicated.

Operating costs
Operating costs were USD 14.6 million in the third quarter 2007, compared with USD 7.9 million reported in the third quarter 2006. Marketing distribution funds of USD 0.5 million is included in operating costs. Compared with previous quarter there was an increase of 0.9 million primarily due to the yearly salary regulations.

Depreciation
Ordinary depreciation and amortisation of acquired technology, fixed assets and product development costs is included with USD 2.0 million in the third quarter 2007, compared with USD 2.2 million in the third quarter 2006 and 1.9 million in the previous quarter. Ordinary depreciation has increased this quarter compared to the third quarter 2006 due to the purchase of Exabyte assets. Technology and development have been capitalised by USD 0.6 million during the quarter

Net financial items
Financial items were positive by USD 3.5 million in the third quarter 2007. Interest expenses related to the company's interest bearing debt is included with USD 1.7 million.

Convertible bond loan and senior secured debt include certain embedded derivatives. Embedded derivatives are separated from the host contract and accounted for as a derivative. Once recognised, embedded derivatives are measured at fair value through profit or loss.

The estimated effect of change in fair value of the derivatives has a positive effect of approximately 10.4 million on other financial items. In addition other financial items include a negative effect of USD 2.2 million due to currency fluctuations.

Tandberg Data had USD 49.1 million in interest bearing debt at September 30, 2007, and net cash balance of USD 7.1 million of which USD 0.6 million is restricted cash.

Profit before tax
Profit before tax amounted to USD 2.2 million, compared with a loss of USD 4.0 million in the third quarter 2006. For the previous quarter, a profit of USD 5.3 million was reported including a profit from the sale of shares in Tandberg Storage of USD 4.8 million.

Cash flow
The company's total cash flow was negative by USD 3.7 million in the third quarter 2007, compared with a negative cash flow of USD 3.1 million in the corresponding quarter in 2006.

The cash flow from operating activities was negative with USD 2.9 million and the cash flow from investing activities was negative with USD 0.7 million in the quarter, due to investment in research and development. Net cash flow from financing activities was negative with USD 0.1 million. This relates to amortization of debt in a subsidiary of the Group. The cash balance at the end of the quarter was USD 7.1 million, compared with 17.4 million at the end of third quarter 2006.

Market update
As previously communicated, tape remains a core technology in the data protection strategies of many enterprises. Tape drives are not growing in market size, but they are part of the predicted growth of low-end and mid-range tape automation.

Business enterprises are under increased pressure to reduce backup windows while accelerating access time to data. This development has paved the way for the trend towards increasing sales of disk based solutions as these solutions provide faster backups.

The trend towards increasing sales of disk based solutions was maintained during the third quarter. Data growth coupled with shrinking back-up window continued to be the main driver. Tandberg Data's removable disk solutions - the RDX QuikStor® - continued to take volumes from mature technology in the low end, entry level segments, and segments which currently do not take back up due to high costs in backup solutions.

In July, Tandberg Data announced the availability of Storageloader 2U, a LTO autoloader with 4th generation LTO technology. In October, the RDX QuikStor available with 300 BG was announced.

In the end of the second quarter, Tandberg entered into an agreement with Apple adding four new products for Mac OS X. The shipments under this agreement started in October.

Other issues
On January 18, 2006, Exabyte filed a complaint against a major IT company in the United States asserting that it had infringed upon a patent owned by Exabyte. Exabyte's position in the lawsuit was acquired by Tandberg Data in connection with the acquisition. The law suit has entered into a phase where a settlement hearing is expected to take place in December 2007.

Tandberg Data has entered into a supplementary agreement for financing at market conditions. The background for the agreement is that the previously expected funding through suppliers did not occur, as well as an increased need for working capital going forward.

Outlook
Tandberg Data has started a process to develop a new strategy for the Group. A new management team was established during the second quarter and the team is actively engaged in the work, together with the Board of Directors in Tandberg Data.

As part of this process Tandberg Data has set a target of cost reductions of minimum USD 10 million, of which more than USD 6 million is already identified and decided by the Board of Directors to implement. A large share of the cost reductions will take place in the US.

Tandberg Data sees opportunities to increase gross margin on the overall product portfolio from the 25.0 per cent reported in the third quarter.

As previously communicated, Tandberg Data expects revenue for the last half of 2007 to be higher than first half. The Company is focusing on making to make the business more efficient and is continuously pursuing additional revenue opportunities with existing and new customers on current and future products.

This report contains forward looking statements. These statements are based on various assumptions, many of which are based, in turn, upon further assumptions, including Tandberg Data's management s examinations of historical operating trends. Although Tandberg Data believes that these assumptions were reasonable when made, because assumptions are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond its control, Tandberg Data cannot give assurance that it will achieve or accomplish these expectations, beliefs or intentions.

CONTACT PERSONS:
Per Kristian Jacobsen
CEO
Tel: + 47 90 18 77 60

Per Øseth
CFO
Tel.: + 47 22 18 94 95