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ShoreTel Generates Record Revenues of $58 Million in Q2

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For the second fiscal quarter of 2012, ShoreTel generated record revenues of $58 million, an increase of 22% over the second quarter of fiscal 2011 and an eight percent increase from the previous quarter. Non-GAAP gross margins were 66.1% – down slightly from last quarter, as more of our business moved to two-tier distribution in the U.S. We posted non-GAAP net income of $1.4 million for the quarter, or $0.03 per share, which represents a significant improvement over last year’s loss of $(.02) per share.

We were pleased with our revenue achievement in what is typically a seasonally strong second quarter. We saw a solid improvement in demand from our U.S. regional partners this quarter, in line with our expectations. Revenues from our US service providers were also up very nicely in the quarter, growing 20 percent sequentially.

We’re continuing to deliver solid international growth, with our international business growing 27 percent over the second quarter of last year and up six percent sequentially.

As is typical in our seasonally strong quarters, revenue from new customers grew as a percentage of our overall business, to 52 percent, up from 46 percent in the first quarter and at its highest level since fiscal 2008.

Once again we saw solid growth in our ShoreTel Mobility product line, with a revenue increase of over 30 percent sequentially in the quarter. We have many ongoing pilots and continue to be pleased with the customer and partner reaction to this growing area of our business. This quarter we also announced an agreement with Hewlett Packard, the world’s largest technology company, to make ShoreTel Mobility part of HP’s fixed mobile convergence solution portfolio. With the addition of HP as a reseller of ShoreTel Mobility we continue to extend the reach of our mobility solutions.

Now let me provide some perspective on the marketplace. We were pleased to see the broader U.S. Enterprise IP telephony market, as well as the U.S. pure IP telephony market, return to growth in the September 2011 quarter, after three quarters of modest declines. According to Synergy Research, the U.S. Enterprise IP telephony market grew approximately 9 percent in the September 2011 quarter, which is the most recent data available.

The worldwide Enterprise IP market also grew approximately 8 percent from the June quarter. ShoreTel’s market share within both worldwide and the United States regions has grown significantly year over year. We expect to build upon these market share gains and continue to close the gap between our current No. 3 position and the No. 2 player in the U.S.

Partner recruitment remains a top priority to support our growth ambitions. During the second quarter we signed a total of 60 new partners around the world, 33 of which came through our relationship with ScanSource.

We also added a record of nearly 1,300 new customers in the quarter, a sequential increase of 24% over Q1.

This quarter we also reached a significant milestone – our total number of licenses, worldwide, surpassed 2 million as of the end of the quarter.  We are pleased to have achieved this milestone in record time, as we announced reaching our one-millionth license just 8 quarters ago. This strong achievement also allowed us to be profitable on a non-GAAP basis for the first half of our fiscal year.