NETEZZA ANNOUNCES THIRD QUARTER FISCAL 2010 FINANCIAL RESULTS

MARLBOROUGH, MA — November 24, 2009 — Netezza Corporation (NYSE: NZ), the global leader in data warehouse and analytic appliances, today reported its financial results for the third fiscal quarter ended October 31, 2009.

“Our third quarter was significant for Netezza given our major transition to our new TwinFin™ platform,” said Jim Baum, Netezza’s President and Chief Executive Officer. “Our experience as an appliance manufacturer allowed us to successfully launch and deliver the next generation of our data warehouse appliance while maintaining a strong focus on our business and customers. We are very pleased with our results for the quarter and particularly with the strong adoption of the TwinFin platform that we have seen in the market.”

Total revenue for the third quarter of fiscal 2010 (fiscal year ending January 31, 2010) was $47.7 million, compared to $50.6 million for the third quarter of fiscal 2009. Total revenue for the nine months ended October 31, 2009 was $137.0 million, compared to $137.2 million for the same period one year ago.

GAAP net income for the third quarter of fiscal 2010 was $0.9 million, or $0.01 per diluted share, compared to GAAP net income of $3.5 million, or $0.05 per diluted share, for the third quarter of fiscal 2009. GAAP net income for the nine months ended October 31, 2009 was $1.3 million, or $0.02 per diluted share, compared to GAAP net income of $8.7 million, or $0.14 per diluted share, for the same period one year ago.

Non-GAAP net income for the third quarter of fiscal 2010 was $3.0 million, or $0.05 per diluted share, compared to non-GAAP net income of $5.7 million, or $0.09 per diluted share, for the third quarter of fiscal 2009. Non-GAAP net income for the nine months ended October 31, 2009 was $6.8 million, or $0.11 per diluted share, compared to non-GAAP net income of $14.7 million, or $0.23 per diluted share, for the same period one year ago.

Non-GAAP net income and non-GAAP diluted net income per share exclude non-cash stock-based compensation, amortization of acquired intangible assets, gain on bargain purchase and the related income tax effect of excluding these expenses. A reconciliation of GAAP to non-GAAP results has been provided in the financial statements included in this press release. An explanation of these measures is also included below under the heading “Use of Non-GAAP Financial Measures.”

Financial Commentary

“With the introduction of the TwinFin appliance, we are extremely well positioned competitively to take advantage of an IT spending recovery,” said Patrick Scannell, Netezza’s Senior Vice President and Chief Financial Officer. “In addition, the favorable market acceptance of the TwinFin platform has led to an improvement in our visibility. We believe that our investments in technology and distribution strengthen our lead in the market and set the foundation for the continued growth of our business.”

Conference Call Information

Date: November 24, 2009

Time: 4:30 p.m. Eastern Time (1:30 p.m. Pacific Time)

Toll-free North America: +1-866-700-6979

International dial-in number: +1-617-213-8836

Passcode: 81893099

A telephonic replay of the conference call will also be available two hours after the call and will run for two weeks. The replay can be accessed by dialing +1-888-286-8010 for participants in the United States and by dialing +1-617-801-6888 for participants outside the United States. The passcode for the replay is 81709365.

The webcast will be accessible from the "Investor Relations" section of Netezza's Web site (http://www.netezza.com). The webcast will be archived on Netezza's Web site for a period of one year.

About Netezza Corporation (NYSE: NZ)

Netezza Corporation is the global leader in data warehouse and analytic appliances that dramatically simplify high-performance analytics across an extended enterprise. Netezza’s technology enables organizations to process enormous amounts of captured data at exceptional speed, providing a significant competitive and operational advantage in today’s data-intensive industries, including digital media, energy, financial services, government, health and life sciences, retail and telecommunications. Netezza is headquartered in Marlborough, Massachusetts and has offices in Northern Virginia, the United Kingdom, Germany, France, Japan, Korea, Australia and Singapore. For more information about Netezza, please visit www.netezza.com.

Forward Looking Statements

The statements set forth above include forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements relate to Netezza’s future financial performance and Netezza's business prospects. These statements involve risk and uncertainties, including: market demand for our products; our limited operating history and history of losses; quarterly fluctuation of our business; our ability to attract and retain key personnel; our ability to develop and introduce new products and manage product transitions; competition in the data warehouse market; our dependence on certain key customers; our ability to protect our patents and intellectual property; our ability to defend against third party infringement claims, other litigation and contingent liabilities; and risks relating to operating internationally. For a further list and description of risks and uncertainties that could cause actual results to differ materially from those contained in the forward-looking statements in this release, we refer you to the “Risk Factors” section of Netezza's Quarterly Report on Form 10-Q for the fiscal quarter ended July 31, 2009, which is on file with the SEC and available in the investor relations section of Netezza's Web site at http://www.netezza.com and on the SEC Web site at http://www.sec.gov. In addition, any forward-looking statements included in this press release represent our views as of November 24, 2009. We anticipate that subsequent events and developments will cause our views to change. However, while we may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so. These forward-looking statements should not be relied upon as representing our views as of any date subsequent to November 24, 2009.

Use of Non-GAAP Financial Measures

To supplement Netezza’s unaudited condensed consolidated financial statements presented in accordance with GAAP, Netezza is presenting certain non-GAAP measures of financial performance. Netezza believes that these non-GAAP financial measures, when taken together with the corresponding GAAP financial measures, provide meaningful supplemental information regarding Netezza’s performance by excluding certain non-cash items that may not be indicative of Netezza’s core business or future outlook. The presentation of these non-GAAP measures is not intended to be considered in isolation from, as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP, and may be different from non-GAAP measures used by other companies. In addition, these non-GAAP measures have limitations in that they do not reflect all of the amounts associated with Netezza’s results of operations as determined in accordance with GAAP.

The non-GAAP financial measures presented by Netezza exclude non-cash stock-based compensation, amortization of acquired intangible assets, gain on bargain purchase and the related income tax effect of excluding these expenses. Because of the varying valuation methodologies and assumptions that companies use under FAS123(R), Netezza’s management believes that excluding non-cash stock-based compensation allows investors to analyze Netezza’s recurring business over multiple periods and provide more meaningful comparisons with other companies. Because the amount of amortization of acquired intangible assets varies in amount and frequency and is significantly affected by the timing and size of our acquisitions, Netezza’s management believes that excluding amortization of acquired intangible assets allows investors to analyze Netezza’s recurring business over multiple periods. The gain on bargain purchase, which was recorded in the three months ended July 31, 2009, resulted from the value of identifiable net assets acquired exceeding the value of the purchase price for Netezza’s acquisition of Tizor Systems, Inc. Since Netezza had no gain on bargain purchase in any prior periods and due to the one-time nature of this charge, Netezza is presenting its operating results without this gain to allow for a more meaningful comparison of current periods to prior year periods. Investors are encouraged to review the reconciliation of these non-GAAP measures to their most directly comparable GAAP financial measures provided in the financial statements included in this press release.

Netezza®, TwinFin™ and the Netezza logo are either registered trademarks or trademarks of Netezza Corporation.

Other names may be trademarks of their respective owners.

Netezza Corporation
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)

			October 31,		January 31,
			2009		2009

Assets

Current assets
	Cash and cash equivalents		$	70,408	$	111,635
	Short-term marketable securities			41,349		-
	Accounts receivable			39,090		34,457
	Inventory			23,142		18,409
	Deferred tax assets, net			12,962		12,723
	Restricted cash			60		379
	Prepaid expenses and other current assets			4,508		3,160
		Total current assets		191,519		180,763

Property and equipment, net				8,433		9,586
Deferred tax assets, net				10,222		9,415
Goodwill				2,000		2,000
Intangible assets, net				4,325		2,935
Long-term marketable securities				40,130		49,222
Restricted cash				639		739
Other long-term assets				3,300		4,199


		Total assets	$	260,568	$	258,859



Liabilities and stockholders' equity

Current liabilities
	Accounts payable		$	11,395	$	8,424
	Accrued expenses			7,107		6,301
	Accrued compensation and benefits			6,190		6,352
	Current portion of deferred revenue			35,350		46,356
		Total current liabilities		60,042		67,433

Long-term deferred revenue				9,668		11,979
Other long-term liabilities				1,953		2,825

		Total liabilities		71,663		82,237

		Stockholders' equity		188,905		176,622


		Total liabilities and stockholders' equity	$	260,568	$	258,859

Netezza Corporation
Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)


			For the three months ended						For the nine months ended
			October 31,						October 31,
			2009			2008			2009		2008

Revenue
	Product		$	33,342		$	38,941		$	96,013	$	105,401
	Services			14,393			11,638			41,023		31,789
		Total revenue		47,735			50,579			137,036		137,190

Cost of revenue
	Product			12,302			15,783			35,769		42,382
	Services			3,572			3,549			10,467		8,541
		Total cost of revenue		15,874			19,332			46,236		50,923

Gross margin				31,861			31,247			90,800		86,267

Operating expenses
	Sales and marketing			16,777			14,883			47,182		43,505
	Research and development			10,068			8,406			30,985		23,668
	General and administrative			3,872			3,985			11,822		10,767
		Total operating expenses		30,717			27,274			89,989		77,940

Operating income				1,144			3,973			811		8,327

Interest income				164			845			671		3,625
Interest expense				24			16			74		16
Other income (expense), net				(8	)		(36	)		370		(256	)

Income before income tax expense				1,276			4,766			1,778		11,680

	Income tax expense			426			1,302			435		2,943

Net income			$	850		$	3,464		$	1,343	$	8,737


Net income per common share:
	Basic		$	0.01		$	0.06		$	0.02	$	0.15
	Diluted		$	0.01		$	0.05		$	0.02	$	0.14

Shares used in per common share calculations:
	Basic			60,637			59,419			60,286		58,718
	Diluted			63,663			63,151			62,913		62,868

Netezza Corporation
Reconciliation of GAAP to Non-GAAP Financial Measures
(in thousands, except per share amounts)
(unaudited)


			For the three months ended						For the nine months ended
			October 31,						October 31,
			2009			2008			2009			2008

Non-GAAP financial measures and reconciliation:

GAAP cost of product revenue			$	12,302		$	15,783		$	35,769		$	42,382
	Non-cash stock-based compensation (1)			12			44			34			130
	Amortization of acquired intangible assets (2)			97			-			263			4
Non-GAAP cost of product revenue			$	12,193		$	15,739		$	35,472		$	42,248

GAAP cost of service revenue			$	3,572		$	3,549		$	10,467		$	8,541
	Non-cash stock-based compensation (1)			99			54			294			165
	Amortization of acquired intangible assets (2)			88			114			258			193
Non-GAAP cost of service revenue			$	3,385		$	3,381		$	9,915		$	8,183

GAAP gross margin			$	31,861		$	31,247		$	90,800		$	86,267
	Non-cash stock-based compensation (1)			111			98			328			295
	Amortization of acquired intangible assets (2)			185			114			521			197
Non-GAAP gross margin			$	32,157		$	31,459		$	91,649		$	86,759

GAAP sales and marketing expenses			$	16,777		$	14,883		$	47,182		$	43,505
	Non-cash stock-based compensation (1)			841			668			2,407			1,840
	Amortization of acquired intangible assets (2)			72			56			212			65
Non-GAAP sales and marketing expenses			$	15,864		$	14,159		$	44,563		$	41,600

GAAP research and development expenses			$	10,068		$	8,406		$	30,985		$	23,668
	Non-cash stock-based compensation (1)			717			529			2,034			1,529
	Amortization of acquired intangible assets (2)			10			2			30			47
Non-GAAP research and development expenses			$	9,341		$	7,875		$	28,921		$	22,092

GAAP general and administrative expenses			$	3,872		$	3,985		$	11,822		$	10,767
	Non-cash stock-based compensation (1)			850			764			2,432			1,997
	Amortization of acquired intangible assets (2)			2			7			6			19
Non-GAAP general and administrative expenses			$	3,020		$	3,214		$	9,384		$	8,751

GAAP operating expenses			$	30,717		$	27,274		$	89,989		$	77,940
	Non-cash stock-based compensation (1)			2,408			1,961			6,873			5,366
	Amortization of acquired intangible assets (2)			84			65			248			131
Non-GAAP operating expenses			$	28,225		$	25,248		$	82,868		$	72,443

GAAP operating income			$	1,144		$	3,973		$	811		$	8,327
	Non-cash stock-based compensation (1)			2,519			2,059			7,201			5,661
	Amortization of acquired intangible assets (2)			269			179			769			328
Non-GAAP operating income			$	3,932		$	6,211		$	8,781		$	14,316

GAAP other income (expense), net			$	(8	)	$	(36	)	$	370		$	(256	)
	Gain on bargain purchase (4)			-			-			(365	)		-
Non-GAAP other income (expense), net			$	(8	)	$	(36	)	$	5		$	(256	)

GAAP income tax expense			$	426		$	1,302		$	435		$	2,943
	Income tax effect (3)			666			-			2,131			-
Non-GAAP income tax expense			$	1,092		$	1,302		$	2,566		$	2,943

GAAP net income			$	850		$	3,464		$	1,343		$	8,737
	Non-cash stock-based compensation (1)			2,519			2,059			7,201			5,661
	Amortization of acquired intangible assets (2)			269			179			769			328
	Income tax effect (3)			(666	)		-			(2,131	)		-
	Gain on bargain purchase (4)			-			-			(365	)		-
Non-GAAP net income			$	2,972		$	5,702		$	6,817		$	14,726


GAAP net income per common share - basic			$	0.01		$	0.06		$	0.02		$	0.15
	Non-cash stock-based compensation (1)			0.05			0.04			0.12			0.10
	Amortization of acquired intangible assets (2)			0.00			0.00			0.01			0.00
	Income tax effect (3)			(0.01	)		-			(0.04	)		-
	Gain on bargain purchase (4)			-			-			-			-
Non-GAAP net income per common share - basic			$	0.05		$	0.10		$	0.11		$	0.25

GAAP net income per common share - diluted			$	0.01		$	0.05		$	0.02		$	0.14
	Non-cash stock-based compensation (1)			0.05			0.03			0.11			0.09
	Amortization of acquired intangible assets (2)			0.00			0.01			0.01			0.00
	Income tax effect (3)			(0.01	)		-			(0.03	)		-
	Gain on bargain purchase (4)			-			-			(0.00	)		-
Non-GAAP net income per common share - diluted			$	0.05		$	0.09		$	0.11		$	0.23

Shares used in per common share calculations:
	Basic			60,637			59,419			60,286			58,718
	Diluted			63,663			63,151			62,913			62,868


Footnotes - Adjustments

(1) Represents non-cash stock-based compensation expense as follows:

			For the three months ended						For the nine months ended
			October 31,						October 31,
			2009			2008			2009			2008

	Cost of product revenue		$	12		$	44		$	34		$	130
	Cost of services revenue			99			54			294			165
	Sales and marketing			841			668			2,407			1,840
	Research and development			717			529			2,034			1,529
	General and administrative			850			764			2,432			1,997
		Total non-cash stock-based compensation expense	$	2,519		$	2,059		$	7,201		$	5,661


(2) Represents amortization of acquired intangible assets:

			For the three months ended						For the nine months ended
			October 31,						October 31,
			2009			2008			2009			2008

	Cost of product revenue		$	97		$	-		$	263		$	4
	Cost of services revenue			88			114			258			193
	Sales and marketing			72			56			212			65
	Research and development			10			2			30			47
	General and administrative			2			7			6			19
		Total amortization expense	$	269		$	179		$	769		$	328

(3) Income tax effect of excluding stock-based compensation, amortization of acquired intangible assets and gain on bargain purchase. There was no adjustment for the comparable period in FY2009.

(4) Represents gain on bargain purchase resulting from the value of identifiable net assets acquired exceeding the value of the purchase price for Netezza's acquisition of Tizor Systems, Inc.

Contacts

Netezza Corporation
Investor Contact:
Patrick J. Scannell, Jr., +1 508-382-8200
Senior Vice President & Chief Financial Officer
ir@netezza.com
or
Media Contact:
Glen Zimmerman, +1 508-382-8267
Director, Public Relations
gzimmerman@netezza.com

Source: Netezza Corporation