• Total revenue was flat sequentially and decreased 9% from the second quarter of fiscal year 2002. Product revenue increased 2% sequentially, and is down 14% from the second quarter of fiscal year 2002. Service revenue increased 4% sequentially, and increased 18% from the second quarter of fiscal year 2002. Royalty revenue decreased 17% sequentially and was down 39% from the second quarter of fiscal year 2002.
• Gross margin was 74% of total revenue, down 2 points sequentially and flat compared to the second quarter of fiscal year 2002.
• Cash flow from operations was positive.
• Cash and short and long-term marketable securities increased by $300,000 in the second quarter to $70.0 million.
• 38 new customers were added worldwide contributing 20% of orders in the second quarter.
• Sales to 282 repeat customers were approximately 80% of orders in the second quarter.
• 47 large deals valued over $100,000 were placed in the second quarter.
• Direct sales represented 47% of total revenue; reseller revenue represented 53% of total revenue.
• International business comprised approximately 13% of total revenue in the second quarter.
• Competitive wins totaled over $3 million in the second quarter, involving approximately 29 deals against other leading network management vendors.

• Two new gigabit probes were released during the quarter, the nGenius(TM) Gigabit Ethernet Aggregation Probe and the nGenius eight- port Gigabit Ethernet Probe for the fast growing gigabit Ethernet market.
• A new ATM OC-3/OC-12 probe was released during the quarter.
• Shortly after the end of the quarter a new storage area network solution began beta testing and is planned for general release by year- end.
• The long-standing agreement with Cisco Systems was extended to allow Cisco to continue shipping nGenius Real-Time Monitor as part of its CiscoWorks LAN Management Solution.

                            NetScout Systems, Inc.
                            Condensed Consolidated
                                Balance Sheets
                                (In thousands)
                                 (Unaudited)

                                                    September 30,    March 31,
                                                          2002         2002

    Assets
    Current assets:
       Cash and cash equivalents                       $26,921        $19,332
       Marketable securities                            37,978         44,849
       Accounts receivable, net                         10,201         12,932
       Inventories                                       3,098          3,698
       Deferred income taxes                             1,418          1,293
       Prepaids and other current assets                 1,152          2,876

          Total current assets                          80,768         84,980

    Fixed assets, net                                    7,889          8,628

    Goodwill and other intangible assets,
     net                                                29,655         30,199
    Deferred income taxes                                8,968          7,617
    Long-term marketable securities                      5,070          5,084
    Other assets                                           -              790

            Total assets                              $132,350       $137,298


    Liabilities and Stockholders' Equity
    Current liabilities:
       Accounts payable                                 $1,611         $2,456
       Accrued compensation                              3,825          5,775
       Accrued other                                     2,211          2,715
       Income tax payable                                  346            542
       Deferred revenue                                 12,350         13,103

          Total current liabilities                     20,343         24,591

    Stockholders' equity:
       Common stock                                         34             34
       Additional paid-in capital                      108,437        107,529
       Other comprehensive income                           55            -
       Deferred compensation                              (258)        (1,063)
       Treasury stock                                  (26,366)       (25,755)
       Retained earnings                                30,105         31,962

          Total stockholders' equity                   112,007        112,707

            Total liabilities and
             stockholders' equity                     $132,350       $137,298

                            NetScout Systems, Inc.
               Condensed Consolidated Statements of Operations
                                (In thousands)
                                 (Unaudited)


                                          Three Months Ended  Six Months Ended
                                              September 30,    September 30,
                                             2002     2001     2002      2001

    Revenue:
       Product                             $10,511  $12,263  $20,832  $22,688
       Service                               5,946    5,031   11,685    9,730
       License and royalty                   1,480    2,438    3,269    5,480
          Total revenue                     17,937   19,732   35,786   37,898

    Cost of revenue:
         Product                             3,475    4,336    6,849    8,786
         Service (including stock-based
          compensation of $1, $2, $3
          and $4, respectively)              1,160      870    2,134    1,787
           Total cost of revenue             4,635    5,206    8,983   10,573

    Gross margin                            13,302   14,526   26,803   27,325

    Operating expenses:
       Research and development (including
        stock-based compensation
       $46, $549, $733 and $1,091,
        respectively)                        3,982    4,983    8,784    9,596
       Sales and marketing (including
        stock-based compensation of $16
       $29, $37 and $58, respectively)       8,316    8,487   16,787   17,577
       General and administrative
        (including stock-based
        compensation
       of $2, $2, $4 and $4, respectively)   2,138    1,904    4,245    3,618
       Amortization of other intangible
        assets                                 272      359      544      718
       Amortization of goodwill                -      2,275      -      4,550
           Total operating expenses         14,708   18,008   30,360   36,059

    Loss from operations                    (1,406)  (3,482)  (3,557)  (8,734)

    Interest income and other expenses,
     net                                       326      499      639    1,186
    Loss before benefit from income taxes   (1,080)  (2,983)  (2,918)  (7,548)
    Benefit from income taxes                 (370)     (38)  (1,061)    (465)
    Net loss                                 $(710) $(2,945) $(1,857) $(7,083)

    Basic and diluted net loss per share    $(0.02)  $(0.10)  $(0.06)  $(0.24)

    Shares used in computing:
         Basic and diluted net loss per
          share                             29,865   29,444   29,834   29,441

    Supplemental information:
    Net loss                                 $(710) $(2,945) $(1,857) $(7,083)
    Stock-based compensation (as detailed
     in expense categories above)               65      582      777    1,157
    Amortization of goodwill and other
     intangible assets                         272    2,634      544    5,268
    Pro forma net income (loss) excluding
     acquisition and stock-based
       compensation costs                    $(373)    $271    $(536)   $(658)

    Pro forma diluted net income (loss)
     per share, excluding
        acquisition and stock-based
         compensation costs                 $(0.01)   $0.01   $(0.02)  $(0.02)

    Shares used in computing pro forma
     diluted net income (loss) per share
        excluding acquisition and stock-
         based compensation costs           29,865   29,785   29,834   29,441
		 
		 

Catherine Taylor
Director of Investor Relations
NetScout Systems, Inc.
978-614-4286
IR@netscout.com