• Total revenue decreased 2% sequentially and decreased 23% from the fourth quarter of fiscal year 2002. Product revenue decreased 4% sequentially, and was down 32% from the fourth quarter of fiscal year 2002. Service revenue increased 1% sequentially, and increased 7% from the fourth quarter of fiscal year 2002. Royalty revenue decreased 5% sequentially and was down 44% from the fourth quarter of fiscal year 2002.
• Gross margin was 76% of total revenue, up 1 point sequentially and up 2 points compared to the fourth quarter of fiscal year 2002.
• Cash flow from operations was positive.
• Cash and short and long-term marketable securities increased by $949,000 in the fourth quarter to $71.3 million.
• 43 new customers were added worldwide in the fourth quarter
• 320 customers made repeat purchases.
• 46 orders over $100,000 were received.
• Direct sales represented 41% of total revenue; reseller revenue represented 59% of total revenue.
• International business comprised approximately 25% of total revenue in the fourth quarter.

• NetScout released a new family of nGenius(R) WAN/Frame Relay Probes that will allow enterprises to extend management capabilities to T3/E3 circuits in their corporate data centers and to T1/E1 circuits at remote sites. The probes can optionally be configured with either Fast Ethernet LAN monitoring for integrated LAN and WAN performance management of remote facilities or an nGenius(R) Network Security Adaptor to extend the security perimeter of the corporate network.

• A new nGenius(R) Gigabit Ethernet over Copper Probe was released during the quarter for enterprises that have upgraded their network from Fast Ethernet to Gigabit Ethernet while leveraging their existing twisted pair cabling.

• A major NetScout achievement in fiscal 2003 was the announcement and initial delivery of its new Common Data Model (CDM(TM)) technology and architecture, which will allow customers to consolidate performance management functions through its single solution, the nGenius(R) Performance Manager that advances the state of network management by reducing the number of tools and the complexity required to optimize the monitoring, troubleshooting, and performance of networks. nGenius Performance Manager utilizes a simplified architecture that allows enterprises to address performance across the enterprise with superior information and greater ease. The nGenius Performance Manager provides capacity planning, application monitoring, network monitoring, troubleshooting, performance fault management, and service level management from a single, integrated solution.

• NetScout introduced an Alliance Program targeted at both network infrastructure vendors and network management application providers. The alliances will leverage the value of the nGenius Performance Management solution by incorporating data from a wider range of network devices and by providing nGenius information to complementary network management applications.
  

• New probes and probe add-ons were released during the year. The additions and enhancements focused on incorporating a reduced size chassis, broader functions and higher speeds:
  
  * New probe product lines with reduced chassis size from 3U to 1U for conserving rack space.
  
  * nGenius(R) Gigabit Ethernet Aggregation Probe and the nGenius Eight-Port Gigabit Ethernet Probe for the fast growing gigabit Ethernet market.
  
  * nGenius(R) ATM OC-3/OC-12 probe for high-speed optical ATM environments.
  
  * nGenius(R) Fibre Channel probe for expanding nGenius Performance Manager's LAN and WAN support to include storage area networks.
  
  * nGenius(R) Network Security Adaptor for lending focus, flexibility, and forensics to network-based intrusion detection system deployments.
  
  * nGenius(R) Gigabit Ethernet over Copper Probe.
  
  * nGenius(R) WAN/Frame Relay Probes.
  

• NetScout held its first User Conference that was attended by representatives from over 40 domestic and international companies.
  

• This year NetScout added 51 partners to its channel partner program with an emphasis on international alliances, including Digital China, Dimension Data (UK and Germany), and SCS Networks (Singapore).

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

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

                                                    March 31,     March 31,
                                                      2003          2002
         Assets
         Current assets:
            Cash and cash equivalents                $43,823        $19,332
            Marketable securities                     27,442         44,849
            Accounts receivable, net                  11,906         12,932
            Inventories                                2,982          3,698
            Refundable income taxes                    1,226            -
            Deferred income taxes                      1,782          1,293
            Prepaids and other current assets          2,088          2,876

               Total current assets                   91,249         84,980

         Fixed assets, net                             6,912          8,628
         Other intangible assets, net                    272          1,429
         Goodwill, net                                28,839         28,770
         Deferred income taxes                         7,651          7,617
         Long-term marketable securities                 -            5,084
         Other assets                                    -              790

                 Total assets                       $134,923       $137,298

         Liabilities and Stockholders' Equity
         Current liabilities:
            Accounts payable                          $1,403         $2,456
            Accrued compensation                       3,658          5,775
            Accrued other                              1,819          2,715
            Income tax payable                           -              542
            Deferred revenue                          16,242         13,103

               Total current liabilities              23,122         24,591

         Stockholders' equity:
            Common stock                                  34             34
            Additional paid-in capital               108,835        107,529
            Other comprehensive income                     7            -
            Deferred compensation                      (132)        (1,063)
            Treasury stock                          (26,366)       (25,755)
            Retained earnings                         29,423         31,962

               Total stockholders' equity            111,801        112,707

                 Total liabilities and
                  stockholders' equity              $134,923       $137,298

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

                                        Three Months Ended    Year Ended
                                             March 31,          March 31,
                                           2003     2002     2003     2002
         Revenue:
            Product                      $10,223  $15,016  $41,696   $51,583
            Service                        6,441    6,000   24,527    21,102
            License and royalty            1,053    1,887    5,435     9,599
               Total revenue              17,717   22,903   71,658    82,284

         Cost of revenue:
              Product (including stock-based
               compensation of $0, $0, $0
              and $1, respectively)        3,070    5,043   13,282    18,465
              Service (including stock-based
               compensation of $1, $2, $6
              and $8, respectively)        1,203      960    4,565     3,628
                Total cost of revenue      4,273    6,003   17,847    22,093

         Gross margin                     13,444   16,900   53,811    60,191

         Operating expenses:
            Research and development
             (including stock-based
             compensation of
            $42, $551, $821 and $2,193,
             respectively)                 4,266    5,361   17,100    19,841
            Sales and marketing (including
             stock-based compensation of $11
            $26, $65 and $109,
              respectively)                8,091    9,079   33,380    36,017
            General and administrative
             (including stock-based
             compensation
            of $1, $2, $6 and $7,
             respectively)                 1,494    2,376    7,447     8,107
            Amortization of goodwill         -      2,202      -       9,026
            Amortization of other intangible
             assets                          272      380    1,088     1,457
                Total operating expenses  14,123   19,398   59,015    74,448

         Loss from operations              (679)  (2,498)  (5,204)  (14,257)
         Interest income and other expenses,
          net                                248      360    1,145     1,919
         Loss before income tax benefit    (431)  (2,138)  (4,059)  (12,338)
         Income tax benefit                 (77)    (397)  (1,520)     (927)
         Net loss                         $(354) $(1,741) $(2,539) $(11,411)

         Basic and diluted net
          loss per share                 $(0.01)  $(0.06)  $(0.08)   $(0.39)

         Shares used in computing:
              Basic and diluted net loss per
               share                      29,981   29,606   29,897    29,533

         Calculation of non-GAAP financial
          measures:
         Net loss                         $(354) $(1,741) $(2,539) $(11,411)
         Stock-based compensation (as detailed
          in expense categories above)        55      581      898     2,318
         Amortization of goodwill and other
          intangible assets                  272    2,582    1,088    10,483
         Pro forma net income (loss) excluding
          acquisition and stock-based
            compensation costs              $(27)  $1,422    $(553)   $1,390

         Pro forma diluted net income (loss)
          per share, excluding
             acquisition and stock-based
              compensation costs            $-      $0.05   $(0.02)    $0.05

         Shares used in computing pro forma
          diluted net income (loss) per share,
             excluding acquisition and stock-
              based compensation costs    29,981   30,341   29,897    30,051

Copyright © 2003. NetScout Systems, Inc. All rights reserved worldwide. NetScout and the NetScout logo, and nGenius®® are registered trademarks of NetScout Systems, Inc. ART MIB, Because the Network is the Business, CDM and the CDM logo, and MasterCare and the MasterCare logo, are trademarks of NetScout Systems, Inc. Other brands, product names and trademarks are property of their respective owners. NetScout reserves the right, at its sole discretion, to make changes at any time in its technical information and specifications, and service and support programs.