EX-99 2 exhibit_a.htm

6-K

EXHIBIT “A”

CERAGON NETWORKS^® REPORTS RECORD THIRD
QUARTER 2006 FINANCIAL RESULTS
“Revenues and Profitability Set New All-time Records”

        TEL AVIV, Israel, October 23, 2006 – Ceragon Networks Ltd. (NASDAQ and TASE: CRNT), www.ceragon.com, a leading provider of high-capacity wireless backhaul solutions, today reported results for the third quarter ended September 30, 2006.

        Revenues for the third quarter of 2006 were $30.5 million, up 62% from $18.9 million for the third quarter of 2005 and 29% from $23.6 million in the second quarter of 2006.

        Net income on a GAAP basis for the third quarter of 2006 was $1.5 million, or $0.06 per basic and diluted share.

        Net income on a non-GAAP basis, which excludes equity-based compensation expense, was $1.9 million, or $0.07 per basic and diluted share, compared to non-GAAP net income of $887,000, or $0.03 per basic and diluted share in the third quarter of 2005. Expense related to equity-based compensation in the third quarter of 2006 was $335,000. A reconciliation table of GAAP and non-GAAP results is provided below.

        Gross margin on a GAAP basis in the third quarter of 2006 was 31.4% of revenues. On a non-GAAP basis gross margin for the third quarter of 2006 was 31.5% of revenues.

        The Company ended the quarter with cash and liquid investments of $28.7 million.

        “This was a very strong quarter for us,” said Ira Palti, President and CEO of Ceragon. “We crossed the $30 million-per-quarter mark for the first time and, more importantly, we reported record net income and the highest net profit margin in our history. We attribute the better than expected results mainly to the success of our go-to-market strategy which focuses on a combination of direct sales, OEM partners and strong local distributors.”

        “Revenues from each of our OEM partners grew substantially this quarter, and we expect OEM business to account for a gradually growing proportion of total revenue in the future. In a market that is characterized by consolidation, convergence and the shift toward all-IP networks, we expect to continue to grow both revenues and profitability through a combination of continuous product innovation, cost reduction and strong OEM partners to augment direct sales.”

        A conference call discussing Ceragon’s results for the third quarter of 2006 will take place today, October 23, 2006, at 9:00 a.m. (EDT). Investors can join the Company’s teleconference by calling (719) 457-2698 and referencing confirmation number 8954906 at 8:50 a.m. EDT

        Investors are also invited to listen to the call live via the Internet by accessing Ceragon Networks’ website at the investors’ page: http://www.ceragon.com/site/Investor_events.asp, selecting the webcast link, and following the registration instructions.

        If you are unable to join us live, the replay numbers are: (888) 203-1112 or international: (719) 457-0820. Access code is: 8954906. A replay of both the call and the webcast link will be accessible through November 2, 2006.

About Ceragon Networks Ltd.

Ceragon Networks Ltd. (NASDAQ and TASE: CRNT) is a leading provider of high-capacity wireless backhaul solutions for cellular and fixed wireless operators, enterprises and government organizations. Ceragon’s modular FibeAir^® product family is recognized as the gold standard for backhaul transmission and is also one of the top solutions chosen by cellular operators for SONET/SDH rings. A scalable, future-proof solution for wireless transport of broadband services, FibeAir operates across multiple frequencies for IP and SONET/SDH protocols, supporting the emerging needs of next-generation networks that are evolving to all-IP based services, including triple-play. It leads the market in IP backhaul, offering a unique, native IP solution that provides the efficient, robust connectivity required for WiFi, WiMAX and converged networks. Ceragon supports its growing base of more than 180 customers in 70 countries by operating an extensive sales network comprising 17 offices and numerous partners located around the world. More information is available at www.ceragon.com.

        Ceragon Networks^®, CeraView^®, FibeAir^® and the FibeAir^® design mark are registered trademarks of Ceragon Networks Ltd., and Ceragon™, PolyView™, ConfigAir™, CeraMon™, EtherAir™, QuickAir™, QuickAir Partner Program™, QuickAir Partner Certification Program™, QuickAir Partner Zone™, EncryptAir™ and Microwave Fiber™ are trademarks of Ceragon Networks Ltd.

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Ceragon Reports third Quarter 2006 Results

CONSOLIDATED STATEMENTS OF OPERATIONS
U.S. dollars in thousands, except share and per share data

			Nine months ended September 30						Three months ended September 30,
			2006			2005*			2006			2005*
Revenues			$	75,470		$	53,667		$	30,508		$	18,876
Cost of revenues				49,314			32,442			20,936			11,639
Gross profit				26,156			21,225			9,572			7,237
Operating expenses:
Research and development				9,850			8,026			3,288			2,668
Less: grants and participations				1,543			1,339			486			451
Research and development, net				8,307			6,687			2,802			2,217
Selling and marketing				12,312			10,028			4,252			3,556
General and administrative				3,736			2,307			1,264			888
Total operating expenses				24,355			19,022			8,318			6,661
Operating profit				1,801			2,203			1,254			576
Financial income, net				868			419			293			193
Net income			$	2,669		$	2,622		$	1,547		$	769
Basic net earnings per share			$	0.10		$	0.10		$	0.06		$	0.03
Diluted net earnings per share			$	0.09		$	0.09		$	0.06		$	0.03
Weighted average number of shares used
in computing basic net earnings per
share				26,602,155			26,085,111			26,721,996			26,251,299
Weighted average number of shares used
in computing diluted net earnings
per share				28,177,826			28,307,070			28,080,684			28,299,124

* The amortization of deferred stock compensation was reclassified in the relevant expense line.

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Ceragon Reports Third Quarter 2006 Results

CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands, except share and per share data

			September 30, 2006			December 31, 2005
ASSETS
CURRENT ASSETS:
Cash and cash equivalents			$	9,976		$	10,315
Short-term bank deposits				3,838			3,917
Marketable securities				6,357			5,654
Trade receivables, net				26,744			15,079
Other accounts receivable and prepaid expenses				7,366			5,141
Inventories				21,321			16,144
Total current assets				75,602			56,250
LONG-TERM INVESTMENTS:
Long-term bank deposits				3,356			5,322
Long-term marketable securities				5,134			7,814
Severance pay funds				2,564			2,142
Total long-term investments				11,054			15,278
PROPERTY AND EQUIPMENT, NET				2,409			2,464
Total assets			$	89,065		$	73,992
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade payables			$	19,257		$	12,382
Deferred revenues				4,945			3,456
Other accounts payable and accrued expenses				6,633			5,541
Total current liabilities				30,835			21,379
ACCRUED SEVERANCE PAY				4,278			3,424
SHAREHOLDERS' EQUITY:
Share capital:
Ordinary shares of NIS 0.01 par value: Authorized: 40,000,000 shares as of
December 31, 2005 and September 30, 2006; Issued and outstanding:
26,335,003 shares and 26,775,408 shares as of December 31, 2005 and
September 30, 2006, respectively				65			65
Additional paid-in capital				179,310			177,338
Deferred stock compensation				-			(26	)
Other comprehensive Income				143			51
Accumulated deficits				(125,566	)		(128,239	)
Total shareholders' equity				53,952			49,189
Total liabilities and shareholders' equity			$	89,065		$	73,992

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Ceragon Reports Third Quarter 2006 Results

RECONCILIATION OF NON-GAAP FINANCIAL RESULTS
U.S. dollars in thousands, except share and per share data

			Quarter Ended September 30, 2006									Quarter ended September 30, 2005
			GAAP (as reported)			Adjustments (*)			Non-GAAP			Non-GAAP (**)
Revenues			$	30,508					$	30,508		$	18,876
Cost of revenues				20,936			41			20,895			11,639
Gross profit				9,572						9,613			7,237
Operating expenses:
Research and development				3,288						3,227			2,688
Less: grants and participations				486						486			451
Research and development, net				2,802			61			2,741			2,217
Selling and marketing				4,252			91			4,161			3,556
General and administrative				1,264			142			1,122			770
Total operating expenses				8,318						8,024			6,543
Operating profit				1,254						1,589			694
Financial income, net				293						293			193
Net income			$	1,547					$	1,882		$	887
Basic net earnings per share			$	0.06					$	0.07		$	0.03
Diluted net earnings per share			$	0.06					$	0.07		$	0.03
Weighted average number of shares used in
computing basic net earnings per share				26,721,996						26,721,996			26,251,299
Weighted average number of shares used in
computing diluted net earnings per share				28,080,684						28,080,684			28,299,124
Total adjustments							335						118

(*) Adjustments related to equity based
compensation expenses according to
SFAS 123 (R)

(**)Adjustments related to equity based
compensation expenses according to APB 25

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Ceragon Reports Third Quarter 2006 Results

RECONCILIATION OF NON-GAAP FINANCIAL RESULTS
U.S. dollars in thousands, except share and per share data

			Nine months ended September 30, 2006									Nine months ended September 30, 2005
			GAAP (as reported)			Adjustments (*)			Non-GAAP			Non-GAAP (**)
Revenues			$	75,470					$	75,470		$	53,667
Cost of revenues				49,314			133			49,181			32,440
Gross profit				26,156						26,289			21,227
Operating expenses:
Research and development				9,850						9,609			8,014
Less: grants and participations				1,543						1,543			1,339
Research and development, net				8,307			241			8,066			6,675
Selling and marketing				12,312			341			11,971			10,012
General and administrative				3,736			627			3,109			2,179
Total operating expenses				24,355						23,146			18,866
Operating profit				1,801						3,143			2,361
Financial income, net				868						868			419
Net income			$	2,669					$	4,011		$	2,780
Basic net earnings per share			$	0.10					$	0.15		$	0.11
Diluted net earnings per share			$	0.09					$	0.14		$	0.10
Weighted average number of shares used in
computing basic net earnings per share				26,602,155						26,602,155			26,085,111
Weighted average number of shares used in
computing diluted net earnings per share				28,177,826						28,177,826			28,307,070
Total adjustments							1,342						158

(*) Adjustments related to equity based
compensation expenses according to
SFAS 123 (R)

(**)Adjustments related to equity based
compensation expenses according to APB 25

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Ceragon Reports Third Quarter 2006 Results

This press release may contain statements concerning Ceragon’s future prospects that are “forward-looking statements” under the Private Securities Litigation Reform Act of 1995. These statements are based on current expectations and projections that involve a number of risks and uncertainties. There can be no assurance that future results will be achieved, and actual results could differ materially from forecasts and estimates. Important factors that could cause actual results to differ materially from forecasts and estimates include: Ceragon’s limited operating history and history of losses; Ceragon’s dependence on a limited number of key customers, independent manufacturers and suppliers; and the demand for Ceragon’s products and technology. These risks and uncertainties, as well as others, are discussed in greater detail in Ceragon’s Annual Report on Form 20-F and Ceragon’s other filings with the Securities and Exchange Commission. Forward-looking statements speak only as of the date on which they are made, and Ceragon undertakes no commitment to revise or update any forward-looking statement in order to reflect events or circumstances after the date any such statement is made.

Contacts:

Vered Shaked
Ceragon Networks Ltd.
+972-3-645-5513
vereds@ceragon.com

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