Revenues for the third quarter of 2009 were $4.4 million compared to $6.9 million for the third quarter of 2008. Revenues in the quarter were primarily impacted by broadband telecom revenues, which decreased approximately 45% to $3.6 million in the third quarter of 2009 compared to $6.5 million for the third quarter of 2008. Professional services revenues increased to $368,000 compared to $209,000 on a year to year basis. Gross margin for the third quarter of 2009 was 25% compared to 58% for the third quarter of 2008. The decrease in gross margin percentage was primarily due to a revenue mix shift toward lower margin products, an excess and obsolete inventory charge and reduced utilization of the manufacturing facility. The company reported a net loss of $2.4 million, or $(0.34) per share for the third quarter of 2009, compared to a net loss of $55,000, or $(0.01) per share in the third quarter of 2008.

"The significant slowdown in purchases at our top Tier 1 customer accounts resulted in reductions in revenue that were more significant than we expected," said Gregory B. Kalush, CEO and President of Interphase. "While it is difficult to predict the timing of customer purchases returning to normal levels due to the uncertainty of network deployments in the industry, we remain encouraged about our longer term future as we continue to be awarded new design wins. Additionally, we have begun targeting other markets in which we believe that we can be successful."

For the first nine months of 2009, revenues decreased slightly to $20.9 million, compared to $21.0 million for the first nine months of 2008. Gross margin decreased to 51% for the nine months ended September 30, 2009, compared to 54% for the same period in 2008. Net loss for the first nine months of 2009 was $1.6 million, or ($0.23) per share compared to $1.7 million, or ($0.27) per share for the first nine months of 2008. The company's balance sheet continues to be strong with a working capital position of $24.7 million, including cash and marketable securities of $20.5 million on September 30, 2009.

About Interphase Corporation

Interphase Corporation (NASDAQ: INPH) delivers solutions for network connectivity, interworking, and packet processing for key applications for the communications, Mil/Aero, and enterprise markets.