Echelon Corporation (Echelon) has reported revenues of $131.07 million for the year-end 2008, compared with the revenues of $135.4 million in the previous year-end. It has also reported net loss of $25.8 million, or $0.64 per share, for the year-end 2008, compared with the net loss of $15.6 million, or $0.39 per share in the previous year-end.

Revenues for the quarter ended December 31, 2008 were $36.8 million compared to revenues of $46.9 million for the same period in 2007. Revenues were comprised of $11.7 million from LonWorks infrastructure products, $20.6 million from our Networked Energy Services (NES) products, and $4.5 million from the Enel project. Revenues for the quarter ended December 31, 2007 were comprised of $13.1 million from LonWorks infrastructure products, $27.7 million from NES products, and $6.1 million from the Enel project.

Gross margin for the fourth quarter of 2008 was 35.9%, compared with 40.9% for the same period in 2007. Gross margin for the year 2008 was 38.4%, compared to 36.5% for the same period in 2007. Total operating expenses for the quarter were $19.6 million compared to $19.2 million for the same period in 2007. Total operating expenses for the year 2008 were $78.5 million compared to $69.9 million for 2007.

The GAAP net loss for the fourth quarter was $6.3 million, or $0.15 cents per share compared to net income of $912,000, or $0.02 cents per share, for the same period in 2007. The non-GAAP net loss for the quarter, which excludes stock-based compensation expenses, was $2.5 million, or $0.06 cents per share, compared to non-GAAP net income of $4.0 million, or $0.09 cents per share, for the same period in 2007. All non-GAAP information in this release is reconciled in the Reconciliation of Non-GAAP to GAAP Results table below.

GAAP net loss for the year was $25.8 million, or $0.64 per share, compared to GAAP net loss of $15.7 million, or $0.39 per share for the same period in 2007. Non-GAAP net loss for the year was $11.4 million, or $0.28 per share, compared to non-GAAP net loss of $7.9 million, or $0.20 per share for the same period in 2007.

Given the challenging economic environment at year-end, we were pleased with our performance in the fourth quarter, said Ken Oshman, chairman and chief executive officer of Echelon. In the near-term, we expect the current economic slowdown to impact our LonWorks product line, mitigated by the continuing drive to reduce costs by conserving energy and by worldwide government initiatives around energy management. For our NES product line, the economic slowdown has also impacted the pace at which some utilities move forward with their smart grid projects. However, we continue to see healthy NES activity from a number of utilities in Western Europe and North America and based on our current order pipeline, we expect modest growth for the year. Long-term, we remain very optimistic and believe our product lines are well positioned for the future, concluded Oshman.

Business Outlook

The following statements are based on management’s current expectations. These statements are forward-looking, and actual results may differ materially. Please see risk factors of forward looking statements at the end of this release for a description of certain important risk factors that could cause actual results to differ. Echelon management offers the following guidance for the first quarter of 2009. All non-GAAP estimates exclude the impact of any stock-based compensation charges. We expect:

Total revenue to be around $17.0 million to $19.0 million, with NES revenue accounting for around 31%, LonWorks revenue 64%, and Enel project revenue 5%.

Non-GAAP gross margin to be in the range of 38.0% to 41.0%.

Non-GAAP operating expenses to be around $17.5 million to $18.0 million.

Stock-based compensation expenses to be around $3.5 million.

Our provision for income taxes is expected to be around $50,000.

Non-GAAP loss per share to be $0.25 to $0.30, based on a fully diluted weighted average shares outstanding of 40,500,000.

GAAP loss per share of between $0.34 and $0.38 for the quarter.