CHELMSFORD, MA -- Mercury Computer Systems, Inc. (NASDAQ: MRCY), a leading supplier of embedded real-time digital signal and image processing systems, today reported results for the first quarter fiscal 2002, ended September 30, 2001. Posting its 43rd consecutive quarter of profitable company performance, in the first quarter: --Revenues were $34.9 million, --Operating income was $4.2 million, representing 12% of revenues, --Net income was $4.0 million, representing 11% of revenues, and --EPS (diluted) was $0.17, exceeding Wall Street's expectations as tracked by Thomson Financial/First Call. "We are generally pleased with our first quarter results," said Jay Bertelli, president and CEO of Mercury Computer Systems. "The entire company responded early in the quarter to the need to lower expenses at every level of the operation. These measures resulted in exceeding our expectations in gross margin, operating income, and net income performance. Considering the continued market uncertainty and the tragic events of the last month, our associates can be quite proud for having met some very challenging business development and expense control objectives. We have confidence that Mercury is properly positioned to perform well in an improving business environment." Defense Electronics Segment First quarter revenues were $21.6 million, representing 62% of the company's total revenues for the quarter. As anticipated in last quarter's report, domestic defense revenues were soft when compared to the most recent several quarters. This softness had occurred primarily because of delays and "push outs" due to the lengthy defense strategic planning effort of the new administration. Looking forward, Mercury's defense electronics business is well positioned to capitalize on any increased need for additional intelligence, surveillance, and reconnaissance capabilities. Based on our visibility prior to the tragic events of September 11, and the subsequent and on-going U.S. response, the outlook for our defense electronics business indicates a return to more traditional annual growth rates beginning with anticipated recovery in the second half of fiscal 2002. It is still too early to predict exactly what effect the war on terrorism will have on Mercury's revenues. Medical Diagnostic Imaging Segment First quarter revenues were $9.9 million, accounting for 28% of the company's first quarter revenues, in line with management expectations. The Company continues to see a strong ramp in revenues coming from its digital cardiology business, at the same time it is experiencing some reduction in revenues coming from its maturing CT business. The MRI and PET business remain healthy. During the quarter, Mercury continued to make advancements in both product and business development of a new software-driven visualization and imaging platform. This highly scalable platform is expected to open new opportunities across multiple medical imaging modalities. OEM Solutions Segment First quarter revenues were $3.4 million, representing 10% of the company's revenues for the quarter. Revenues were in line with management's expectations, in part reflecting the downturn in the overall semiconductor manufacturing sector. Despite the market downturn in this sector, the company is continuing to experience success in developing new OEM design wins. Mercury currently has eight product line design wins with seven different OEMs ranging from startups to market leaders. While these successes will produce very little revenue in the near term, they represent potential new annual revenues estimated in excess of $25 million beginning in fiscal 2003 growing to approximately $50 million in fiscal 2004. Wireless Communications Segment The business unit continued to aggressively pursue the development of an initial design win in the 3G wireless infrastructure market. The refinement of the team's base station performance simulation capability has continued, with the latest results indicating that base stations operating with Mercury's communications computer, running the Company's current version of the Multi-User Detection (MUD) algorithm, could offer up to 70% improvement in total voice capacity. Management has continued to tightly control the investments in this area in consideration of the on-going uncertainty in the wireless industry, in general, and 3G wireless infrastructure business, in particular. We continue to make progress in the business development area and remain confident that we will eventually enter into a development agreement that will lead to an initial design win in what remains an extremely large potential new market for the Company. Additionally, we have made good progress in leveraging the new basic core product modules, developed by the wireless engineering team working in concert with our core engineering team, into system modules capable of addressing the requirements of new applications within our defense and commercial businesses.