Zebra Technologies Announces 2007 Third Quarter Financial Results

Zebra Technologies Corporation (NASDAQ: ZBRA) announced 16.5% growth in net sales to a record $217,218,000 for the quarter ended September 29, 2007, up from $186,386,000 for the third quarter of 2006. Net income for the period was $26,961,000, or $0.39 per diluted share, compared with a net loss of $4,263,000, or $0.06 per basic and diluted share, a year ago.

“Record international and North American sales and further improvement in gross profit margin led to solid growth and financial performance,” stated Anders Gustafsson, Zebra’s chief executive officer. “Zebra continues to benefit from focused activities to accelerate sales growth through further penetration of targeted vertical markets, placing more Zebra sales representatives in high-growth regions, and building stronger relationships with channel partners and key accounts. Operational improvements are resulting in lower manufacturing variances to increase profitability. Our acquisition program is positioning the company for further growth by expanding our customer base, adding to our technology portfolio and providing additional high-value solutions to enable companies to identify, locate and track critical assets. All of these actions make Zebra a more formidable competitor and position the company for further growth and improvement as we look to 2008 and beyond.”

Discussion and Analysis
For the third quarter of 2007 compared with the third quarter of 2006:

• All international territories achieved strong sales growth, with record sales in Latin America and Asia Pacific. The company’s North America territory achieved record sales with an improving growth trend. Sales from WhereNet Corp., which was acquired in January 2007, and Swecoin, which was acquired in October 2006, supplemented sales growth. Foreign currency translation also had a favorable effect on sales growth.
• Gross profit margin of 48.2% increased from 47.1%. Profitability was positively affected by the higher sales volume and a favorable product mix, as well as improvements in manufacturing variances and movements in foreign exchange translation.
• Consolidated expenses for sales and marketing, research and development, and general and administrative activities increased principally from the addition of personnel related to the acquisitions of WhereNet, Swecoin and proveo, which Zebra acquired in the third quarter of 2007. In addition, general and administrative expenses include $3,979,000, or $0.04 per share, in one-time charges related to the retirement of former CEO Ed Kaplan and Board of Director project activity related to the search and hiring of a new chief executive officer.

On a non-GAAP basis, excluding charges for stock-based compensation and the amortization of intangible assets, the company’s gross profit margin for the third quarter was 48.3%, compared with 47.2% for the previous year. Operating income on a non-GAAP basis was $44,726,000, or 20.6% of net sales.

For the first nine months of 2007, net sales increased 15.5% to $634,706,000 from $549,621,000 for the corresponding period a year ago. Net income totaled $79,310,000, or $1.15 per diluted share, versus $49,500,000, or $0.70 per diluted share, for the first three quarters of 2006.

At September 29, 2007, Zebra had $469,360,000 in cash and investments, and no long-term debt. Net inventories were $84,512,000, and accounts receivable, net, were $133,880,000.

Fourth Quarter Outlook
Zebra also announced its financial forecast for the fourth quarter of 2007. Net sales are expected within a range of $215,000,000 and $227,000,000. Earnings are expected within a range of $0.38 and $0.45 per diluted share.

Use of Non-GAAP Financial Measures
In addition to results presented in accordance with Generally Accepted Accounting Principles (“GAAP”), this release includes non-GAAP financial measures stated above and in the Supplemental Information chart attached to this press release. The Supplemental Information chart reconciles these non-GAAP financial measures to the GAAP financial measures. Management believes these non-GAAP financial measures provide information useful to investors in understanding the underlying operational performance of Zebra’s business. Management uses these non-GAAP measures internally to assess Zebra’s current performance and to make strategic decisions. These non-GAAP measures should not, however, be considered a substitute for GAAP financial measures.

Forward-looking Statement
This press release contains forward-looking statements, as defined by the Private Securities Litigation Reform Act of 1995, including, without limitation, the statements regarding the company’s financial forecast for the fourth quarter of 2007 stated in the paragraph above. Actual results may differ from those expressed or implied in the company’s forward-looking statements. These statements represent estimates only as of the date they were made. Zebra may elect to update forward-looking statements but expressly disclaims any obligation to do so, even if the company’s estimates change.

These forward-looking statements are based on current expectations, forecasts and assumptions and are subject to the risks and uncertainties inherent in Zebra’s industry, market conditions, general domestic and international economic conditions, and other factors. These factors include market conditions in North America and other geographic regions and market acceptance of Zebra’s printer and software products and competitors’ product offerings and the potential effects of technological changes. Other factors include U.S. and foreign regulations that pertain to electrical and electronic equipment, including European Union and other country directives relating to the collection, recycling, treatment and disposal of products and the reduction or elimination of certain specified materials in such products. Zebra’s failure to comply with these regulations may subject Zebra to penalties, prevent Zebra from selling its products in a certain country, or increase the cost of supplying the products. Profits and profitability will be affected by the company’s ability to control manufacturing and operating costs. Because of a large investment portfolio, interest rates and financial market conditions will also have an impact on results. Foreign exchange rates will have an effect on financial results because of the large percentage of our international sales. The outcome of litigation in which Zebra is involved, and particularly litigation or claims related to alleged infringement of third-party intellectual property rights, is another factor. In addition, the acquisitions of WhereNet, which was completed in January 2007, and proveo, which was completed in the third quarter of 2007, have risks relating to integrating these companies’ businesses and operations with Zebra’s. These and other factors could have an adverse effect on Zebra’s revenues, gross profit margins and results of operations and increase the volatility of our financial results. When used in this release and documents referenced, the words “anticipate,” “believe,” “estimate,” and “expect” and similar expressions, as they relate to the company or its management, are intended to identify such forward-looking statements, but are not the exclusive means of identifying these statements. Descriptions of the risks, uncertainties and other factors that could affect the company’s future operations and results can be found in Zebra’s filings with the Securities and Exchange Commission. In particular, readers are referred to Zebra’s Form 10-K for the year ended December 31, 2006.

Zebra Technologies Corporation helps companies identify, locate and track assets, transactions and people with on-demand specialty digital printing and automatic identification solutions in more than 100 countries around the world. More than 90% of Fortune 500 companies use innovative and reliable Zebra printers, supplies, RFID products and software to increase productivity, improve quality, lower costs, and deliver better customer service. Information about Zebra and Zebra-brand products can be found at http://www.zebra.com