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Zoom Telephonics Reports Results for Quarter and 9 Months Ending 9/30/96

Boston, October 22, 1996 - Zoom Telephonics, Inc. (NASDAQ: ZOOM), a leading manufacturer of faxmodems and other personal computer communications products, today announced sales for its third quarter ending September 30, 1996 of $20.0 million, down 15% from $23.5 million in the third quarter of 1995, primarily due to lower average faxmodem selling prices. Sales for the first nine months of 1996 grew 22% to $74.4 million from $61.0 million in the first nine months of 1995, primarily due to unit volume increases for V.34 faxmodems.

Third quarter 1996 net income of $253 thousand or $.03 per share was down from $1.54 million or $.25 per share in the third quarter of 1995, primarily due to lower sales and gross margin. Net income for the first nine months of 1996 of $2.72 million or $.38 per share was down from $3.75 million or $ .62 per share for the first nine months of 1995, primarily due to lower gross margin.

Sales of branded Zoom products in North America continued to account for the majority of sales, in spite of significant gains in other markets. Worldwide OEM sales were 19% of Zoom's sales in the third quarter of 1996, up from 9% in the third quarter of 1995. Zoom-brand sales outside North America were 16% of sales in the third quarter of 1996, equal to the third quarter of 1995.

Gross margin declined to 19.4% in the third quarter of 1996 from 25.7% in the third quarter of 1995, reflecting an increase in lower-margin OEM sales and increased price competition. These factors also affected the first nine months of 1996, as gross margin dropped from 24.9% to 20.7%.

Zoom's acquisition of Tribe Computer Products on June 24, 1996 reduced third quarter 1996 net income by 2 cents per share. Only $262 thousand in Tribe products were shipped in the third quarter, as Zoom worked to cost-reduce Tribe products and integrate them into Zoom's production. Zoom expects that production of Tribe products will be fully integrated in the fourth quarter of 1996. Zoom expects to close the Tribe Alameda office in late November 1996, and to move Tribe activities to Boston at that time.

Zoom's operating expenses for the third quarter of 1996 rose to $3,838,000 or 19.2% of sales from $3,627,000 or 15.4% in the third quarter of 1995, as non-Tribe expenses declined slightly but increased as a percentage of sales. Research and Development expense rose to $715,000 or 3.6% of sales from $447,000 or 1.9% of sales, primarily due to increased personnel costs. Sales and Marketing expenses decreased to $2,199,000 from $2,442,000 but rose in percentage terms to 11% from 10.4%, reflecting increased OEM sales and the importance of variable selling expenses. General and Administrative expenses increased to $924,000 or 4.6% of sales from $738,000 or 3.1%, primarily reflecting increased personnel costs.

"We expected a tough quarter, and we got what we expected," said Frank Manning, Zoom's President. "Pricing dropped abruptly late in the second quarter. The rate of decline slowed considerably during the third quarter, but we had to live with lower prices. We do hope for some future gross margin improvement due to lower product costs and the introduction of certain new higher-margin products. Unit volume remains fairly strong, and we recently began a relationship with an important PC manufacturer. In addition, we recently began shipping to CompUSA, and we're extremely pleased about this opportunity. ComStarTM SVD began shipping during the last week of September, and there appears to be strong demand for this product, which includes a 33.6 Kbps faxmodem, voice mail, full-duplex speakerphone, AudioSpanTM simultaneous voice and data, and our new ZoomLinkTM CD-ROM. We have begun shipping a number of new Zoom Business Products to go with the Zoom/MultiLine. And we're close to shipping three more new products in the USA, including the Zoom/FaxModem 33.6 SVD low-cost AudioSpan product, the ComStar XT SVD external version of our internal Comstar SVD, and our new line of internal ISDN products. Internationally we continue to expand our product line and the number of countries where we're selling products. We have a strong product line now, and believe that we're well-positioned to take advantage of expected growth from 56 Kbps modems, 128 Kbps ISDN products, and even higher speed solutions in years to come."

Zoom's balance sheet remained strong, with a current ratio of 8.0. The company ended the quarter with $12.6 million in cash and shareholders' equity of $6.33 per share.

For additional information, please contact Investor Relations, Zoom Telephonics, 207 South Street, Boston, Massachusetts 02111, telephone (617) 423-1072, fax (617) 338-5015, E-mail address Investor@Zoomtel.com Zoom's World Wide Web site is www.zoomtel.com

More financial information

This press release contains certain forward-looking statements including, without limitation, statements relating to the company's gross margins and the shipment and introduction of new products. These forward-looking statements involve risks and uncertainties, including that there can be no assurance that the Company will be able to increase its margins, that any of the Company's new products will be introduced on a timely basis, if at all, or that the company's new products if introduced will achieve market acceptance, and other risks and uncertainties indicated from time to time in Zoom's filings with the Securities and Exchange Commission.

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