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Stratos Announces Third Quarter Financial Results

--Results reflect improvement in margins and profitability--

BETHESDA, MD (November 2, 2006) - Stratos Global Corp. (TSX: SGB), the leading provider of advanced mobile and fixed-site remote communications solutions, today announced financial results for the third quarter ended September 30, 2006.

Third Quarter Highlights

  • Revenue totals US$138.6 million, a 46 percent increase from the same quarter a year ago.
  • Gross margin (excluding favorable commercial settlements) improves to 26.3 percent compared to 23.6 percent in the second quarter of 2006.
  • Segment earnings* (excluding favorable commercial settlements and mark to market adjustments relating to certain stock-based compensation plans) reach US$18.7 million, up 28 percent from the third quarter of 2005 (as adjusted below) and a 28 percent sequential quarterly increase.
  • Adjusted net earnings (as described below) total US$2.7 million, or US$0.06 per share, up 69 percent from the same quarter of 2005.
  • Cash flow from operations, before working capital requirements, increases to US$13.3 million, up 47 percent sequentially (excluding the non-cash portion of favorable commercial settlements and mark to market adjustments).
  • Liquidity continues to remain strong with cash-on-hand of US$48.8 million on September 30, 2006.

Third Quarter Results
For the quarter, the Corporation reported revenue of US$138.6 million and segment earnings of US$22.6 million representing increases of 46 percent and 90 percent, respectively, compared with the US$95.2 million of revenue and US$11.9 million of segment earnings in the same quarter a year ago. Third quarter 2006 segment earnings were positively impacted by favorable commercial settlements related to satellite airtime volume discounts and telecommunications costs totaling US$3.3 million, of which US$2.1 million related to prior years. Also favorably impacting third quarter segment earnings were mark to market adjustments of US$0.6 million relating to certain stock-based compensation plans. Third quarter 2005 segment earnings were negatively impacted by US$1.7 million as a result of hurricanes Katrina and Rita in the Gulf of Mexico and by US$1.0 million as a result of the write-off of previously deferred acquisition costs. Excluding these items, adjusted segment earnings (a non-GAAP measure) improved by 28 percent compared to the same quarter a year ago. The growth in revenue and improvement in segment earnings compared with the third quarter of 2005 reflect the acquisition of Xantic (which was consolidated with Stratos beginning February 14, 2006), growth in newer technology Inmarsat services, as well as higher volume discounts earned from Inmarsat.

The Corporation also reported net earnings of US$0.5 million, or US$0.01 basic earnings per share, for the third quarter of 2006, compared with a net loss of US$0.5 million, or US$0.01 per share in the third quarter of 2005. Results for the third quarter of 2006 were negatively impacted by after-tax severance and other costs of US$3.0 million, or US$0.07 per share, related primarily to cost reduction initiatives, as well as by non-cash, after-tax amortization of customer relationship intangibles of US$1.8 million, or US$0.04 per share, related to the Xantic and Plenexis acquisitions. These unfavorable items were partially offset by the favorable commercial settlements and mark to market adjustments totaling US$2.6 million after-tax, or US$0.06 per share. Third quarter 2005 results were negatively impacted by hurricanes Katrina and Rita, and the write-off of previously deferred acquisition costs. Excluding these items, the Corporation reported adjusted net earnings (a non-GAAP measure) for the quarter of US$2.7 million, or US$0.06 per share, compared with adjusted net earnings of US$1.6 million, or US$0.04 per share in the third quarter of 2005.

In the Mobile Satellite Services (MSS) business, revenue increased by 61 percent to US$107.7 million in the third quarter of 2006, as compared to the same quarter in 2005, reflecting increased revenue from the Xantic acquisition and growth in newer technology Inmarsat services. On a sequential quarterly basis, revenue from the sale of Inmarsat services increased by 1 percent to US$88.4 million. MSS segment earnings improved to US$20.2 million in the third quarter. Excluding the favorable commercial settlements and mark to market adjustments totaling US$3.7 million, adjusted segment earnings (a non-GAAP measure) were US$16.5 million in the quarter, up 46 percent compared to the same quarter a year ago and 31 percent on a sequential quarterly basis. This improvement reflects the increased revenue from the Xantic acquisition, growth in newer technology services, as well as higher volume discounts earned from Inmarsat.

Revenue in the Broadband division was US$30.9 million in the third quarter of 2006, an 8 percent increase compared to the same quarter of last year and essentially flat with the second quarter of 2006. Third quarter 2006 revenue was impacted by delays in the implementation of certain recently awarded contracts reflecting changing customer schedules, while revenue in the third quarter of last year was negatively impacted by the hurricanes in the Gulf of Mexico. Broadband third quarter 2006 segment earnings totaled US$2.3 million, compared with US$0.6 million in the same quarter a year ago and US$2.0 million in the second quarter of this year.

"We are pleased with the overall improvement in our financial results in the third quarter, and we are particularly gratified with the strong performance achieved by the MSS business," said Jim Parm, Stratos president and chief executive officer. "The growth that we experienced with our new services, the improved margins and profitability, and continued solid progress with the integration of Xantic, all indicate that we are on track to achieve our objective of improved performance from this business segment."

"In the Broadband business, we signed several important contracts, and began to implement actions to increase profitability, including targeted price increases in the Gulf of Mexico and cost reductions in Europe," added Parm. "The launch of an initiative aimed at further streamlining operations, reducing expenses and eliminating redundancies, as well as optimizing our sales delivery processes, is expected to generate improved margins and increased profitability in our Broadband business beginning in the fourth quarter," Parm concluded.

First Nine Month Results
For the first nine months of 2006, the Corporation achieved revenue of US$397.2 million, a 42 percent increase compared with US$280.4 million reported in the same period a year ago. This growth reflects the acquisition of Xantic, which was completed on February 14, 2006, as well as growth in Broadband VSAT services. Results for the nine months ended September 30, 2006, were adversely impacted by non-cash, after-tax write-offs of approximately US$23.3 million and amortization of customer relationship intangibles of US$4.8 million after-tax, primarily related to the Xantic acquisition. As a result, the Corporation reported a net loss for the first nine months of 2006 of US$28.5 million, or US$0.68 per share, compared with net earnings of US$3.4 million, or US$0.08 per share for the same period a year ago.

Cash flow from operations, before working capital requirements, for the first nine months of 2006 totaled US$30.4 million, compared with US$33.9 million generated in the same period of 2005, primarily reflecting increased interest costs related to the financing of the Xantic acquisition, which were largely offset by higher segment earnings. Working capital requirements totaled US$13.1 million in the first nine months of 2006 compared to US$16.5 million in the same period of 2005.

Capital expenditures totaled US$20.9 million in the first nine months of 2006, including US$8.8 million in the third quarter as capital spending for the Xantic integration accelerated. For the first nine months of 2005, capital expenditures totaled US$17.9 million. Liquidity continues to remain strong with cash-on-hand as of September 30, 2006, totaling US$48.8 million.

Full Year Guidance
Based upon year-to-date results, currently available information and market conditions, the Corporation expects reported revenue growth to be in the 40 percent range for the full year 2006, including revenue related to the acquisition of Xantic (from the date of acquisition on February 14, 2006). The Corporation expects to report a net loss per share for the full year 2006, primarily driven by non-cash, after-tax write-offs related to the acquisition of Xantic as well as amortization of customer intangibles related to both the Xantic and Plenexis acquisitions. Excluding the effects of these items, the Corporation expects adjusted earnings per share for 2006 to be below 2005 reported earnings per share. Capital expenditures are anticipated to be in the six to seven percent of revenue range.

The Corporation's financial statements for the three and nine-month periods ended September 30, 2006, and related notes, together with management's discussion and analysis of such results, are attached.

A conference call with analysts to discuss these results will be held at 8:30 a.m. ET, Friday, November 3, 2006. To access the conference call, please dial 1-866-249-1964. A live audio webcast of the call will be available online at: http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=1625140. A replay of the conference call also will be available through Friday, November 10. To access the replay, please call 1-877-289-8525 and use access code 21206452 followed by the number sign.

About Stratos
Stratos Global Corporation (www.stratosglobal.com) is a publicly traded company (TSX: SGB) and the leading global provider of a wide range of advanced mobile and fixed-site remote communications solutions for users operating beyond the reach of traditional networks. With its owned-and-operated infrastructure and extensive portfolio of industry-leading satellite and microwave technologies (including Inmarsat, Iridium, Globalstar, MSAT, VSAT, and others), Stratos serves the voice and high-speed data connectivity requirements of a diverse array of markets, including government, military, energy, industrial, maritime, aeronautical, enterprise, media and recreational users throughout the world.

Caution Concerning Forward-Looking Statements
Documents related to this release contain statements and information about potential future circumstances and developments. Such statements and information are qualified by the inherent risks and uncertainties surrounding future expectations generally and may differ materially from Stratos Global Corporation's actual future results. For additional information with respect to these risks and uncertainties, reference should be made to the Corporation's continuous disclosure materials filed with the Canadian Securities Administrators. Stratos Global Corporation disclaims any intention or obligation to update or revise any forward-looking statements or information, whether as a result of new information, future events, or otherwise.



* Segment earnings is defined by the Corporation as earnings before interest expense, depreciation and amortization, other costs (income), non-controlling interest, equity in earnings of investee, and income taxes.

For additional information :
Paula McDonald, FCA
Executive Vice President and Chief Financial Officer
709.724.5227
paula.mcdonald@stratosglobal.com