EXHIBIT 99.1

COSINE COMMUNICATIONS ANNOUNCES
FIRST QUARTER FISCAL 2005 FINANCIAL RESULTS

SAN JOSE, CALIF., May 16, 2005 — CoSine Communications, Inc. (Nasdaq: COSN), a provider of customer support services for managed, network-based IP and broadband service providers, today announced revenue for the quarter ended March 31, 2005 of $ 897,000 and a net loss of $ 878,000 or $ 0.09 loss per share, as compared to revenue of $4.5 million and a net loss of $ 7.4 million or $ 0.74 loss per share for the quarter ended March 31, 2004.

About Cosine Communications

CoSine Communications was founded in 1998 as a global telecommunications equipment supplier to empower service providers to deliver a compelling portfolio of managed, network-based IP and broadband services to consumers and business customers. Currently, CoSine’s business consists primarily of a customer service capability operated under contract by a third party.

Safe Harbor Warning

“Safe Harbor” Statement Under the Private Securities Litigation Reform Act of 1995: This release contains forward-looking statements, which include, among others, statements concerning CoSine’s expected financial performance, exploration of strategic alternatives, and business outlook, expected performance and developments. The company uses words such as “anticipate,” “believe,” “plan,” “expect,” “future,” “intend” and similar expressions to identify forward-looking statements. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those reflected in the forward-looking statements.

Factors that might cause such a difference include, but are not limited to, Cosine’s ability to identify and effectuate desirable strategic alternatives, the time and costs required to explore and investigate possible transactions and other corporate actions, management and board interest in and distraction due to exploring and investigating strategic alternatives, the reactions, either positive or negative, of investors, competitors, customers, employees and others to CoSine exploring possible strategic alternatives and opportunities and to any specific strategic alternative or opportunity selected by CoSine and the continued downturn in the telecommunications industry and slow development of the market for network-based IP services, all as may be discussed in more detail on pages 30 through 36 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2004. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management’s opinions only as of the date hereof. CoSine undertakes no obligation to revise or publicly release the results of any revision to these forward-looking statements.

For additional information contact:

Terry Gibson
(408) 236-7518
E-mail: Terry.Gibson@Cosinecom.com

CoSine Communications, Inc.
CONSOLIDATED STATEMENT OF OPERATIONS
(In conformity with generally accepted accounting principles)
(in thousands, except per share data)

	Three months ended
	March 31,
	2005
	(unaudited)			2004
Revenue	$	897		$	4,455
Cost of sales		454			1,497
Gross profit		443			2,958
Operating expenses:
Research and development		103			5,255
Sales and marketing		105			3,383
General and administrative		1,305			1,708
Restructuring and impairment charges		(91	)		35
Total operating expenses		1,422			10,381
Loss from operations		(979	)		(7,423	)
Interest income and expense and other, net		113			81
Loss before income tax (benefits) provision		(866	)		(7,342	)
Income tax (benefits) provision		13			43
Net loss	$	(879	)	$	(7,385	)
Basic and diluted net loss per share	$	(0.09	)	$	(0.74	)
Shares used in computing basic and diluted net loss per share		10,122			10,010

CoSine Communications, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In conformity with generally accepted accounting principles)
(in thousands)

	March 31, 2005			December 31,
	(unaudited)			2004
ASSETS
Current assets:
Cash and cash equivalents	$	11,020		$	9,203
Short-term investments	$	12,640			15,710
Accounts receivable, trade		602			1,328
Accounts receivable, other		93			483
Inventory		—			—
Prepaid expenses and other current assets		833			949
Total current assets		25,187			27,673
Property and equipment, net		—			—
Long-term deposits		528			150
	$	25,715		$	27,823
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	225		$	252
Accrued warranty liability		157			157
Other accrued liabilities		1,522			3,129
Accrued compensation		175			412
Deferred revenue		710			509
Current portion of equipment and working capital loans		—			—
Total current liabilities		2,789			4,459
Accrued rent		—			—
Total liabilities		2,789		$	4,459
Stockholders’ equity (net capital deficiency):
Series A convertible preferred stock		—			—
Common stock		1			1
Additional paid-in capital		538,947			540,028
Notes receivable from stockholders		—			(1,520	)
Accumulated other comprehensive income (loss)		616			614
Deferred compensation		—			—
Accumulated deficit		(516,637	)		(515,759	)
Stockholders’ equity		22,926			23,364
	$	25,715		$	27,823

1 Amounts are derived from the December 31, 2004 audited financial statements.