8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934

Date of Report (Date of earliest event reported):  May 25, 2004

XETA Technologies, Inc.
(Exact name of registrant as specified in its charter)
Oklahoma	0-16231	73-1130045
(State or other jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

1814 West Tacoma, Broken Arrow, Oklahoma	74012
(Address of principal executive offices)	(Zip Code)
Registrant’s telephone number, including area code: 918-664-8200
(Former name or address, if changed since last report.)

Item 7.  Financial Statements, Pro Forma Financial Information and Exhibits.

  (c)     Exhibits.

     99.1     Press release issued by XETA Technologies, Inc. dated May 25, 2004.

Item 12.  Results of Operations and Financial Condition.

On May 25, 2004, XETA Technologies, Inc. issued a press release reporting the Company’s financial results for the second quarter of fiscal 2004.  A copy of the Company’s press release is attached hereto as Exhibit 99.1.

The information in this Form 8-K shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that Section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, regardless of any general incorporation language in such filing.

SIGNATURES

          Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. 

	XETA TECHNOLOGIES, INC.
	(Registrant)
Dated:   May 25, 2004	By:	/s/ ROBERT B. WAGNER
		Robert B. Wagner
		Chief Financial Officer

2

EX-99

NEWS RELEASE
Date:	May 25, 2004
	FOR IMMEDIATE RELEASE
Contact:	Cheryl Moll
	XETA Technologies
	(918) 664-8200

XETA TECHNOLOGIES ANNOUNCES
STRONG SECOND QUARTER AND YTD GROWTH

Broken Arrow, OK - XETA Technologies (NASDAQ: XETA) today announced fiscal 2004 second-quarter earnings of $0.410 million, or $0.04 per share diluted, on revenues of $13.2 million for the period ending April 30, 2004.  For the six months year to date, the Company also reported earnings of $0.972 million, or $0.10 per share diluted, on revenues of $30.1 million.  In comparison to fiscal 2003, these quarterly results represent a 31 percent growth in earnings on 12 percent higher revenues.  They also represent a 21 percent growth in earnings on 11 percent higher revenues over those of the first six months of fiscal 2003.

“Our momentum continued through the second quarter,” stated Jack Ingram, President and CEO.  “Significant increases in both revenues and earnings are highlighted by positive financial leverage as we continue to increase earnings at a faster pace than revenues.”

“During the quarter, we continued to implement our growth strategies in a very structured and disciplined manner,” commented Larry Patterson, Executive Director of Operations.  “Most notably, we are approximately four to six months ahead of schedule on our Nortel Networks market development plan.  We have achieved accreditation on all of Nortel’s major product lines, including the new Succession 3.0 converged communications product, placing XETA as one of only nine Nortel Networks partners (of over 1,200) who are accredited on the Succession 3.0.  Since launching this major market initiative in June 2003, we have established the technical capabilities necessary to effectively service the Nortel market and are now emphasizing the second phase of our Nortel development plan to add significant Nortel capabilities to our nationwide sales force,” added Patterson.

“I am extremely pleased with our 16% year-over-year growth in service revenues,” said Ingram.  “This growth came in all facets of our services, and most prominently in our Enterprise Contracts (up 142% increase) and Time/Material (up 64%) segments.  Growth in these two areas of recurring revenue is the direct result of the start-up of our services offering to the vast customer base of Nortel products.  We are more enthusiastic than ever regarding the potential associated with this major initiative.”

Ingram continued, “Also, with the stabilizing economy, the customer transition to IP telephony is finally under way with some degree of consistency.  We are just beginning to reap the benefits of several years of preparation.  System orders are well ahead of last year and our sale funnel is very healthy.  We are very well prepared for this historic shift in enterprise communications with leading edge capabilities in design, installation and service of this dynamic technology.”

“While fully recognizing that economic uncertainties remain, we believe our third quarter earnings will most likely exceed those of the second quarter, and are therefore setting earnings expectations at 3 to 7 cents for the third quarter.” said Ingram.

XETA Technologies will host a conference call to discuss the Company’s fiscal 2004 second quarter results at 10 a.m. CDST on Wednesday, May 26. The media, analysts and investors are invited to participate by dialing 888-273-9885.  A replay of the call will be available from 1:30 p.m. CDST that day through 11:59 p.m. CDST on June 2, 2004 by dialing 800-475-6701, access code 730650.

	Quarter Ending Apr 30						Six Month Ending Apr 30
	2004			2003			2004			2003
Sales
Systems		6,468			6,010			16,487			14,735
Services		6,521			5,605			13,276			11,722
Other		200			151			356			740
Total		13,189			11,765			30,119			27,197
Gross Profit Margin		24.8	%		29.2	%		24.0	%		27.0	%
Operating Expense		2,680			2,800			5,681			5,782
Income from Operations		595			637			1,550			1,573
Interest and Other Income (Expense)		78			-121			49			-250
Net Income After Tax		410			313			972			805
Basic Earnings Per Share	$	0.04		$	0.03		$	0.10		$	0.08
Diluted Earnings Per Share	$	0.04		$	0.03		$	0.10		$	0.08
Wt. Avg. Common Shares Outstanding		10,006			9,724			10,005			9,713
Wt. Avg. Common Equivalent Shares		10,230			9,937			10,219			9,940

(The information is presented in thousands except percentages and per-share data.)

	Apr 30, 2004		Oct 31, 2003
Assets
Current
Cash		451		291
Receivables (net)		7,923		5,795
Inventories (net)		7,309		5,615
Other		1,757		2,188
Subtotal		17,440		13,889
Non-Current
Receivables (net)		386		420
PPE (net)		10,664		10,467
Goodwill		25,699		25,727
Capitalized Software		0		58
Other		53		112
Subtotal		36,802		36,784
Total Assets		54,242		50,673
Liabilities
Current
Notes Payable		1,210		1,210
Revolving Line of Credit		2,756		719
Accounts Payable		4,205		3,929
Unearned Revenue		2,083		1,620
Accrued Liabilities		2,392		2,206
Subtotal		12,646		9,684
Non-Current
Long Term Debt		3,425		4,030
Other		2,541		2,348
Subtotal		5,966		6,378
Total Liabilities		18,612		16,062
Equity		35,630		34,611

(The information is presented in thousands.)

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About XETA Technologies

XETA Technologies is a leading communications integrator with sales and service locations nationwide, serving national business clients in sales, consulting, engineering, project management, installation and service support.  Through internal growth and corporate acquisitions, XETA is a frontrunner in the emerging, highly technical world of converged communications solutions for voice, data and video applications.   XETA is one of the largest integrators of Avaya voice and data systems and has recently added the Nortel Networks product line of voice and data solutions.   XETA is also the largest distributor for Hitachi’s PBX group—the leading provider of communication systems for the lodging industry—and has long been recognized as the leading provider of call accounting solutions to the hospitality industry.

XETA Technologies has recently been recognized by Business 2.0 magazine’s “Fastest-Growing Technology Companies” and has also been recognized by Fortune Small Business magazine’s Top 100 Fastest-Growing Companies, Fortune magazine’s “100 Fastest-Growing Companies,” Forbes magazine’s “Best 200 Small Companies in America” and BusinessWeek’s  “Top 100 Hot Growth Companies.”  For more information about XETA Technologies, visit www.xeta.com

This news release contains forward-looking statements, which are made subject to the provisions of the Private Securities Litigation Reform Act of 1995.  These statements include statements concerning XETA’s earnings expectations for the third quarter of fiscal 2004.  These and other forward-looking statements (generally identified by such words as “expects,” “plans,” “believes,” “anticipates” and similar words or expressions) reflect management’s current expectations, assumptions, and beliefs based upon information currently available to management. Investors are cautioned that all forward-looking statements are subject to certain risks and uncertainties which are difficult to predict and that could cause actual results to differ materially from those projected.  These risks and uncertainties include, but are not limited to, the state of the U.S. economy and the telecommunications market specifically, the Company’s ability to successfully exploit the Nortel Networks market, the continuance of various vendor incentive programs that support the Company’s sales and marketing efforts, the long term success of the Company’s growth strategies, market acceptance of and demand for the Company’s product and service offerings, competition, inflation, and the availability and retention of sales professionals and trained technicians.  Additional factors which could affect actual results are described in the section entitled “Outlook and Risk Factors” contained in the Company’s Form 10-K for its fiscal year ended October 31, 2003.