exv99w1

EXHIBIT 99.1

Contact: Michael Attar
Investor Relations
(818) 880-7821

Tekelec Announces Q3 Results:
Achieves Orders of $150.7 M and Record Revenue of $148.1 M;
International Sales Reach 41% of Revenue

MORRISVILLE, NC (October 27, 2005)... Tekelec (Nasdaq: TKLC) today reported financial results for its 2005 third quarter.

Revenue for the third quarter of 2005 was $148.1 million, compared to $106.6 million in the third quarter of 2004. On a GAAP basis, Tekelec’s net income was $8.7 million, or $0.12 per diluted share, for the third quarter of 2005, compared to net income of $18.7 million, or $0.27 per diluted share, in the third quarter of 2004. Non-GAAP net income for the third quarter of 2005, which excludes the effects of acquisition-related amortization, non-cash stock-based deferred compensation, a one-time, non-cash charge for the write-off of acquired in-process research and development related to the iptelorg acquisition and restructuring and other charges related to the relocation of corporate headquarters, was $13.4 million, or $0.19 per diluted share, compared to non-GAAP net income of $14.9 million, or $0.21 per diluted share, in the third quarter of 2004. Non-GAAP net income for the third quarter of 2004 excludes the effects of acquisition-related amortization, the write-off of in-process research and development, the restructuring charge related to the relocation of manufacturing operations, the write-off of certain acquired intangibles as a result of rebranding activities, the gain on Tekelec’s investment in Telica and the gain on the settlement of the Catapult convertible notes. Orders received in the third quarter for Tekelec products and services were $150.7 million, compared to $150.8 million in the third quarter in 2004.

Tekelec President and CEO Fred Lax commented, “Tekelec’s results were strong in the third quarter, with revenue increasing 39% year-over-year, as well as up 11% sequentially. And, for the twelfth consecutive quarter, our order volumes provided us with a book-to-bill ratio greater than one, with a Q3 book-to-bill of 1.02.

“Network Signaling Group revenue increased to $88.2 million, up 13%, compared to $78.0 million in Q3 ’04, and increased 8% sequentially, marking the highest quarterly signaling revenue in the history of the Company. As one example contributing to this success, we are pleased to announce that Mobinil, a leading Egyptian wireless operator, is significantly expanding the signaling capacity of its existing Eagle 5 platform and is also expanding its deployment of Tekelec’s network-wide monitoring solution. Mobinil is part of the Orange Group, a subsidiary of France Telecom and one of the world’s largest mobile operators.

“Switching Solutions Group revenue increased to $37.6 million, up 149%, compared to $15.1 million in Q3 ’04, and increased 13% sequentially, as we added 16 new switching customers during the quarter. As was announced recently, we are pleased that the Tekelec 8000 wireless multimedia gateway has been successfully deployed by Zhejiang Mobile, a subsidiary of China Mobile, the world’s largest wireless operator. This represents the first deployment of the Tekelec-Alcatel mobile next-gen solution in China and will allow the operator to improve its quality of service and reduce network operation and maintenance costs.

“Communications Software Solutions Group revenue increased to $9.8 million, up 216%, compared to $3.1 million in Q3 ‘04, and increased 38% sequentially. As part of a bundled Tekelec implementation, Mobinil is also expanding its deployment of our network-wide monitoring solution. This solution will feed the critical business intelligence data required for the applications that run the carrier’s customer care, call center operations and customer settlements processes.

“Finally, regarding global expansion, approximately 41% of revenues were generated outside the U.S. during the quarter. This international percentage treats all revenue associated with the Alcatel channel as U.S. sourced revenue, although some of the products are destined for international deployment. As one example of this success, we are pleased to announce today that Mobilink, part of Orascom Telecom’s operations in Pakistan, with more than 8 million subscribers, or approximately 61% of all mobile phone users in Pakistan, has selected Tekelec’s Eagle 5 Signaling platform to increase its network capacity and support the operator’s rapid growth.”

COMPARATIVE TEKELEC GROUP REVENUES


	Revenue ($ in Millions)
	Q3 2005		Q3 2004
Switching Solutions Group	$	37.6	$	15.1
Network Signaling Group	$	88.2	$	78.0
Communications Software Solutions Group ⁽¹⁾	$	9.8	$	3.1
IEX Contact Center Group	$	12.5	$	10.4


(1)		As a result of the Steleus acquisition, a new operating group, the Communications Software Solutions Group, was created in Q4 2004. This Group’s products consist of the Steleus solutions and Tekelec’s business intelligence applications and other network element independent solutions that were previously reported as part of the Network Signaling Group. The revenue related to these Network Signaling Group solutions was reclassified from the Network Signaling Group to the Communications Software Solutions Group for 2004. The Communications Software Solutions Group revenue for Q3 2004 does not include any Steleus revenue.

Q4 FINANCIAL GUIDANCE


	Q4 2005 Guidance	Q4 2004 Actual Results

Total Revenue:	$150.0 million - $156.0 million	$115.9 million
GAAP Net Income	$0.12 - $0.16 per diluted share⁽¹⁾	$0.17 per diluted share⁽²⁾


(1)		For the fourth quarter of 2005, Tekelec expects expenses to include amortization of acquired intangibles, amortization of non-cash stock-based deferred compensation, and restructuring and other charges related to our Corporate and Hyannis relocations in the aggregate amount of approximately $5.8 million, pre-tax. This guidance excludes any potential one-time, non-cash charge for the write-off of acquired in-process research and development related to the acquisition of Santera’s Minority Interest on October 3, 2005.

(2)		Fourth quarter 2004 net income includes a $3.8 million one-time, non-cash charge for the write-off of acquired in-process research and development related to the Steleus acquisition, a $20.3 million gain on Santera’s warrants in Spatial Wireless common stock, and an adjustment made in Q4 2004 to reduce the gain on sale of investment in privately held company previously recorded in Q3 2004, by $1.3 million, net of tax.

Lax concluded, “The record quarterly revenues for all of our operating groups highlight the progress we are making executing on our strategy focused on next-gen switching, signaling, value-added applications,

Employment Inducement Stock Options

On October 26, 2005, 82 new Tekelec employees hired during the third quarter of 2005 and through the date of this earnings release were granted options to purchase a total of 619,550 shares of Tekelec common stock. The total number of shares subject to such options amounts to less than 1% of the outstanding shares of Tekelec common stock. The option grants were made under Tekelec’s 2004 Equity Incentive Plan for New Employees and met the “employment inducement” exception to the Nasdaq rules requiring shareholder approval of equity-based incentive plans.

About Tekelec

Tekelec is a leading developer of now and next-generation switching and signaling telecommunications solutions, network performance management technology, and value-added applications. Tekelec’s innovative solutions are widely deployed in traditional and next-generation wireline and wireless networks and contact centers worldwide. Corporate headquarters are located in Morrisville, NC with research and development facilities and sales offices throughout the world. For more information, please visit www.tekelec.com.

Non-GAAP Information

Certain non-GAAP financial measures are included in this press release. In the calculation of these measures, Tekelec generally excludes certain items such as amortization of acquired intangibles, restructuring and other charges, non-cash stock-based compensation charges, and unusual, non-recurring gains and charges. Tekelec believes that excluding such items provides investors and management with a representation of the Company’s core operating performance and with information useful in assessing our prospects for the future and underlying trends in Tekelec’s operating expenditures and continuing operations. Management uses such non-GAAP measures to evaluate financial results and to establish operational goals. In addition, since the Company has historically reported non-GAAP measures to the investment community, we believe the inclusion of this information provides consistency in our financial reporting. The attachments to this release provide a reconciliation of non-GAAP net income referred to in this release to the most directly comparable GAAP measure, GAAP net income from continuing

operations. The non-GAAP financial measures are not meant to be considered a substitute for the corresponding GAAP financial measures.

Forward-Looking Statements

Certain statements made in this news release are forward looking, reflect the Company’s current intent, belief or expectations and involve certain risks and uncertainties. There can be no assurance that the Company’s actual future performance will meet the Company’s expectations. As discussed in the Company’s 2004 Annual Report on Form 10-K and other filings with the SEC, the Company’s future operating results are difficult to predict and subject to significant fluctuations. Factors that may cause future results to differ materially from the Company’s current expectations include, among others: overall telecommunications spending, changes in general economic conditions, unexpected changes in economic, social, or political conditions in the countries in which the Company operates, the timing of significant orders and shipments, the lengthy sales cycle for the Company’s products, the timing of revenue recognition of multiple elements in an arrangement sold as part of a bundled solution, the timing of the convergence of voice and data networks, the success or failure of strategic alliances or acquisitions including the success or failure of the integration of Santera, Taqua, Steleus, VocalData, and iptelorg’s operations with those of the Company, litigation or regulatory matters such as the litigation described in Tekelec’s SEC reports and the costs and expenses associated therewith, the ability of carriers to utilize excess capacity of signaling infrastructure and related products in their networks, the capital spending patterns of customers, the dependence on wireless customers for a significant percentage and growth of the Company’s revenues, the timely development and introduction of new products and services, product mix, the geographic mix of the Company’s revenues and the associated impact on gross margins, market acceptance of new products and technologies, carrier deployment of intelligent network services, the ability of our customers to obtain financing, the level and timing of research and development expenditures, and sales, marketing, and compensation expenses, regulatory changes, and the expansion of the Company’s marketing and support organizations, both domestically and internationally. The Company undertakes no obligation to publicly update any forward-looking statements whether as a result of new information, future events or otherwise.

TEKELEC
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2005		2004		2005			2004
	(thousands, except earnings per share data)
Revenues	$	148,103	$	106,636	$	400,522		$	281,124
Costs and expenses:
Cost of goods sold		49,166		25,684		120,460			69,022
Amortization of purchased technology		1,963		1,497		5,715			6,953
Research and development		31,262		25,461		92,234			70,249
Selling, general and administrative		50,061		37,603		148,391			108,039
Acquired in-process research and development		1,210		2,400		1,210			10,400
Amortization of intangibles		701		763		2,282			1,704
Restructuring and other charges ⁽¹⁾		1,589		275		4,349			1,327

Income from operations		12,151		12,953		25,881			13,430
Interest and other income (expense), net		592		37		(500	)		152
Gain on notes receivable		—		2,186		—			2,186
Gain on investment in privately-held company		—		9,869		—			9,869

Income before provision for income taxes		12,743		25,045		25,381			25,637
Provision for income taxes ⁽²⁾		6,021		13,873		15,652			27,078

Income (Loss) before minority interest		6,722		11,172		9,729			(1,441	)
Minority interest		2,014		7,565		11,239			25,723

Net income	$	8,736	$	18,737	$	20,968		$	24,282


Earnings per share
Basic	$	0.13	$	0.30	$	0.32		$	0.39
Diluted		0.12		0.27		0.31			0.36


Weighted average number of shares outstanding:
Basic		66,113		63,172		65,811			62,554
Diluted ⁽³⁾		75,183		72,332		74,403			71,801


		Notes to Condensed Consolidated Statements of Operations (000’s):

(1)		This amount represents restructuring and other costs (e.g., costs associated with duplicate staff during the transition, recruiting fees, etc.) related to the relocation of our Corporate headquarters and Hyannis facilities.

(2)		For the three and nine months ended September 30, 2005, the consolidated provision for income taxes excludes any benefit relating to the expense recognized for acquired in-process research and development as this is non-deductible for income tax purposes. For the three and nine months ended September 30, 2005 and 2004, Santera, a majority-owned company, is included in the consolidated results of operations of Tekelec. The consolidated provision for income taxes does not include any benefit from the losses generated by Santera due to the following:

-		Santera’s losses cannot be included on Tekelec’s consolidated federal tax return because its ownership interest in Santera does not meet the threshold to consolidate under income tax rules and regulations.

-		A full valuation allowance has been established on the income tax benefits generated by Santera as a result of Santera’s historical operating losses.

(3)		For the three and nine months ended September 30, 2005 and 2004, the calculation of earnings per share includes the add-back to net income of $581 and $1,743, respectively for assumed after-tax interest cost related to the convertible debt using the “if-converted” method of accounting for diluted earnings per share. The weighted average number of shares outstanding for both the three and nine months ended September 30, 2005 and September 30, 2004 includes 6,361 shares related to the convertible debt using the “if-converted” method.

TEKELEC
NON-GAAP ⁽¹⁾ STATEMENTS OF OPERATIONS
(unaudited)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2005		2004		2005		2004

	(thousands, except earnings per share data)
Revenues	$	148,103	$	106,636	$	400,522	$	281,124
Costs and expenses:
Cost of goods sold		48,978		25,868		119,882		69,627
Research and development		31,233		25,325		92,059		70,017
Selling, general and administrative		48,992		37,273		145,641		107,476


Income from operations		18,900		18,170		42,940		34,004
Interest and other income, net		592		37		844		152


Income before provision for income taxes		19,492		18,207		43,784		34,156
Provision for income taxes ⁽²⁾		7,738		10,321		20,558		25,127

Income before minority interest		11,754		7,886		23,226		9,029
Minority interest		1,622		7,001		9,271		23,338

Non-GAAP net income	$	13,376	$	14,887	$	32,497	$	32,367


Non-GAAP earnings per share
Basic	$	0.20	$	0.24	$	0.49	$	0.52
Diluted		0.19		0.21		0.46		0.48


Non-GAAP earnings per share weighted average number of shares outstanding:
Basic		66,113		63,172		65,811		62,554
Diluted ⁽³⁾		75,183		72,332		74,403		71,801


		Notes to Condensed Consolidated Statements of Operations (000’s):

(1)		The above Non-GAAP Statements of Operations exclude the effects of the following:

-		For the three and nine months ended September 30, 2005, restructuring and other costs related to the relocation of our Corporate headquarters and Hyannis facilities amounting to $1,589 and $4,349, respectively. The related income tax benefits for the three and nine months ended September 30, 2005 were $556 and $1,522 respectively.

-		For the three and nine months ended September 30, 2005, amortization of deferred stock-based compensation related to stock options and restricted stock units granted amounting to $1,301 and $3,196, respectively. The related income tax benefits for the three and nine months ended September 30, 2005 were $455 and $1,118 respectively.

-		For the three and nine months ended September 30, 2005 the amortization of purchased technology and other intangibles related to the acquisition of Taqua, VocalData, Steleus, iptelorg and the majority interest in Santera amounting to $2,649 and $8,304, respectively. The related income tax benefits for the three and nine months ended September 30, 2005 were $706 and $2,266 respectively. The minority interest impact of the amortization and write-off for the three and nine months ended September 30, 2004 was $392 and $1,968, respectively.

-		For the three and nine months ended September 30, 2005, the write-off of in-process research and development relating to the acquisition of iptelorg amounting to $1,210.

-		For the nine months ended September 30, 2005, the loss on sale of investments amounting to $1,344 relates to the sale of Santera’s holdings of Alcatel shares received in conjunction with warrants exercised in December 2004.

-		For the three and nine months ended September 30, 2004, restructuring costs related to the relocation of our manufacturing operations amounted to $275 and $1,327, respectively.


-		For the three and nine months ended September 30, 2004, amortization of deferred stock compensation related to the unvested portion of stock options granted as part of the Taqua acquisition amounted to $469 and $800, respectively.

-		For three and nine months ended September 30, 2004 the amortization of purchased technology and other intangibles related to the acquisitions of Santera, Taqua and VocalData amounted to $763 and $6,737, respectively. The related income tax benefits for the three and nine months ended September 30, 2004 were $551 and $1,666, respectively.

-		For the three and nine months ended September 30, 2004, a gain of $2,186 on the settlement of our convertible notes receivable from Catapult.

-		For the three and nine months ended September 30, 2004, a gain of $9,869 on the sale of our investment in Telica.

(2)		The above Non-GAAP Statements of Operations assume an effective income tax rate of 35% for the Tekelec business excluding Santera for the three and nine months ended September 30, 2005 and 2004. There were no income tax benefits associated with the losses generated by Santera.

(3)		For the three and nine months ended September 30, 2005 and 2004, the calculation of earnings per share includes the add- back to net income of $581 and $1,743, respectively for assumed after-tax interest cost related to the convertible debt using the “if-converted” method of accounting for diluted earnings per share. The weighted average number of shares outstanding for both the three and nine months ended September, 2005 and September 30, 2004 includes 6,361 shares related to the convertible debt using the “if-converted” method.

TEKELEC
CONDENSED CONSOLIDATED BALANCE SHEETS


	September 30,		December 31,
	2005		2004
	(unaudited)		(unaudited)
	(thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	103,042	$	48,925
Short-term investments, at fair value		138,701		134,435
Accounts receivable, net		90,404		107,850
Inventories		53,007		33,654
Deferred income taxes, net		16,163		15,804
Prepaid expenses and other current assets		55,633		44,639

Total current assets		456,950		385,307
Long-term investments, at fair value		50,852		93,622
Property and equipment, net		38,578		30,617
Investments in privately-held companies		7,322		7,322
Deferred income taxes		41,671		45,748
Other assets		5,239		6,757
Goodwill		135,664		128,732
Intangible assets, net		81,853		83,538

Total assets	$	818,129	$	781,643


LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current portion of deferred revenues	$	103,272	$	92,182
Other current liabilities		94,130		93,123

Total current liabilities		197,402		185,305
Long-term convertible debt		125,000		125,000
Long-term portion of notes payable		—		78
Long-term portion of deferred revenues		4,218		2,187
Deferred income taxes		19,076		19,586

Total liabilities		345,696		332,156

Minority interest⁽¹⁾		9,250		20,489
Total shareholders’ equity		463,183		428,998


Total liabilities and shareholders’ equity	$	818,129	$	781,643


(1)		On October 3, 2005, Tekelec completed the purchase of the minority interest of Santera for $75.6 million in cash.

TEKELEC
IMPACT OF NON-GAAP ADJUSTMENTS ON NET INCOME
(unaudited)


	Three Months Ended September 30, 2005
	(thousands, except for earnings per share data)
								Non-
	GAAP				Adjustments			GAAP

Revenues	$	148,103			$	—		$	148,103
Costs and expenses:
Cost of goods sold		49,166				(391	)⁽¹⁾⁽²⁾		48,775
Amortization of purchased technology		1,963				(1,760	)⁽²⁾		203

Total cost of sales		51,129				(2,151	)		48,978

Gross profit		96,974	65.5	%		2,151			99,125	66.9	%


Research and development		31,262				(29	)⁽¹⁾		31,233
Selling, general and administrative		50,061				(1,069	)⁽¹⁾		48,992
Acquired in-process research and development		1,210				(1,210	)⁽⁴⁾		—
Amortization of intangibles		701				(701	)⁽²⁾		—
Restructuring and other charges		1,589				(1,589	)⁽³⁾		—

Total operating expenses		84,823				(4,598	)		80,225

Income from operations		12,151				6,749			18,900
Interest and other income, net		592				—			592

Income before provision for income taxes		12,743				6,749			19,492
Provision for income taxes		6,021				1,717	⁽⁵⁾		7,738

Income before minority interest		6,722				5,032			11,754
Minority interest		2,014				(392	)⁽⁶⁾		1,622

Net income	$	8,736			$	4,640		$	13,376


Earnings per share
Basic	$	0.13						$	0.20
Diluted ⁽⁷⁾		0.12							0.19
Earnings per share weighted average number of shares outstanding:
Basic		66,113							66,113
Diluted ⁽⁷⁾		75,183							75,183


(1)		The adjustments represent the amortization of deferred stock-based compensation related to stock options and restricted stock units assumed or granted.

(2)		The adjustments represent the amortization of purchased technology and other intangibles related to the acquisition Taqua, VocalData, Steleus, iptelorg and the majority interest in Santera.

(3)		The adjustment represents restructuring and other costs related to the relocation of our Corporate headquarters and Hyannis facilities.

(4)		The adjustment represents acquired in-process research and development relating to the acquisition of iptelorg.

(5)		The adjustments represents the income tax effect of footnotes (1), (2), (3) and (4) in order to reflect our non-GAAP effective tax rate at 35% for the Tekelec business, excluding Santera.

TEKELEC
IMPACT OF NON-GAAP ADJUSTMENTS ON NET INCOME
(unaudited)


	Three Months Ended September 30, 2004
	(thousands, except earnings per share data)
								Non-
	GAAP				Adjustments			GAAP

Revenues	$	106,636			$	—		$	106,636
Costs and expenses:
Cost of goods sold		25,684				(7	)⁽¹⁾⁽²⁾		25,677
Amortization of purchased technology		1,497				(1,306	)⁽²⁾		191

Total cost of sales		27,181				(1,313	)		25,868

Gross profit		79,455	74.5	%		1,313			80,768	75.7	%


Research and development		25,461				(136	)⁽¹⁾		25,325
Selling, general and administrative		37,603				(330	)⁽¹⁾		37,273
Acquired in-process research and development		2,400				(2,400	)⁽²⁾		—
Amortization of intangibles		763				(763	)⁽²⁾		—
Restructuring		275				(275	)⁽³⁾		—

Total operating expenses		66,502				(3,904	)		62,598

Income from operations		12,953				5,217			18,170
Interest and other income, net		37				—			37
Gain on notes receivable		2,186				(2,186	)⁽⁴⁾		—
Gain on investment in privately-held company		9,869				(9,869	)⁽⁵⁾		—

Income (Loss) before provision for income taxes		25,045				(6,838	)		18,207
Provision for income taxes		13,873				(3,552	)⁽⁶⁾		10,321

Income (Loss) before minority interest		11,172				(3,286	)		7,886
Minority Interest		7,565				(564	)⁽⁷⁾		7,001

Net income (loss)	$	18,737			$	(3,850	)	$	14,887


Earnings per share
Basic	$	0.30						$	0.24
Diluted ⁽⁸⁾		0.27							0.21

Earnings per share weighted average number of shares outstanding:
Basic		63,172							63,172
Diluted ⁽⁸⁾		72,332							72,332


(1)		The adjustments represent the amortization of deferred stock compensation related to the unvested portion of stock options granted as part of the Taqua acquisition.

(2)		The adjustments represent the amortization of purchased technology and other intangibles related to the acquisition of Santera, Taqua and VocalData and the write-off of acquired in-process research and development related to the acquisition of VocalData.

(3)		The adjustment represents restructuring costs related to the relocation of our manufacturing operation.

(4)		The adjustment represents a gain on the settlement of our convertible notes receivable from Catapult.

(5)		The adjustment represents a gain on the sale of our investment in Telica.


(6)		The adjustments represent the income tax effect of footnotes (1), (2), (3), (4) and (5) in order to reflect our non- GAAP effective tax rate at 35% for the Tekelec business, excluding Santera.

(7)		The adjustment represents the minority interest impact of footnote (2).

(8)		For the three months ended September 30, 2004, calculations of earnings per share include the add-back to net income of $581 for assumed after-tax interest cost related to the convertible debt using the “if-converted” method of accounting for diluted earnings per share. The weighted average number of shares outstanding for the three months ended September 30, 2004 includes 6,361 shares related to the convertible debt using the “if-converted” method.

TEKELEC
IMPACT OF NON-GAAP ADJUSTMENTS ON NET INCOME
(unaudited)


	Nine Months Ended September 30, 2005
	(thousands, except for earnings per share data)
									Non-
	GAAP					Adjustments			GAAP

Revenues	$	400,522				$	—		$	400,522
Costs and expenses:
Cost of goods sold		120,460					(1,254	)⁽¹⁾⁽²⁾		119,206
Amortization of purchased technology		5,715					(5,039	)⁽²⁾		676

Total cost of sales		126,175					(6,293	)		119,882

Gross profit		274,347		68.5	%		6,293			280,640	70.1	%


Research and development		92,234					(175	)⁽¹⁾		92,059
Selling, general and administrative		148,391					(2,750	)⁽¹⁾		145,641
Acquired of in-process research and development		1,210					(1,210	)⁽⁴⁾		—
Amortization of intangibles		2,282					(2,282	)⁽²⁾		—
Restructuring and other charges		4,349					(4,349	)⁽³⁾		—

Total operating expenses		248,466					(10,766	)		237,700

Income from operations		25,881					17,059			42,940
Interest and other (expense) income, net		(500	)				1,344	⁽⁵⁾		844

Income before provision for income taxes		25,381					18,403			43,784
Provision for income taxes		15,652					4,906	⁽⁶⁾		20,558

Income before minority interest		9,729					13,497			23,226
Minority interest		11,239					(1,968	)⁽⁷⁾		9,271

Net income	$	20,968				$	11,529		$	32,497


Earnings per share
Basic	$	0.32							$	0.49
Diluted ⁽⁸⁾		0.31								0.46
Earnings per share weighted average number of shares outstanding:
Basic		65,811								65,811
Diluted ⁽⁸⁾		74,403								74,403


(1)		The adjustments represent the amortization of deferred stock compensation related to stock options and restricted stock units assumed or granted.

(2)		The adjustments represent the amortization of purchased technology and other intangibles related to the acquisition Taqua, VocalData, Steleus and majority interest in Santera.

(3)		The adjustment represents restructuring and other costs related to the relocation of our Corporate headquarters and Hyannis facilities.

(4)		The adjustment represents acquired in-process research and development relating to the acquisition of iptelorg.

(5)		The adjustment represents the a realized loss on the sale of Santera’s holdings of Alcatel shares received in conjunction with warrants exercised in December 2004.


(6)		The adjustments represent the income tax effect of footnotes (1), (2), (3), (4) and (5) in order to reflect our non-GAAP effective tax rate at 35% for the Tekelec business, excluding Santera.

(7)		The adjustment represents the minority interest impact of footnote (2) and (4).

(8)		For the nine months ended September 30, 2005, calculations of earnings per share include the add-back to net income of $1,743 for assumed after-tax interest cost related to the convertible debt using the “if-converted” method of accounting for diluted earnings per share. The weighted average number of shares outstanding for the nine months ended September 30, 2005 includes 6,361 shares related to the convertible debt using the “if-converted” method.

TEKELEC
IMPACT OF NON-GAAP ADJUSTMENTS ON NET INCOME
(unaudited)


	Nine Months Ended September 30, 2004
	(thousands, except earnings per share data)
									Non-
	GAAP					Adjustments			GAAP

Revenues	$	281,124				$	—		$	281,124
Costs and expenses:
Cost of goods sold		69,022					(9	)^{(1) (2)}		69,013
Amortization of purchased technology		6,953					(6,339	)⁽²⁾		614

Total cost of sales		75,975					(6,348	)		69,627

Gross profit		205,149		73.0	%		6,348			211,497	75.2	%

Research and development		70,249					(232	)⁽¹⁾		70,017
Selling, general and administrative		108,039					(563	)⁽¹⁾		107,476
Acquired in-process research and development		10,400					(10,400	)⁽²⁾		—
Amortization of intangibles		1,704					(1,704	)⁽²⁾		—
Restructuring		1,327					(1,327	)⁽³⁾		—

Total operating expenses		191,719					(14,226	)		177,493

Income from operations		13,430					20,574			34,004
Interest and other income, net		152					—			152
Gain on note receivable		2,186					(2,186	)⁽⁴⁾		—
Gain on investment in privately-held company		9,869					(9,869	)⁽⁵⁾		—

Income before provision for income taxes		25,637					8,519			34,156
Provision for income taxes		27,078					(1,951	) ⁽⁶⁾		25,127


Income (Loss) before minority interest		(1,441	)				10,470			9,029
Minority Interest		25,723					(2,385	)⁽⁷⁾		23,338

Net Income	$	24,282					8,085		$	32,367

Earnings per share
Basic	$	0.39							$	0.52
Diluted ⁽⁸⁾		0.36								0.48

Earnings per share weighted average number of shares outstanding:
Basic		62,554								62,554
Diluted ⁽⁸⁾		71,801								71,801


(1)		The adjustments represent the amortization of deferred stock compensation related to the unvested portion of stock options granted as part of the Taqua acquisition.

(2)		The adjustments represent the amortization of purchased technology and other intangibles related to the acquisition of IEX, Santera, Taqua and VocalData and the write-off of in-process research and development related to the acquisition of Taqua and VocalData.

(3)		The adjustment represents restructuring costs related to the relocation of our manufacturing operation.

(4)		The adjustment represents a gain on the settlement of our convertible notes receivable from Catapult.

(5)		The adjustment represents a gain on the sale of our investment in Telica.


(6)		The adjustments represent the income tax effects of footnotes (1), (2), (3), (4) and (5) in order to reflect our non-GAAP effective tax rate at 35% for the Tekelec business, excluding Santera.

(7)		The adjustment represents the minority interest impact of footnote (2).

(8)		For the nine months ended September 30, 2004, calculations of earnings per share include the add-back to net income of $1,743 for assumed after-tax interest cost related to the convertible debt using the “if-converted” method of accounting for diluted earnings per share. The weighted average number of shares outstanding for the nine months ended September 30, 2004 includes 6,361 shares related to the convertible debt using the “if-converted” method.