RELEASE: Tut Systems Q3 results

Tut Systems, Inc. Announces Third Quarter 2006 Results Lake Oswego, Oregon, November 6, 2006 -- Tut Systems, Inc. (Nasdaq: TUTS), today announced its third quarter results for 2006. Revenue for the quarter ended September 30, 2006, was $8.2 million compared with revenue of $10.0 million for the quarter ended September 30, 2005. This represents a decrease in revenue of 18.1% when compared with the third quarter of 2005, and a 1.5% increase when compared with second quarter 2006 revenue of $8.1 million. Revenue for the nine months ended September 30, 2006 was $27.8 million compared with revenue of $26.8 million for the nine months ended September 30, 2005. This represents a year-over-year increase in revenue of 4.0%. Revenue related to video processing systems was $6.9 million and $8.1 million for the quarters ended September 30, 2006 and 2005, respectively. Revenue relating to private broadband network products was $1.1 million and $1.2 million for the quarters ended September 30, 2006 and 2005, respectively. Revenue related to legacy product sales from the Copper Mountain Networks merger was $0.2 million and $0.7 million for the quarters ended September 30, 2006 and 2005, respectively. International sales represented 13.0% and 27.0% of total sales for the quarters ended September 30, 2006 and 2005, respectively. Gross profit for the quarter ended September 30, 2006, was $2.6 million, an increase of 21.0% compared with gross profit of $2.2 million for the quarter ended September 30, 2005. Included in gross profit was a charge for amortization of intangibles of $0.4 million for each of the quarters ended September 30, 2006 and 2005. Gross profit for the nine months ended September 30, 2006, was $9.0 million compared with $8.2 million for the nine months ended September 30, 2005. Gross margin for the quarter ended September 30, 2006, was 32.0%, compared with third quarter 2005 gross margin of 21.7%. Gross margin was 32.3% and 30.6% for the nine months ended September 30, 2006 and 2005, respectively. Net loss for the three months ended September 30, 2006, was $(1.3) million or $(0.04) per basic and diluted share. Net loss for the three months ended September 30, 2005was $(5.6) million or $(0.17) per basic and diluted share. The net loss for the three months ended September 30, 2006 includes a gain related to the change in value on the convertible note derivatives of $2.5 million and amortization of the debt discount of $(0.2) million associated with the convertible notes issued on August 22, 2006. The impact of these two non-cash items was to decrease the net loss for the three months ended September 30, 2006 by $2.3 million or $0.07 per basic and diluted share. Net loss for the nine months ended September 30, 2006 was $(9.1) million or $(0.27) per basic and diluted share compared with $(13.4) million or $(0.48) per basic and diluted share for the nine months ended September 30, 2005.

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