Visual Networks reported today a sequential increase in revenue of 2% for the third quarter ending Sept. 30. The $11.6 million quarter was down 16% from the same quarter last year. However, the company put some litigation issues behind it and exited the quarter with $10.3 million in cash.

With Visual Networks’ four largest customers--AT&T, MCI, SBC and Verizon--busy with merger activity, the network and application performance management solutions provider turned up the volume on its enterprise play. The company added more than 20 new enterprise customers and, with what appears to be a bright sign for the future, recorded approximately 25% of revenues this quarter from sales of its new products, which are Ethernet appliances and application performance management and VoIP software modules.

Larry Barker, president and CEO of Visual Networks, said that revenue from its Ethernet appliances doubled in the quarter and demand for its performance management software modules continues to be strong.

Visual Networks’ $691,000 in net income returned the company to profitability after falling off last quarter with a $1.2 million loss. Despite 16% more in earnings for the same quarter last year, the company improved its net income by $445,000.

Revenue from a SBC grew by 75% in the third quarter.

During the quarter, the company hired Daniel Kim as director of sales for new Asia/Pacific operations and launched a new synthetic call generation solution for VoIP. It also raised $10 million in private placement, passed an ISO 9001 Surveillance Audit and settled outstanding IP litigation with Paradyne Corp. and Zhone Technologies.

“After almost two years and $4 million in cost, we settled the Paradyne litigation, eliminated future risk and reduced quarterly litigation expenses by $500,000 to $700,000 per quarter,” Barker said.

The company expects fourth quarter revenue to be in the range of $12 million to $13 million and earnings per share to be in the range of $0.02 and $0.04.