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Wednesday January 20, 4:38 pm Eastern Time
Company Press Release
VLSI Technology Reports Fourth Quarter Results
SAN JOSE, Calif.--(BUSINESS WIRE)--Jan. 20, 1999--VLSI Technology, Inc. (NASDAQ:VLSI - news) today reported fourth quarter revenues of $137.9 million, an increase of 5.4 percent from the $130.8 million in the third quarter of 1998 and a decrease of 28.5 percent from $193.0 million for the same quarter a year ago. Fiscal year 1998 revenues were $547.8 million, a decrease of 23.1 percent from the $712.7 million reported in 1997.
Net income for the fourth quarter was $14.8 million or $0.31 per share (all per share amounts diluted), which included a gain of $22.4 million associated with the sale of a portion of the Company's shares in ARM Holdings Limited. Without the gain, net income would have been $1.0 million or $0.02 per share. Net income for the fourth quarter of 1997 was $22.0 million or $0.45 per share. In the third quarter of 1998 the Company reported a net loss of $3.6 million or $0.08 per share. Without the special charge and gains, third quarter net income would have been $1.2 million or $0.03 per share.
Net income for 1998 was $20.9 million or $0.44 per share. Excluding the special charge and gains, net income would have been $8.5 million or $0.18 per share. Income from continuing operations for 1997 was $66.6 million or $1.36 per share.
''We are pleased that during this year's semiconductor slowdown VLSI remained profitable,'' said Alfred J. Stein, chairman and CEO. ''Revenues in the Communications business increased, reflecting the growth in this market and the sharpening of VLSI's strategic focus. Our balance sheet remains strong, and we continue to invest prudently in leading-edge process technology and advanced products that will be our key drivers for success going forward.''
''VLSI is a strong competitor in its target markets, with a set of core competencies that are second-to-none, and that have shown themselves to be critical in decreasing our customers' time to market and enhancing their competitiveness. Everything we do is designed to make our customers more competitive,'' Stein said.
An excellent example of this focus is Velocity(tm). Announced in the third quarter of 1998, the Velocity(tm) family of rapid silicon prototyping products is designed to cut development time significantly in all of its target markets. During the four months since that announcement, there has been strong interest that continues to build momentum. The Company has already won several significant designs from large customers, and expects to win additional designs during 1999 and beyond.
''We believe that the business outlook for the semiconductor sector will show steady improvement over the next two years,'' Stein said. To prepare for this recovery, the company has begun converting its San Antonio wafer fabrication facility to 8-inch capability. The conversion will result in reduced production costs and the ability to quickly add additional capacity as needed.
VLSI announced several key developments during the past four months:
3Com Partnership - (Communications Market) VLSI entered into a strategic technology partnership with 3Com Corporation that will revolutionize how data is secured from the desktop to the network. VLSI will supply a custom data security coprocessor chip to 3Com that will be designed into several of the company's network product offerings, including network interface card (NIC) products for client and server applications.
CDMA+(tm) 13 QCELP Vocoder - (Communications Market) VLSI's CDMA+(tm) 13 QCELP Vocoder (voice coder) was the first to be successfully tested using the Modified-Methodology IS-736 Minimum Performance Standard. Passing this test is a critical step in demonstrating and delivering a high-voice-quality CDMA solution. All cellular standards including CDMA, GSM, TDMA and PDC use a vocoder algorithm to compress and decompress the speech being transmitted over the air. The particular algorithm chosen for each standard has a major impact on its voice quality. The 13 QCELP Vocoder was specifically developed for CDMA to provide a wireline level of quality.
Vega+(tm) Single-Chip DECT Solution - (Communications Market) A new-generation baseband processor for cost-sensitive DECT applications, the Vega+ family delivers best-in-class DECT performance for handset and residential base-station applications at a lower-than-ever price point. Implemented in VLSI's leading edge 0.25um process technology for low power consumption, the new processor combines on-chip memory, additional signal processing capabilities and lower-pin-count packages. Vega+'s on-chip features include high-performance voice compression for digital answering machines, full support for three-way calls, integrated Caller ID algorithms and DTMF detection, allowing remote control of an answering machine.
ViSTA(tm) '99 Product Line - (Consumer Market) ViSTA(tm) '99 is the first complete open-market silicon solution for design and implementation of set-top boxes that intend to meet OpenCable industry specifications. The new chips and associated software development tools also enable consumer electronics manufacturers to build digital interactive multimedia set-top boxes compatible with the world's diverse digital TV technical standards and delivery models.
ThunderBird PCI(tm) - (Consumer Market) VLSI introduced two new members of the ThunderBird PCI(tm) audio integrated circuit (IC) family. The ThunderBird SD(tm) chips are the first independent audio accelerators offering EAX standards compatibility and stereo-to-quad conversion from various sources.
Technical Relationship With Wind River Systems - (Advanced Computing Market) VLSI strengthened the Velocity(tm) Rapid Silicon Prototyping initiative's credentials as an innovative solution for embedded hardware/software co-design by establishing a technical linkage with Wind River Systems' Tornado(tm) development environment and VxWorks® embedded operating system. Hardware/software co-design makes big contributions to Rapid Silicon Prototyping's ability to cut embedded system-on-a-chip design cycles by 50 percent or more. Support for industry-leading software from Wind River Systems marks an important milestone in the emergence of the Velocity initiative as an industrial-strength alternative for time-to-market-critical embedded product design and development programs.
Certain statements in this press release are forward-looking. Actual results may differ materially. Among the factors that could cause actual results to differ are the following: weakness in the semiconductor industry in general and in the wireless communications and consumer entertainment markets in particular; further deterioration in Asian economic markets; slowing growth or decline in the demand for the company's semiconductors; product pricing pressures and the impact of competitive forces; loss of one or more major customers, particularly in the communications market; failure to develop and introduce new products in a timely manner; inability to hire and retain top management personnel to fill vacated positions; low factory utilization and excess capacity leading to unfavorable gross margins; and unanticipated problems experienced in ramping up production of a new process or facility. For a more detailed discussion of these and other risk factors, see the Company's SEC reports, including but not limited to the Annual Report on Form 10-K for the year ended December 26, 1997 and the Quarterly Report on Form 10-Q (A) for the quarter ended September 25, 1998. The Company disclaims any duty to update the forward-looking statements contained herein, except as may be required by law.
About VLSI Technology, Inc.
VLSI Technology, Inc. designs and manufactures custom and semicustom integrated circuits for leading firms in the wireless communications, networking, consumer digital entertainment and computing markets. VLSI's value proposition is based on full-service customer support, deep libraries of vertical market-focused IC intellectual property, unparalleled custom circuit design expertise enabled through the Velocity(tm) Rapid Silicon Prototyping design style, and one of the world's most flexible and efficient custom circuit manufacturing facilities in San Antonio, Texas. The company is based in San Jose, California with 1998 revenues from continuing operations of $547.8 million, and approximately 2,200 employees worldwide. For more information, visit the VLSI homepage, www.vlsi.com.
Velocity, Vega+, CDMA+, ViSTA, ThunderBird PCI and ThunderBird SD are trademarks of VLSI Technology, Inc. Other brand or product names are registered trademarks or trademarks of their respective companies.
VLSI TECHNOLOGY, INC.
Summary Consolidated Financial Statements
(Thousands, except per share amounts)
CONSOLIDATED STATEMENT OF INCOME
Three months ended Twelve months ended
Dec. 25, Dec. 26, Dec. 25, Dec. 26,
1998 1997 1998 1997
Net revenues $137,869 $193,017 $547,804 $712,653
Cost of sales 84,887 105,933 333,308 404,709
Gross profit 52,982 87,084 214,496 307,944
Research and development 30,659 26,825 111,708 98,434
Marketing, general and
administrative 21,864 29,491 93,769 114,011
Special charge - - 7,400 -
Operating income 459 30,768 1,619 95,499
Interest income
(expense), net 23,373 (640) 30,562 (4,204)
Income from continuing
operations before taxes 23,832 30,128 32,181 91,295
Provision for taxes
on income 9,015 8,135 11,265 24,650
Income from continuing
operations 14,817 21,993 20,916 66,645
Income from discontinued
operations, including
gain on disposal,
net of taxes - - - 5,173
Net income $ 14,817 $ 21,993 $ 20,916 $ 71,818
Net income per share
- Basic:
- continuing
operations $ .32 $ .47 $ .45 $ 1.43
- net income $ .32 $ .47 $ .45 $ 1.55
Net income per share
- Diluted:
- continuing
operations $ .31 $ .45 $ .44 $ 1.36
- net income $ .31 $ .45 $ .44 $ 1.47
Weighted average common
and common equivalent
shares outstanding
- Diluted 47,421 49,306 47,511 48,978
CONSOLIDATED BALANCE SHEET
Dec. 25, Dec. 26,
1998 1997
Current assets:
Cash and cash equivalents $122,460 $193,899
Marketable securities 171,921 89,585
Accounts receivable 81,890 110,869
Inventories 43,096 51,875
Deferred and refundable income taxes 54,382 82,870
Other current assets 8,962 4,779
Total current assets 482,711 533,877
Property, plant and equipment, net 428,931 380,904
Other assets 10,403 7,297
Total assets $922,045 $922,078
Total current liabilities $183,948 $186,228
Long-term debt 164,808 182,039
Other long-term obligations 18,239 24,960
Non-current deferred income taxes - 12,456
Stockholders' equity 555,050 516,395
Total liabilities and stockholders' equity $922,045 $922,078
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Contact:
VLSI Technology
Media: Earle Speranza, 408/922-5268
earle.speranza@vlsi.com
or
Financial: Lisa Ewbank, 408/474-5519
or
Sunil Mehta, 408/474-5519
or
Victor Lee, 408/474-5519
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