M-Systems reports earnings of 2c + 8c (capital gain)
Not bad and not super...revenue growth is present
Tuesday April 28, 5:02 am Eastern Time
Company Press Release
M-Systems Reports Profitable First Quarter
Successfully Completes Divestment of Non-Flash Taiwanese Operations
TEL-AVIV, Israel--(BUSINESS WIRE)--April 28, 1998--M-Systems Flash Disk Pioneers Ltd. (NASDAQ:FLSHF - news) today announced results for the first quarter of 1998.
Revenues for the quarter ended March 31, 1998 increased to $4,056,000 from $3,827,000 in the first quarter of 1997 (an increase of 6 percent).
It should be noted that the results of the first quarter of 1997 included the results of C-One Technology Corp., a Taiwanese corporation acquired by the Company, and of C-One's U.S. subsidiary, Pretec Electronics Corp. In contrast, the Company's results this past quarter do not include the results of C-One and Pretec due to the Company's divestment of its non-Flash operations in Taiwan as discussed further below.
The Company's net income for the first quarter (not including the capital gain it derived from the closing of the C-One/Pretec transaction) was $184,000 (2 cents per share) compared to a loss of $846,000 in the first quarter of 1997 (not including the one time write-off of R&D in Process in that quarter of $3,970,000).
The Company also reported a capital gain of $785,000 as a result of the C-One/Pretec transaction. The Company's total profit for the first quarter was $969,000 (10 cents per share).
The Company's gross margin went up this quarter to 46% from 27% in the first quarter of 1997.
Dov Moran, the Company's President, said ''We are very pleased with our first quarter results, and especially with our continued profitability and improving gross margin. Since the results that we are presenting exclude the C-One/Pretec sales that were included in the comparable period of 1997, these results actually represent impressive revenue growth over that period. Additionally, we are now completing five consecutive quarters of sustained growth in both our bottom line and our gross margin. Our gross margin this quarter went up to 46% from 27% in 1Q97 and from 39% in 4Q97.''
''Additionally, we are delighted by the groundbreaking agreement we recently signed with Microsoft providing for the inclusion of M-Systems' DiskOnChip drivers and linear flash drivers in the Microsoft Windows CE operating system. This Agreement includes a commitment by Microsoft to help promote M-Systems' Flash Disk technology solutions, and further evidences M-Systems' technological leadership and the growing status of DiskOnChip. Most importantly, it makes DiskOnChip -- M-Systems' flagship product with numerous advantages over competitive products -- a Plug and Play solution for the countless advanced applications which are due to be based on the much-heralded Windows CE platform. We believe that DiskOnChip is now well poised to enter the mainstream of Flash data storage, including such exciting new applications as Internet Access Devices, Web-TVs, Pocket PC's, CarPC's and thin-clients'' concluded Moran.
As indicated above, the Company completed a restructuring of its interests in Taiwan substantially in accordance with the terms of its previously-announced letter of intent. The restructuring is consistent with M-Systems' continued objective of focusing on its core business, while reducing expenses and efforts related to non-core businesses.
The outline of the completed transaction is as follows: C-One has transferred its Flash-related technology and business to M-Systems Asia, Ltd., a newly-incorporated Taiwanese corporation wholly-owned by M-Systems. C-One is hereafter to focus on its non-Flash business. M-Systems exchanged 6,045,500 shares of C-One (reducing its equity interest on C-One to 15.7%) for 665,000 shares of M-Systems (which were returned by former C-One shareholders who had received such shares as part of the original acquisition of C-One by M-Systems).
Furthermore, during the one year period commencing on the second anniversary of the restructuring, M-Systems has the right -- but not the obligation -- to exchange the remaining C-One shares it holds for an additional 123,700 shares of M-Systems.
''We are very satisfied with the successful restructuring of our operations in Taiwan,'' stated Moran. ''The divestment of the non-Flash operations in Taiwan allows us to increase our focus on our core business of Flash data storage solutions while continuing to meet our strategic objectives in having acquired C-One: i.e., the ability to offer the broadest range of Flash Disk offerings on the markets (via the ATA technology now transferred to M-Systems) and an enhanced presence in the Taiwanese and Far East market. And we are pleased to announce that we have appointed Mr. Barry Doong, previously Director of Sales at Phoenix Technologies (Taiwan) Ltd., to serve as president of M-Systems Asia.''
Moran will discuss the Company's earnings results and the other news discussed herein in a group conference call today at 11:30 AM US EST. Those who wish to participate may call 617/225-2125 or 800/360-0565. An instant replay will also be available starting at 4:00 PM US EST by calling 713/925-2505, replay code No. 144119.
M-Systems Flash Disk Pioneers (NASDAQ:FLSHF - news) develops, manufactures, and markets Flash data storage solutions utilizing TrueFFS(R), including a range of Flash PC Cards, PC Flash Disks, and DiskOnChip(R) devices.
The matters discussed in this news release contain forward looking statements that are subject to certain risks and uncertainties, including those described under the caption ''Risk Factors'' and elsewhere in the Company's most recent prospectuses and other periodic reports filed with the Securities and Exchange Commission. The Company assumes no obligation to update the Information in this release.
Other product and company names herein may be the trademarks of their respective owners.
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