Business Wire S3 INC. REPORTS FOURTH QUARTER AND FISCAL YEAR 1998 FINANCIAL RESULTS; COMPANY ALSO ANNOUNCES KEY DESIGN WIN WITH IBM
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SANTA CLARA, Calif.--(BUSINESS WIRE)--Jan. 25, 1999--S3 Inc.
(Nasdaq:SIII.O) today reported fourth quarter and fiscal year 1998
financial results for the period ended December 31, 1998.
Net revenues for the fourth quarter of 1998 were $41.5 million;
and net revenues for the 1998 fiscal year were $224.6 million. The net
loss before write-offs of impaired long-lived assets, underutilized
wafer capacity and inventory obsolescence, was $29.0 million for the
quarter or $0.56 per diluted share, while the reported net loss for
the fourth quarter was $70.3 million or $1.36 per diluted share. The
reported net loss for fiscal year 1998 was $113.2 million.
"We expect that the aggressive ramp of our new Savage products
combined with our financial actions will help accelerate S3's goal of
returning to profitability," said Ken Potashner, president and CEO of
S3 Inc. "We believe our operating performance will be significantly
improved through these actions, which include cost-structure
improvements, the write-down of long-lived assets and the elimination
of underutilized wafer capacity."
Added Potashner, "We are also making significant progress towards
establishing the partnerships I believe will be necessary to provide
rapid growth for the company. This progress combined with realigned
business models and a more effective organizational structure should
enable S3 to quickly pursue growth and profitability. In the past
month, we have announced partnerships with Intel, IBM and Fujitsu and
we will be announcing additional relationships and design wins over
the next several weeks. We are pleased to report that our products are
being embraced by both OEM and add-in-card customers worldwide."
S3 Forms Strategic Partnership with Intel
During the past quarter, S3 announced a long-term strategic
partnership with Intel Corp. that can provide S3 with substantial
advantages over the competition. The agreement includes a 10-year
cross-license agreement for all S3 and Intel patents for the
development of certain semiconductor products, a bus license for
current and future Intel general purpose processors, and the selection
of S3 as an Intel AGP 4X validation partner. Intel will also purchase
warrants to buy S3 shares under undisclosed terms.
According to Potashner: "The Intel agreement gives S3 significant
opportunities that our competitors don't have and we intend to
leverage this strength to its fullest potential. OEM and add-in-card
customers worldwide have expressed substantial interest in doing
business with S3 because of this partnership, the associated
advantages for our customer base and the features of our next
generation desktop and mobile Savage products."
S3 Secures Major OEM Design Wins with IBM and Fujitsu
In a separate press release today, S3 also announced a key design
win with IBM. Said Potashner, "Having the world's second largest
supplier of desktops incorporate our products is indicative of the
types of successes we expect in the future."
The IBM announcement involves S3's Trio3D, which has been
incorporated into the new IBM PC 300GL series. These new PCs are
designed to offer small and medium business customers the advanced
performance and business productivity tools that larger customers can
take for granted.
Earlier this month, S3 also announced that Fujitsu had selected
S3's Savage3D graphics accelerator to power its new line of high-end
multimedia PCs targeted at the PC gamer. Scheduled to ship in
February, the new range of high-performance multimedia PCs delivers
stunning 3D graphics and DVD/video playback through S3's award-winning
Savage3D accelerator.
S3's Vision for the Future
S3 is currently the world's second largest supplier of integrated
2D, 3D and video accelerators for the desktop and mobile markets.
According to Potashner, "S3 intends to recapture the number one market
share position by executing on its product roadmap, leveraging
existing partnerships with Intel and other industry leaders, forming
new partnerships that provide substantial leverage for the company,
and utilizing S3's strong financial and manufacturing strength for
future growth opportunities."
In addition to re-establishing its leadership in the desktop and
mobile markets, S3 also intends to pursue new markets that represent
substantial growth prospects for the company. Targeted products in
these new markets may include set-top boxes, WinCE machines, consumer
appliances, industrial point-of-sale systems, and automotive GPS
systems, among others.
About S3 Inc.
S3 Inc., founded in 1989 with headquarters in Santa Clara, is a
premier supplier of multimedia acceleration hardware and its
associated software. S3 is committed to applying its expertise in
video, graphics and multimedia acceleration to create innovative and
affordable products for the home, desktop and mobile markets.
Except for the historical information contained herein, the
matters set forth in this press release, including statements as to
the company's ability to return to profitability and expectations
related to additional design wins, are forward-looking statements that
are subject to risk and uncertainties that may cause actual results to
differ materially, including the impact of competitive products and
pricing and of alternative technological advances, the company's
ability to develop successfully new products and form and operate
successfully strategic partnerships, the company's ability to execute
its strategic plan, and other risks detailed from time to time in S3's
SEC reports, including its Quarterly Report on Form 10-Q for the
quarter ended September 30, 1998. These forward-looking statements
speak only as of the date hereof. S3 disclaims any intent or
obligation up update these forward-looking statements.
S3 is a registered trademark of S3 Inc. The S3 corporate logo,
Savage3D and Trio product names are trademarks of S3 Inc. Other marks
referenced herein are the property of their respective owners.
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S3 Inc.
Statements of Operations
(In thousands, except per share data )
Three Months Ended Twelve Months Ended
December 31, December 31,
1998 1997 1998 1997
Net sales $ 41,547 $101,911 $ 224,639 $ 436,359
Cost of sales 57,869 75,468 226,711 301,185
Gross margin (16,322) 26,443 (2,072) 135,174
Operating expenses:
Research and development 18,447 35,764 78,566 95,792
Selling, marketing and
administrative 8,765 15,983 41,926 55,879
Other operating expense 27,226(1) -- 41,335(2) --
Total operating
expenses 54,438 51,747 161,827 151,671
Income (loss) from
operations (70,760) (25,304) (163,899) (16,497)
Gain on sale of manufacturing
joint venture -- -- 26,561 --
Other income (expense), net (1,233) (1,126) (5,291) (2,134)
Income (loss) before
income taxes and equity
in income of manufacturing
joint venture (71,993) (26,430) (142,629) (18,631)
Provision (benefit)
for income taxes -- (10,767) (11,956) (8,497)
Income (loss) before
equity in income of
manufacturing
joint venture (71,993) (15,663) (130,673) (10,134)
Equity in income from
manufacturing
joint venture 1,703 7,542 17,469 19,012
Net income (loss) $(70,290) $ (8,121) $(113,204) $ 8,878
Net income (loss)
per share - basic $ (1.36) $ (0.16) $ (2.22) $ 0.18
Net income (loss)
per share - diluted $ (1.36) $ (0.16) $ (2.22) $ 0.17
Shares used in per-share
calculation - basic 51,554 50,440 51,078 49,519
Shares used in per-share
calculation - diluted 51,554 50,440 51,078 51,740
(1) Represents a charge for impairment of long-lived assets.
(2) Includes write-off of acquired in-process technology of
$8,000,000, restructuring charge of $6,109,000 and charge for
impairment of long-lived assets of $27,226,000.
S3 Inc.
Consolidated Balance Sheets
(dollars in thousands)
December 31, December 31,
1998 1997
ASSETS
Current assets:
Cash and investments $119,575 $117,670
Accounts receivable, net 23,864 60,713
Inventories, net 11,383 71,882
Prepaid expenses and other 42,356 51,172
Total current assets 197,178 301,437
Property and equipment, net 22,392 46,628
Production capacity rights -- 4,800
Investment in joint venture 76,938 104,465
Other assets 18,175 35,524
Total $314,683 $492,854
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 16,315 $ 42,819
Notes payable 15,888 26,717
Accrued liabilities 10,826 10,987
Deferred revenue 1,905 10,921
Total current liabilities 44,934 91,444
Notes payable -- 4,800
Other liabilities 13,837 22,270
Total liabilities 58,771 118,514
Convertible subordinated debentures 103,500 103,500
Stockholders' equity 152,412 270,840
Total $314,683 $492,854
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CONTACT: S3 Inc.
Press contact: Kelly Morris, 408/588-8023
Investor contact: Walt Amaral, 408/588-8007 |
