TranSwitch Corporation Announces Record Revenues and Record Profitabililty for the First Quarter - Company Financial Information

Cambridge Telcom Report, April 17, 2000

TranSwitch Corporation (NASDAQ:TXCC) announced Wednesday that it has posted record revenues, record operating income, and record net income for the first quarter ended March 31, 2000. The financial highlights for the first quarter 2000 are as follows:

-- Quarterly Revenues up 85% over the first quarter 1999

-- Quarterly Operating Income up 222% over the first quarter 1999

-- Quarterly Revenues up 20% sequentially over the fourth quarter 1999

-- Quarterly Operating Income up 36% over the fourth quarter 1999

Total Revenues for the first quarter 2000 were $26,747,000, an 85% increase over the revenues of $14,461,000 reported for the first quarter of 1999. In addition, the Company reported an operating income of $8,875,000 a sequential increase of 36% over $6,530,000 reported in the fourth quarter of 1999, and an increase of 222% over the $2,752,000 reported a year ago in the first quarter of 1999.

In the first quarter 2000, TranSwitch's effective tax rate was 38%. The net income for the first quarter of 2000, taxed at this 38% rate, is $6,375,000, or $0.15 per diluted share, compared with a net income of $3,124,000, or $0.08 per diluted share, taxed at a 5% rate, in the first quarter of 1999.

"With this quarter, our revenues have grown for fourteen quarters sequentially, and we also have had sequential growth in profitability for the last eleven quarters. In addition, we have had strong book-to-bill ratios for thirteen quarters sequentially", commented Dr. Santanu Das, President and CEO of TranSwitch Corporation.

"We also improved our cash position by $13.6 million this quarter. Our total cash and investments were $125 million on March 31, 2000. With this strong balance sheet," said Dr. Das, "we feel very well-positioned to further deepen our relationships with major accounts where we have had significant success in the last few years.

"We are targeting three fast growing end markets in the communications semiconductor sector - namely, the Public Network Infrastructure, Internet Infrastructure, and the corporate Wide Area Network (WAN).

"We believe," Dr. Das continued, "that the record revenue and the record profitability in the first quarter, as well as the strong book-to-bill ratios realized in this quarter, reflect the strength of these end markets - as well as TranSwitch's strong position in this space. Our performance in this quarter and solid track record in the last three years give us the confidence that we are beginning the new millennium with positive anticipation," concluded Dr. Das.

TranSwitch Corporation, headquartered in Shelton, Connecticut, is a leading developer and global supplier of innovative high-speed VLSI semiconductor solutions -- Connectivity Engines - to original equipment manufacturers who serve three fast-growing end-markets: the Worldwide Public Network Infrastructure, the Internet Infrastructure, and corporate Wide Area Networks (WANs). Combining its in-depth understanding of applicable global communication standards and its world-class expertise in semiconductor design, TranSwitch Corporation implements communications standards in VLSI solutions which deliver high levels of performance. Committed to providing high-quality products and service, TranSwitch is ISO 9001 registered. Detailed information on TranSwitch products, news announcements, seminars, service and support is available on TranSwitch's home page at the World Wide Web site -- http://www.transwitch.com.

                        TranSwitch Corporation
                 Consolidated Statements of Operations

                                           Three Months Ended
(In thousands, except per share data)          March 31,
                                              (unaudited)

                                            2000       1999
                                            ----       ----

Total Revenues                             $26,747    $14,461
--------------
Total cost of revenues                       8,542      5,222
                                           -------    -------
Gross Profit                                18,205      9,239
------------
Operating expenses:
-------------------
  Research and development                   4,424      3,131
  Marketing and sales                        3,868      2,637
  General and administrative                 1,038        719
                                           -------    -------
Total operating expenses                     9,330      6,487
------------------------
Operating income                             8,875      2,752
----------------                          -------    -------
Interest income, net                         1,415        532
                                           -------    -------
Income before tax                           10,290      3,284
-----------------
Provision for taxes                          3,915        160
                                           -------    -------
Net income                                 $ 6,375    $ 3,124
----------                                 -------    -------
Basic earnings  per share                  $  0.16      $0.09
-------------------------                  -------    -------
Diluted earnings per share                 $  0.15      $0.08
--------------------------                 -------    -------
Basic average shares outstanding            39,813     36,153(a)

Diluted average shares outstanding          43,103     38,894(a)

                 Condensed Consolidated Balance Sheets

                                           March 31,  December 31,
                                               2000        1999
                                               ----        ----
                                            (unaudited)
                                            -----------
Assets
Cash and short term investments             $ 88,115    $ 75,317
Accounts receivable, net                      14,474      12,368
Inventory                                     10,247       7,900
Other current assets                           5,453       4,919
                                            --------    --------
Total current assets                         118,289     100,504

Long term investments                         36,834      36,003
Property and equipment, net                    7,861       7,118
Deferred taxes-non-current                     8,826      11,567
Other assets                                   3,576       4,702
                                            --------    --------
Total assets                                $175,386    $159,894
                                            --------    --------
Liabilities and stockholders' equity
Accounts payable & accrued expenses         $  7,299    $  4,364
Other accrued liabilities                      5,048       4,337
                                            --------    --------
Total current liabilities                     12,347       8,701

Total stockholders' equity                   163,039     151,193
                                            --------    --------
Total liabilities & stockholders' equity    $175,386    $159,894
                                            --------    --------

(a) Adjusted for the 3 for 2 stock splits effective June 4, 1999
    and 11-Jan-00