Financial: VLSI Technology Q3 Results - Company Financial Information

Edge: Work-Group Computing Report, Oct 19, 1998

VLSI Technology, Inc. (NASDAQ: VLSI) Wednesday reported that third quarter revenues were $130.8 million, a decrease of 27.8% from $181.2 million for the same quarter one year ago and a decrease of 5.1% from the $137.8 million revenues in the second quarter of 1998.

Net loss for the third quarter was $3.6 million or $0.08 per share, which includes both a pre-tax charge against earnings primarily associated with severance costs of $7.4 million and a gain of $0.8 million from the repurchase of some of the company's convertible subordinated notes. Without the charge and gain, net income was $1.2 million or $0.03 per share. Net income for the third quarter of 1997 was $28.5 million or $0.57 per share, of which $7.7 million or $0.15 per share was associated with the sale of COMPASS Design Automation. In the second quarter of 1998, the company reported net income of $6.5 million or $0.14 per share, of which $0.07 per share came from the sale of 20% of the company's holdings in ARM Limited in their April initial public offering.

"VLSI maintained operating profitability through a period when the world-wide semiconductor market continued to be soft," said Alfred J. Stein, chairman and CEO. "With our workforce reduction in July, we positioned the company for this weakness and have maintained tight controls on spending. Our balance sheet remains strong, and we have and will continue to invest selectively in processes, technologies and products that we believe will drive our target market sales when the global industry demand returns."

VLSI is focused on helping customers get their products to market faster by providing them with function-rich, customized solutions. In the quarter VLSI announced the Velocity family of rapid silicon prototyping products, which can cut development time in half -- a substantial breakthrough that enables VLSI customers to deliver end products to market significantly faster. In the month since its announcement, VLSI has won multiple new designs with its Velocity development system. Several additional major customers are showing interest in this new Fast-Time-To-Market product family.

To further strengthen its system-on-a-chip solutions, the company signed a memorandum of understanding to partner with Macronix International Co. Ltd. of Taiwan to develop an advanced manufacturing process for adding embedded flash memory.

VLSI and the DSP Group announced DSP Group's new PalmDSPCore. The new core is an important addition to VLSI's extensive embedded core library.

VLSI acquired Atlantic Cores Inc., a privately held wide area network chip design company. ACI's technologies will significantly strengthen the company's wide area network offerings.

In the third quarter the company completed an 8% workforce reduction of approximately 190 people. As previously announced, Rich Beyer, president and chief operating officer, left the company for personal reasons; Alfred J. Stein, chairman and CEO, assumed his duties. Bala Iyer, senior vice president and chief financial officer, has departed the company recently to accept a position as CFO of a larger semiconductor company.

To expand on the significant projects that will enhance VLSI's products and technologies, the following is a summary of the company's recent announcements.

o VLSI announced the Velocity family of Rapid Silicon Prototyping chip development products. VLSI believes the Velocity family can reduce system-on-a-chip product development time by more than half in suitable applications, enabling VLSI customers to deliver end products to market significantly faster than under prevailing methods. Custom system-on-a-chip integrated circuits created with the Velocity product family will enable customers to integrate more features, and lower the costs, of new generations of high-volume wireless communications, consumer electronics and data communications end products. Velocity products use the rapid silicon prototyping methodology, a new custom integrated circuit design style developed by VLSI to narrow the "design productivity gap," cited by many as a key challenge facing the semiconductor industry.

o VLSI and Macronix International Co. Ltd. of Taiwan, a leading manufacturer of high performance flash and other non-volatile memory products, jointly announced that they signed a memorandum of understanding to develop cooperatively advanced embedded flash memory process technologies. The advanced technologies will allow flash memory to be included in system-on-a-chip semiconductor products targeting such applications as wireless communications and handheld computing. This feature allows system designers the flexibility to reprogram many times the on-chip memory for software upgrades, enhancements and bug fixing, thus reducing cost and time to market. Non-volatile flash memory differs from conventional dynamic RAM because it does not erase when power to it shuts off.

o VLSI and the DSP Group announced DSP Group's new PalmDSPCore. The new core, which VLSI is the first to license, is another addition to VLSI's extensive embedded core roadmap. The PalmDSPCore is a parallel digital signal processor architecture providing the performance and flexibility customers need to meet the demands of leading edge embedded DSP applications. The PalmDSPCore is designed for embedded applications that require high processor throughput and architectural flexibility such as GSM/CDMA handsets, third generation IMT-2000 wireless products, high-speed Data Subscriber Links (e.g. xDSL), pooled modems, Internet gateways and multimedia applications.