Saifun Semiconductors Reports Third Quarter 2005 Results

Revenues Increase 97% from Third Quarter 2004

Netanya, Israel, November 18, 2005 -- Saifun Semiconductors Ltd. (Nasdsaq: SFUN) today announced financial results for the third quarter and nine months ended September 25, 2005.

For the third quarter of 2005, revenues were $17.9 million (of which $2.35 million represented non-cash license revenues recognized in connection with the exit in December 2004 from the company’s former joint venture with Infineon Technologies). This represented an increase in revenues of 97% from revenues of $9.1 million in the third quarter of 2004. Operating income for the third quarter of 2005 was $10.5 million compared to $4.2 million in the third quarter of 2004. Net income from continuing operations for the quarter was $11.0 million, or $0.49 per basic and $0.44 per diluted share on a pro forma basis , compared to a net loss from continuing operations of $2.4 million, or $0.11 per basic and diluted share on a pro forma basis1 in the third quarter of 2004. Net income for the quarter was $10.8 million (including a loss of $0.2 million from discontinued operations), or $0.48 per basic and $0.43 per diluted share on a pro forma basis1, compared to a net loss of $4.4 million (including a loss of $2.0 million from discontinued operations), or $0.21 per basic and diluted share on a pro forma basis1 in the third quarter of 2004. The company’s net income from continuing operations during this period included $0.6 million of stock-based compensation expense compared to $0.1 million in the third quarter of 2004.

Licensing revenues for the quarter were $15.3 million (including $2.35 million of non-cash license revenues), representing an increase of 124% compared to the third quarter of 2004. Service revenues were $2.6 million, representing an increase of 15% from the comparable period in 2004. Cost of service revenues for the quarter was $3.1 million, of which $1.2 million relates to the cost of services performed by research and development personnel with respect to services provided to licensees whereby no revenues were recognized in this quarter.

For the nine months ended September 25, 2005, revenues were $61.9 million (of which amount, $18.8 million represented non-cash license revenues). This represented an increase in revenues of 193% from revenues of $21.1 million for the comparable period in 2004. Operating income for the period was $40.8 million, compared to $8.2 million in 2004. Net income from continuing operations for the period was $41.3 million, or $1.84 per basic and $1.62 per diluted share on a pro forma basis1, compared to a net loss from continuing operations of $9.9 million, or $0.46 per basic and diluted share on a pro forma basis1 in the first nine months of 2004. Net income for the period was $35.9 million (including a loss of $5.5 million from discontinued operations), or $1.59 per basic and $1.41 per diluted share on a pro forma basis1, compared to a net loss of $13.5 million (including a loss of $3.6 million from discontinued operations), or $0.63 per basic and diluted share on a pro forma basis1 in the first nine months of 2004. The company’s net income from continuing operations during this period included $2.4 million of stock-based compensation expense compared to $0.4 million in the first nine months of 2004.

Licensing revenues for the period were $52.8 million (including $18.8 million of non-cash license revenues), representing an increase of 252% compared to the nine months ended September 26, 2004. Service revenues were $9.1 million, representing an increase of 49% from the comparable period in 2004. Cost of service revenues for the period was $8.2 million, of which $1.2 million relates to cost of services performed by research and development personnel with respect to services provided to licensees, whereby no revenues were recognized.

During the quarter ended September 25, 2005, the company started accounting for the discontinuation of its product sales operations in accordance with Financial Accounting Standards Board (FASB) Statement No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.’’ Accordingly, the results of operations for product sales activities were reported separately as discontinued operations in the company’s statement of operations for the periods reported in the accompanying results of operations, as well as for all historical periods presented.

Kobi Rozengarten, President of Saifun Semiconductors said, “Our first reporting period as a public company, the third quarter and first nine months of 2005, reflects the growth of our business as well as the industry demand for Non Volatile Memory (NVM) solutions based on our NROM technology. During the quarter, we signed an agreement with SMIC, the fourth largest global foundry in 2004 in terms of revenues, and we continue to implement our technology and execute projects with our licensees, including Infineon, Sony, Spansion and others.

“Saifun NROM addresses the needs of all NVM end markets with a single manufacturing process, allowing our licensees to reduce manufacturing costs while increasing yields and speeding time to market. NROM, which we believe is the only technology capable of storing four bits of information in a single memory cell, is the ideal solution for mass storage applications such as digital media players and digital still and video cameras.”

Mr. Rozengarten concluded, “With our leading technology, world-class customers and strong financial position, we are excited about the opportunities ahead.”

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¹Pro forma basic and diluted net income (loss) per ordinary share gives effect to the conversion of all our outstanding preferred shares into ordinary shares at a ratio of 1:1 immediately prior to the completion of our initial public offering on November 8, 2005.

About Saifun Semiconductors Ltd.
Saifun is a provider of intellectual property (IP) solutions for the non-volatile memory (NVM) market. The company’s innovative Saifun NROM® technology allows semiconductor manufacturers to deliver high performance, reliable products at a lower cost per megabit, with greater storage capacity, using a single process for all NVM applications. Saifun licenses its IP to semiconductor manufacturers who use this technology to develop and manufacture a variety of stand-alone and embedded NVM products. These include Flash memory for the telecommunications, consumer electronic, networking and automotive markets. The companies currently licensing Saifun NROM technology are Infineon Technologies, Macronix International, Matsushita, Sony Corporation, Spansion, and Tower Semiconductors.

 

 

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