Silicon Image Reports Fourth Quarter 2004 Financials

SUNNYVALE, Calif., January 25, 2005 - Silicon Image, Inc. (Nasdaq: SIMG), a leader in multi-gigabit semiconductor solutions for the secure transmission and storage of rich digital media, today reported financial results for its fourth quarter and year ended December 31, 2004. 

Selected Q4 Highlights:

• Revenue of $46.1 million for the quarter, a sequential decrease of 4 percent from the third quarter and a 52 percent increase over the year ago quarter.
• Sequential product revenue growth of 6 percent for Storage, 5 percent for PC, and a sequential revenue decline of 11 percent for Consumer Electronics (CE).
• GAAP net loss of $0.1 million, or $0.00 per diluted share, as compared to a net loss of $5.3 million or $0.07 per diluted share for the year ago quarter. 
• Pro-forma* net income of $10.3 million, or $0.12 per diluted share, as compared to Pro-forma* net income of $2.3 million or $0.03 per diluted share for the year ago quarter.
• Expansion of the PanelLink Cinema™ Partners Program through the addition of industry leaders Sony and Hitachi.
• Added 40 new High-Definition Multimedia Interface™ (HDMI™) licensees, bringing total licensees to 170. 

Selected Full Year 2004 Highlights: 

• Revenue of $173.2 million for the full year 2004, an increase of 67 percent from the $103.5 million recorded for 2003.
• GAAP net loss of $0.3 million, or $0.00 per diluted share, as compared to a net loss of $12.8 million, or $0.18 per diluted share, for 2003.
• Pro-forma* net income was $33.4 million, or $0.39 per diluted share, as compared to Pro-forma* net income of $2.3 million or $0.03 per diluted share for 2003.
• The Company achieved revenue of $46.1 million for the fourth quarter, a decrease of 4 percent from revenue of $47.9 million in the third quarter of 2004, and an increase of 52 percent from revenue of $30.3 million in the fourth quarter of 2003.  Revenue for the full year 2004 was $173.2 million, an increase of 67 percent over revenue of $103.5 million for 2003.  

Net loss under Generally Accepted Accounting Principles (GAAP), which includes stock compensation expense, amortization of intangible assets, loss (gain) on derivative investment security, restructure expenses, gain on escrow settlement, in-process research and development expenses and patent defense costs, was $0.1 million, or $0.00 per diluted share, for the quarter ended December 31, 2004.  This compares to net income of $7.9 million, or $0.09 per diluted share, for the prior quarter, and a net loss of $5.3 million, or $0.07 per diluted share, for the fourth quarter of 2003.  On a full year basis, the GAAP net loss was $324,000, or $0.00 per diluted share, as compared to a net loss of $12.8 million, or $0.18 per diluted share, for 2003.

Fourth quarter pro-forma* net income was $10.3 million, or $0.12 per diluted share.  This compares to pro-forma net income of $10.0 million, or $0.12 per diluted share, for the third quarter of 2004, and pro-forma net income of $2.3 million, or $0.03 per diluted share, for the fourth quarter of 2003.  Pro-forma net income for the fourth quarter of 2004 excludes $10.4 million of charges attributable to the following: a non-cash charge for stock compensation; patent defense costs; and non-cash charges for the amortization of intangible assets.

On a full year basis, the pro-forma net income was $33.4 million or $0.39 per diluted share, which compares to pro-forma net income of $2.3 million or $0.03 per diluted share.  Pro-forma net income for FY 2004 excludes $33.7 million of charges attributable to the following: a non-cash charge for stock compensation, patent defense costs, non-cash gain on derivative investments and a non-cash charge for amortization of intangible assets.

"The fourth quarter marked the completion of a very successful year for Silicon Image.  We saw revenue grow 67 percent year-over-year.  Our gross margins expanded to 62.4 percent in the fourth quarter and reflected an average improvement year-over-year in excess of 600 basis points.  In addition to our financial success, we saw HDMI continue its rapid adoption, and we have clearly established ourselves as the quality and interoperability leader.  Furthermore, the successful launch of our new SteelVine™ products positions us for above average growth in our storage business for 2005 and 2006," commented Steve Tirado, Silicon Image's new president and chief executive officer. 

"Despite a tight business climate, we were able to achieve record product revenue, expand our gross margins and tightly control our operating expenses.  Even so, in the fourth quarter we experienced a decline in our licensing revenue, resulting in flat earnings per diluted share quarter-to-quarter.  The decline in licensing revenue was due to a multi-million dollar transaction anticipated to close in the fourth quarter.  We continue to work this deal and are optimistic that it will close in the first quarter," commented Bob Gargus, chief financial officer of Silicon Image. "Furthermore, it is noteworthy to point out that on a year-to-year revenue increase of slightly under $70 million, we were able to improve our pro-forma bottom line by slightly more than $31 million to the bottom-line.  Our improved financials combined with our new products, the various partnerships, and the rapid adoption of HDMI contributed to a very good year for Silicon Image."

The Company will host a conference call at 2:00 p.m. PST today to discuss its fourth quarter 2004 results and business outlook.  The call will be broadcast over the Internet and can be accessed on the investor relations section of the Company's Web site located at www.siliconimage.com. 

*Pro-forma net income or loss represents net income or net loss, exclusive of stock compensation expense, amortization of intangible assets, patent defense costs, acquisition integration costs, restructuring costs, gain/(loss) on derivative securities, gains on escrow settlement, and in-process research and development.

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About Silicon Image
Headquartered in Sunnyvale, Calif., Silicon Image, Inc. designs, develops and markets multi-gigabit semiconductor and system solutions for a variety of communications applications demanding high-bandwidth capability.  With its proprietary Multi-layer Serial Link (MSL™) architecture, Silicon Image is well positioned for leadership in multiple mass markets including PCs, consumer electronics, and storage.  Silicon Image is a leader in the global PC/display arena with its innovative digital interconnect technology and is now emerging as a leading player in the fields of storage and consumer electronics by offering robust, high-bandwidth semiconductors.  For more information on Silicon Image, visit www.siliconimage.com>

Safe Harbor Statement
This news release contains forward-looking information within the meaning of federal securities regulations. These forward-looking statements include statements related to future financial results, business outlook, business programs and initiatives, market growth  and product introductions.  These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those anticipated by these forward-looking statements.  In particular, future demand in PC, display, consumer electronics and storage markets may differ from current expectations, adversely affecting expected future results for the Company, new product introductions may not be timely or successful, business programs and initiatives and markets may not grow at the rates anticipated, and standards may not be adopted at the rates anticipated.  In addition, see "Management's Discussion and Analysis of Financial Condition and Results of Operations - Factors Affecting Future Results" in the most recent Quarterly Report on Form 10-Q and Annual Report on Form 10-K filed by Silicon Image with the SEC.  Silicon Image assumes no obligation to update this forward-looking information.

Silicon Image, PanelLink Cinema, SteelVine, MSL and www.siliconimage.com are trademarks, registered trademarks or service marks of Silicon Image, Inc. in the United States and other countries.