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SST Reports Results for Second Quarter 2001.

Business Editors/High-Tech Writers

SUNNYVALE, Calif.--(BUSINESS WIRE)--July 18, 2001

SST (Silicon Storage Technology, Inc.) (Nasdaq:SSTI) today announced results for the second quarter ended June 30, 2001.

Net revenues for the second quarter were $62.7 million, compared with $86.3 million in the first quarter of 2001 and with $103.2 million in the second quarter a year ago.

Net profit for the second quarter of 2001 was $1.1 million, or a profit of $0.01 per share, based on approximately 96.0 million diluted shares outstanding. This compares with a net profit of $5.4 million in the first quarter of 2001, or a profit of $0.06 per share, based on approximately 96.4 million diluted shares outstanding and with a net profit for the second quarter of 2000 of $22.5 million, or $0.24 per share, based on approximately 95.8 million diluted shares outstanding.

"The second quarter was another difficult quarter for the industry and for SST due to the excess inventory situation and a continuing slowdown in new orders," said Bing Yeh, president and CEO. "In reaction to sluggish sales, we were able to work with our foundry partners to significantly reduce our wafer-start rate in order to control our inventory level.

"Despite the slowdown, however, SST is continuing its focus on strategic product development. During the second quarter, we introduced a new family of Small-Sector Flash (SSF) memory products. This new 29 Series SSF family product is the first product on the market that allows a 55 nanosecond read access speed and a low standby current in a small 128 Byte sector architecture. Using these products, system designs no longer have to sacrifice read access speeds in order to have small-sector flash memory with low power consumption. They are ideal for digital consumer applications such as PDAs, electronic organizers, data pagers and video games.

"Recently, at the Embedded Systems Conference in Chicago, we announced a new concurrent SuperFlash product family that combines small footprint, low energy consumption with simultaneous read/write operation. As the first product in this new 36 Series Concurrent SuperFlash (CSF) family, it has the industry's smallest footprint for a 16 Mbit flash memory device, while reducing battery consumption substantially below that of competing solutions. It is especially ideal for mobile and wireless communications applications such as cell phones, Bluetooth modules, global positioning systems and wireless modems.

"We also expanded our embedded mass storage portfolio with a new ATA-Disk Module (ADM) family to meet market demand for high-performance and easy-to-implement embedded mass storage solutions for applications such as set-top boxes, thin client systems, network computers, Internet appliances and other PC-based systems.

"In addition, we introduced a second generation ATA-Disk Chip (ADC) family of products that are an easy-to-implement replacement for conventional IDE hard disk drives in applications that require low power and high-performance mass data storage.

"The interest in licensing our SuperFlash technology for embedded applications has continued to grow from global companies worldwide. We expect our licensing business to continue its robust growth through 2001. With the leverage of technology licensing, we have also been able to secure more capacity with advanced technologies from both existing and new wafer foundry partners. After suffering from a severe capacity shortage during most of 2000, our goal is to secure ample capacity with deep sub-micron process technologies during the current industry slowdown for our next round of growth. Our strategy is to work with foundries that are memory producers who understand the memory market's demand for low cost wafers and high volume production.

"Earlier this year, we announced a deep sub-micron foundry agreement with Vanguard International, an affiliate of TSMC. Vanguard, which last year announced its transformation from a DRAM product company to a semiconductor memory foundry, will manufacture SST's 0.18 micron and 0.13 micron flash memory chips at its facilities in Hsin Chu, Taiwan. This relationship allows SST to secure additional deep sub-micron capacity, which is strategically important for us as we expand into higher density flash markets.

"In April, we announced the expansion of our technology licensing and foundry agreement with Samsung. This agreement expands our partnership to include additional deep sub-micron technology and facilitates our move from current 0.33 micron to smaller process geometries including 0.25 micron, 0.18 micron and 0.13 micron. This agreement also expands our potential for a future royalty stream as Samsung intends to embed SST's SuperFlash technology into its high-volume products, such as smart cards and embedded microcontrollers.

"In May, we also announced a foundry, technology licensing and joint product development agreement with Nanya Technology. Under this agreement, Nanya will serve as a foundry for SST's 0.25 micron and 0.18 micron flash memory products. Nanya, which is focused on the DRAM production and memory foundry business, will process SuperFlash as the sole nonvolatile memory technology in its factories. Our two companies will also work together to jointly develop applications specific flash memory products with densities comparable to DRAM for mass storage or computer main memory applications.

"In short, we believe that our diversified product portfolio, our strength in flash technology, our new design wins in major emerging markets, our strong manufacturing partners and our technology licensing business model will help us weather the current gloomy macro economic climate.

"Furthermore, we will continue to focus on new product development, managing our expenses and making the appropriate strategic investments. We believe these activities, combined with our strong balance sheet, will continue to allow us the highest probability of success in expanding our market share. I am confident that SST is well positioned to emerge from this cycle a stronger, and more dominant player in the global flash memory market."

Third Quarter 2001 Outlook

For the third quarter of 2001, the company expects revenue to be in the range of $60 to $70 million. The tax rate is expected to remain at 38 percent. Earnings per share are expected to be in the range of a net loss of $0.02 to a net profit of $0.02.

Conference Call

SST's quarterly conference call will be held today, July 18th at 1:30 p.m. PDT. Those wishing to participate in the conference should dial (866) 580-3168 using the password "SST" at approximately 1:20 p.m. PDT. A replay of the call will be available for two weeks by dialing (800) 475-6701 using the access code "594630." A webcast of the conference call will be available on and on Both webcasts will be available until the next earnings conference call.

Securities and Exchange Commission's Regulation Fair Disclosure

In adhering to the Securities and Exchange Commission's Regulation Fair Disclosure, SST will provide its investors and analysts with information and some forward-looking guidance each quarter in its earnings news releases and in its conference call. SST will not provide any further guidance or updates on its performance during the quarter unless it does so in a news release, conference call or SEC filing in compliance with Regulation Fair Disclosure.

About SuperFlash Technology

SST's SuperFlash technology is a NOR type, split-gate cell architecture which uses a reliable thick-oxide process with fewer manufacturing steps resulting in a low-cost, nonvolatile memory solution with excellent data retention and higher reliability. The split-gate NOR SuperFlash architecture facilitates a simple and flexible design suitable for high performance, high reliability, small or medium sector size, in- or off-system programming and a variety of densities, all in a single CMOS-compatible technology.

About Silicon Storage Technology, Inc.

Headquartered in Sunnyvale, California, SST designs, manufactures and markets a diversified range of nonvolatile memory solutions, based on proprietary, patented SuperFlash technology, for high volume applications in the digital consumer, networking, wireless communications and Internet computing markets. SST's product families include high functionality flash memory components, flash mass storage products and 8-bit microcontrollers with on-chip flash memory. SST also offers its SuperFlash technology for embedded applications through its world-class manufacturing partners and technology licensees IBM, Motorola, National Semiconductor, Oki Electric Industry Co. Ltd., Samsung Electronics Co. Ltd., SANYO Electric Co., Ltd., Seiko Epson Corp. and Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC). TSMC offers SuperFlash under its trademark Emb-FLASH. Further information on SST can be found on the company's Web site at

Forward-Looking Statements

Except for the historical information contained herein, this news release contains forward-looking statements regarding flash memory market conditions, the company's future financial performance, the performance of new products and the company's ability to bring new products to market that involve risks and uncertainties. These risks may include timely development, acceptance and pricing of new products, the terms and conditions associated with licensees' royalty payments, the impact of competitive products and pricing, and general economic conditions as they affect the company's customers, as well as other risks detailed from time to time in the company's SEC reports, including the report on Form 10-K for the year ended December 31, 2000 and report on Form 10-Q for the quarter ended March 31, 2001.

Note to Editors: The SST logo and SuperFlash are registered trademarks of Silicon Storage Technology, Inc. Emb-FLASH is a trademark of TSMC. All other trademarks or registered trademarks are the property of their respective holders.

 Silicon Storage Technology, Inc. and Subsidiary
 Condensed Consolidated Statements of Operations
 (in thousands except per share data)

 Three months ended Six months ended
 June 30, June 30,
 2000 2001 2000 2001
 (unaudited) (unaudited)
Net revenues:
 Product revenues $102,076 $ 52,897 $163,889 $132,826
 Technology licensing 1,110 9,818 1,611 16,187
 -------- -------- -------- --------
 Total net revenues 103,186 62,715 165,500 149,013

Cost of revenues 57,084 38,037 93,559 95,395
 -------- -------- -------- --------
Gross profit 46,102 24,678 71,941 53,618
 -------- -------- -------- --------
Operating expenses:
 Research and
 development 9,181 12,425 17,257 24,711
 Sales and marketing 5,876 6,179 10,503 12,523
 General and
 administrative 3,680 5,637 6,319 10,445
 -------- -------- -------- --------
 Total operating
 expenses 18,737 24,241 34,079 47,679
 -------- -------- -------- --------
Income from
 operations 27,365 437 37,862 5,939
Interest and other
 income 3,082 1,469 3,100 4,846
Interest expense (101) (87) (545) (186)
 -------- -------- -------- --------
Income before
 provision for
 income taxes 30,346 1,819 40,417 10,599
Provision for
 income taxes 7,810 692 8,237 4,028
 -------- -------- -------- --------
Net income $ 22,536 $ 1,127 $ 32,180 $ 6,571
 ======== ======== ======== ========
Net income per
 share - basic $ 0.25 $ 0.01 $ 0.39 $ 0.07
 ======== ======== ======== ========
Shares used in per
 share calculation 88,753 90,982 82,530 90,827
 ======== ======== ======== ========
Net income per
 share - diluted $ 0.24 $ 0.01 $ 0.36 $ 0.07
 ======== ======== ======== ========
Shares used in per
 share calculation 95,842 96,001 90,444 96,212
 ======== ======== ======== ========

 Silicon Storage Technology, Inc. and Subsidiary
 Condensed Consolidated Balance Sheets
 (in thousands)

 December 31, June 30,
 2000 2001


Current assets:
 Cash, cash equivalents and
 short-term investments $249,049 $145,052
 Trade accounts receivable, net 126,258 65,962
 Inventories 73,290 179,239
 Other current assets 24,326 32,733
 -------- --------
 Total current assets 472,923 422,986

Equipment, furniture and
 fixtures, net 16,874 24,540
Other assets 22,793 85,076
 -------- --------
 Total assets $512,590 $532,602
 ======== ========


Current liabilities:
 Notes payable, current portion $ -- $ 299
 Trade accounts payable 46,523 63,300
 Accrued expenses and other
 liabilities 33,879 23,697
 Deferred revenue 15,274 18,373
 -------- --------
 Total current liabilities 95,676 105,669

Other liabilities 279 1,575
 -------- --------
 Total liabilities 95,955 107,244
 -------- --------


Common stock 330,310 332,377
Accumulated other
 comprehensive income 132 217
Retained earnings 86,193 92,764
 -------- --------
 Total shareholders' equity 416,635 425,358
 -------- --------
 Total liabilities and
 shareholders' equity $512,590 $532,602
 ======== ========
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Publication:Business Wire
Geographic Code:1USA
Date:Jul 18, 2001
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