SST: Fiscal 2Q09 Financial Results

Silicon Storage Technology, Inc.
announced results for the second quarter, ended June 30, 2009.

Net revenues for the second quarter were $58.1 million compared with $50.1 million in the first quarter of 2009 and with $83.7 million in the second quarter of 2008. Product revenues for the second quarter of 2009 were $51.8 million, compared with $38.8 million in the first quarter of 2009 and with $71.1 million in the second quarter of 2008. Revenues from technology licensing for the second quarter were $6.3 million, compared with $11.3 million in the first quarter of 2009 and with $12.6 million in the second quarter of 2008.

Loss from operations for the second quarter was $7.5 million compared with a loss from operations of $6.3 million in the first quarter of 2009 and with a loss from operations of $5.9 million in the second quarter of 2008.

SST is in the process of completing an evaluation of a potential impairment charge during the second quarter related to its investment in Grace Semiconductor Manufacturing Corporation. SST’s preliminary net loss for the second quarter of 2009, before any such potential impairment charge, if any, was $8.2 million, or $0.09 per share, based on approximately 95.8 million diluted shares. If SST is required to further impair its investment in GSMC, its net loss will increase; however, SST cannot at this time estimate the potential range of any such impairment charge, if any. In the first quarter of 2009, the company recorded a net loss of $9.2 million, or $0.10 per share, based on approximately 95.7 million diluted shares. For the second quarter of 2008, SST reported net loss of $9.6 million, or $0.09 per share based on approximately 101.8 million diluted shares.

SST finished the second quarter of 2009 with $131.3 million in cash, cash equivalents, short-term investments, and long-term marketable debt securities, up approximately $5.6 million from $125.7 million at March 31, 2009.

Management Qualitative Comments
"After hitting bottom during the month of January, our product shipments rebounded and the momentum continued into the second quarter," said Bing Yeh, chief executive officer. "The inventory replenishment by our customers, coupled with modest improvement in demand, accounted for our better-than-expected product revenues in the second quarter. Licensing revenue in the second quarter reflected the declines in our licensees’ business and is expected to rebound somewhat in the third quarter. Market conditions remain challenging in the memory space as there continues to be uncertainty over the macro-economic environment resulting in poor visibility and continued pricing pressure. We continue to experience ASP declines, particularly in commodity memory, causing pressure on our gross margins. Modest growth in revenues is expected with ASP erosion significantly offsetting unit volume increases. Given these difficult conditions, SST continues to place emphasis on cost-control as well as inventory and cash management. Further, we are focusing our resources on areas of our business that will yield the most impact over time, creating additional opportunity without additional R&D expense. We are taking a fresh look at every aspect of our business and are working hard on our goal of returning our company to profitability."

Third Quarter 2009 Outlook
SST expects its third quarter revenues to be between $61 million and $68 million. Gross margin is expected to be between 25 and 29 percent, subject to the risk of changing market conditions. Total operating expenses are expected to be between $22 million and $24 million. Net loss per share is expected to be between $0.07 and $0.03.