SST: Fiscal 4Q08 Financial Results

Silicon Storage Technology, Inc. announced results for the fourth quarter and year ended Dec. 31, 2008.

Net revenues for the fourth quarter were $58.4 million compared with $92.4 million in the third quarter of 2008 and with $107.4 million in the fourth quarter of 2007. Product revenues for the fourth quarter of 2008 were $46.3 million, compared with $79.8 million in the third quarter of 2008 and with $95.6 million in the fourth quarter of 2007. Revenues from technology licensing for the fourth quarter were $12.1 million, compared to $12.6 million in the third quarter of 2008. Technology licensing revenues in the fourth quarter of 2007 were $11.7 million.

Loss from operations for the fourth quarter was $9.9 million compared with income from operations of $4.1 million in the third quarter of 2008 and a loss from operations of $18.6 million in the fourth quarter of 2007.

Net loss for the fourth quarter of 2008 was $29.7 million, or $0.31 per share, based on approximately 95.5 million diluted shares. Included in the fourth quarter 2008 net loss were restructuring charges of $2.5 million, an impairment charge related to the company’s investment in Grace Semiconductor Manufacturing Corporation of $5.6 million and an impairment charge related to the company’s investment in ACET of $9.7 million. By comparison, in the third quarter of 2008, the company recorded a net income of $4.9 million, or $0.05 per share, based on approximately 99.7 million diluted shares. For the fourth quarter of 2007, SST reported a net loss of $23.5 million, or $0.23 per share based on approximately 104.2 million diluted shares. Included in the fourth quarter 2007 net loss was $19.0 million in impairment charges related to goodwill and fixed assets.

SST finished the fourth quarter of 2008 with $131.7 million in cash, cash equivalents, short-term investments, and long-term marketable debt securities, down approximately $1.1 million from $132.8 million at September 30, 2008 and down $30.5 million from $162.2 million at the end of 2007. During the fourth quarter, the company repurchased 2.8 million shares of its common stock at an aggregate cost of approximately $8.4 million.

Fiscal 2008 Results
Net revenues for the year ended Dec. 31, 2008 were $315.5 million compared with $411.7 million for the year ended Dec. 31, 2007. Total gross margin for 2008 was 31.1 percent compared with 29.2 percent in 2007. Operating expenses for the year ended Dec. 31, 2008 were $114.4 million compared with $144.5 million in 2007. Net loss for the year ended Dec. 31, 2008 was $32.9 million, or a loss of $0.33 per share based on 100.0 million diluted shares outstanding. Net loss for 2008 included $15.8 million investment related impairments and $2.5 million in restructuring expenses. This compares with a net loss of $49.0 million, or a loss of $0.47 per share based on 104.1 million diluted shares outstanding for the year ended Dec. 31, 2007. Net loss in 2007 included $22.4 million in investment related impairments and $30.9 million in impairments to long lived assets and expenses related to our financial restatement. During 2008, the company spent $28.9 million to repurchase 9.5 million shares of its common stock for an average cost of $3.04 per share.

Management Qualitative Comments
"The unprecedented sudden drop in demand of semiconductor products during the fourth quarter resulting from the deepening global financial crisis has caused significant decline in our revenues," said Bing Yeh, president and CEO. "This persistent difficult economic environment necessitated that we accelerate our planned changes to our business and focus in late 2008. We took important steps to reduce our inventory, streamline our organizational structure and cut our expenses by focusing our efforts on our most strategic initiatives with the goal of returning the company to profitability. With these organizational changes, we believe that we can control our expenses while continuing to execute our product and technology roadmap and position SST for growth as the economy recovers."

First Quarter 2009 Outlook
SST expects its first quarter revenues to be between $39 million and $45 million. Gross margin is expected to be between 38 and 40 percent, subject to the risk of changing market conditions. Total operating expenses are expected to be between $23 million and $25 million. Net loss per share is expected to be between $0.12 and $0.06.