Increase in Flash Memory Revenue Results in 25% Sequential Revenue Growth for SimpleTech

2/5/2003 - SimpleTech, Inc. (Nasdaq:STEC), a technology solutions provider offering products based on DRAM, SRAM and Flash memory technologies, announced its financial results for the fourth quarter and the year ended December 31, 2002.

Revenues for the fourth quarter of 2002 were $45.8 million, an increase of 25% from $36.5 million for the third quarter of 2002 and an increase of 29% from $35.6 million for the fourth quarter of 2001. Net income for the fourth quarter of 2002 was $153,000 including approximately $600,000 of tax credits. This is an improvement from a net loss for the third quarter of 2002 of $1.1 million. For the fourth quarter of 2002, earnings per share were flat at $0.00, compared with a loss per share of $0.03 for the third quarter of 2002.

Fiscal year 2002 revenues were $176.5 million, an increase of 7% from $164.2 million for 2002. Net loss for 2002 was $1.3 million. This compares with net income of $2.3 million for 2001. Loss per share was $0.03 for fiscal year 2002, compared to earnings per share of $0.06 for fiscal year 2001. On a year-over-year basis our unit shipments increased from approximately 2.9 million for fiscal year 2001 to approximately 3.6 million for fiscal year 2002.

Business Segments Commercial Division
Revenues from Commercial Division customers comprised 75% of total revenues for the fourth quarter of 2002 and 76% of total revenues for fiscal year 2002. Commercial revenues increased to $34.2 million for the fourth quarter of 2002 from $27.4 million for the third quarter of 2002. Commercial revenues increased to $135.0 million for fiscal year 2002 from $116.2 million for fiscal year 2001. Total Commercial units shipped during the fourth quarter of 2002 increased to approximately 769,000 from approximately 619,000 for the third quarter of 2002.

Industrial Division
Revenues from Industrial Division customers comprised 25% of total revenues for the fourth quarter of 2002 and 24% of total revenues for fiscal year 2002. Industrial revenues increased to $11.6 million for the fourth quarter of 2002 from $9.1 million for the third quarter of 2002. Industrial revenues for fiscal year 2002 decreased to $41.5 million from $48.0 million for 2001. Total Industrial units shipped during the fourth quarter of 2002 increased to approximately 231,000 from approximately 158,000 for the third quarter of 2002.

Xiran Division
In late December 2002, the Xiran Division received its ASIC, the key component in its universal solution to accelerate the delivery of content between network and storage, from IBM, its fabrication partner. Initial integration into board and system level products and testing are currently underway. We are encouraged by the progress made by the Xiran Division. As a result, SimpleTech has increased the budget for the Xiran Division from approximately $6.5 million for fiscal year 2002 to approximately $9 million for fiscal year 2003. This will accelerate the R&D activities, establish a sales and marketing infrastructure and expedite its time to market.

Business Outlook
The company invested approximately $7.0 million to enhance its manufacturing facility during the two-year period ending December 31, 2002. This investment follows increases in units shipped of 18% for 2001 and 23% for 2002. The company believes that it has the capacity to capitalize on the demand expected from an improvement in the business climate including an IT spending increase as well as increases in demand resulting from new Industrial and Commercial customers.

"With all of the challenges posed during 2002 -- notably the continued poor memory pricing environment -- we showed, again, strong performance from our core memory operations," said Manouch Moshayedi, chief executive officer of SimpleTech. "We achieved our positive 2002 performance by employing a combination of strict expense reduction and balance sheet management while making significant investments in research and development and completing a major manufacturing facility enhancement. As industry conditions improve, our investments will enable us to capitalize on the improved business climate. Currently, we continue our concerted efforts to gain new Industrial Division and Commercial Division customers while infusing new solutions into both channels. Given our performance in 2001 and 2002 coupled with our current financial strength and strategic investments, we are optimistic about SimpleTech's future.

"Based on softening seasonal demand and the erosion of DRAM and Flash pricing during the latter part of fiscal year 2002 and the first part of Q1 2003 we expect our revenues to decline to a range of $38 million and $42 million for the first quarter of 2003."

About SimpleTech
SimpleTech, Inc. is a technology solutions provider offering products based on DRAM, SRAM and Flash memory technologies. Headquartered in Santa Ana, Calif., the company is a leader in the design, development, manufacturing and marketing of memory solutions. For information, please contact the company's Investor Relations department at (949) 260-8328 (ir@simpletech.com) or visit www.simpletech.com.

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