Cypress Reports Four Percent Increase in First Quarter Revenue

4/21/2003 - Cypress Semiconductor Corporation (NYSE: CY) announced that revenue for the 2003 first quarter was $181.0 million, up 4% from the prior quarter revenue of $174.4 million and down 6% from the year-ago first quarter revenue of $193.2 million. Pro forma net loss for the 2003 first quarter was $12.4 million, resulting in a pro forma loss per share of $0.10, compared with the prior quarter pro forma loss per share of $0.12 and the year-ago first quarter pro forma loss per share of $0.10.

Including amortization of intangibles and other acquisition-related, restructuring and other charges and credits, Cypress posted a GAAP net loss of $33.3 million for the 2003 first quarter, resulting in a loss per share of $0.27, compared with the prior quarter net loss of $126.2 million or $1.02 per share. The first quarter 2003 results included a restructuring charge of $3.4 million, related to the company’s actions to further reduce its cost structure, with a reduction in force impacting approximately 150 employees.

Cypress CEO T.J. Rodgers said, “We’re very pleased to have started fiscal 2003 on an up trend. The first quarter turned out much better than we expected, particularly in our wireless and computation segments. Bookings and turns continued at a good pace in the wake of our mid-quarter update on March 4, 2003, and we ended the quarter with a book-to-bill greater than 1.0. We expect a high-turns business environment to continue for most of 2003, though we grew our backlog in the first quarter, following a two-quarter decline.”

Rodgers continued, “Gross margin for the 2003 first quarter was 43.5%[1], with an approximately 2% benefit from the sale of previously reserved inventory. We were cash-flow positive from operations and ended the quarter with total cash (includes cash, cash equivalents, investments and restricted cash) of approximately $237 million. Cash for the quarter includes equipment-related financing, which contributed approximately $25 million to our quarter-end balance.”

In order to make our revenue expansion initiatives easier to understand, we are revising our market segment presentation to highlight our subsidiaries separately. The report below shows our usual market segments plus a grouping called “Cypress Subsidiaries,” which now and in the future will include business updates on Silicon Light Machines, Silicon Magnetic Systems, Cypress MicroSystems and SunPower Corporation. Revised quarterly revenue by segment for Q402 and Q103 is also included in this report.

Wide Area Network and Storage Area Network (WAN/SAN)
Revenue from the WAN/SAN segment, which accounted for 31% of first-quarter revenue, decreased 10% from the prior quarter, compared with our flat revenue expectation. This segment posted a gross margin of 51%1. The datacom market continues to suffer from market-demand weakness, and we expect it to be sluggish through 2003. We anticipate flat revenue in the second quarter. Segment highlights include:

Wireless Terminals and Wireless Infrastructure (WIT/WIN)
Revenue from the WIT/WIN segment, which accounted for 32% of first-quarter revenue, increased 22% from the prior quarter with a gross margin of 36%1. The increase in revenue is attributed to a higher-than-expected rebound in handset-related demand, a higher-density memory mix and market share gains. We expect WIT/WIN sales to be slightly up in the second quarter of 2003, aided by continued market share gains. Segment highlights for the quarter include:

Computation and Consumer
Revenue from the computation and consumer segment, which accounted for 33% of first-quarter revenue, was up 2% from the prior quarter and posted a gross margin of 40%1. While consumer-related demand was soft, the increase in this segment’s revenue was driven primarily by better-than-expected PC-related demand and an increase in the adoption rate of USB 2.0 technology, a serial plug-and-play connection standard for PCs and peripherals. We expect computation and consumer segment sales to be flat in the second quarter. Segment highlights include:

Cypress Subsidiaries
Revenue from Cypress subsidiaries, which accounted for 4% of first-quarter revenue, was up 22% from the prior quarter largely due to the consolidation of SunPower Corporation’s financial results. The subsidiaries posted a gross margin of 70%1. We expect revenue contribution from the subsidiaries to be relatively flat in the second quarter. Segment highlights include:

Rodgers concluded, “We expect to grow revenue sequentially in the second quarter of 2003, return to pro forma profitability2 and generate free cash.”

About Cypress
Cypress Semiconductor Corporation (NYSE: CY) is Connecting from Last Mile to First Mile with high-performance solutions for personal, network access, enterprise, metro switch, and core communications-system applications. Cypress Connects using wireless, wireline, digital, and optical transmission standards, including USB, Fibre Channel, SONET/SDH, Gigabit Ethernet, and DWDM. Leveraging its process and system-level expertise, Cypress makes industry-leading physical layer devices, framers, and network search engines, along with a broad portfolio of high-bandwidth memories, timing technology solutions, and programmable microcontrollers. More information about Cypress is accessible online at

Cypress and the Cypress logo are registered trademarks of Cypress Semiconductor Corporation. “Connecting from Last Mile to First Mile,” “Cypress Connects,” EZ-Host, EZ-OTG, More Battery Life, No Bus Latency, RAM9, NoBL, MetroLink2T-2, POSIC2GVC, POSIC2G, EZ-USB TX2, MoBL2,and C8 are trademarks of Cypress Semiconductor Corporation. Intel and Pentium are registered trademarks of Intel Corporation or its subsidiaries in the United States and other countries. PSoC and Programmable System-on-Chip are trademarks of Cypress MicroSystems. Silicon Light Machines, Grating Light Valve, and GLV are trademarks of Silicon Light Machines.

[1] The equivalent GAAP gross margin is 43.3%, with the difference related to deferred compensation from prior acquisitions. These charges are not allocated to the segments.

[2] The projected profitability in the second quarter of 2003 will have a delta to GAAP profitability of approximately $18 million, representing amortization of intangibles and other acquisition-related charges. We expect a GAAP loss in the second quarter due to these charges.

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