12/3/2004 - Tundra Semiconductor Corporation (TSX:TUN), the leader in System Interconnect, reported financial results for the second quarter of fiscal 2005, which ended October 31, 2004.
The results for Q2-2005 represent the twelfth consecutive quarter of sequential revenue growth for Tundra and another record quarter for revenue and profitability.
GUIDANCE FOR Q3-2005
"While we are pleased with the results we achieved in Q2-2005, we are disappointed with our third quarter guidance," said Jim Roche, President and Chief Executive Officer of Tundra. "There are three issues causing this decline. First is the downturn we are seeing across our industry. Second is an inventory build-up at our customers. For example, two of our major customers are forecasting significantly lower run-rates this quarter. The third issue is the strengthening of the Canadian dollar versus the US dollar."
"Forecast visibility has dropped significantly," said Norm Paquette, Chief Financial Officer. "In Q1-2005 orders booked to ship within the same quarter - turns orders - averaged less than 15%, indicating strong forecast visibility. In contrast, turns orders today are averaging over 50%."
"This is a speed bump. We believe that end markets are stabilizing and inventory build-ups are clearing," said Jim Roche. "We remain positive about the opportunities for Tundra's standards-based System Interconnect. Our business strategy is sound and our expanding presence in our target markets positions Tundra well for the long-term."
Tundra continues to collaborate with industry leaders such as Freescale Semiconductor, IBM, Intel, Motorola and Texas Instruments to develop next-generation System Interconnect products that customers value.
Tundra recently announced volume availability of the Tundra Tsi500TM, a high-performance, cost-effective switch fabric for the wireless, networking and storage markets. The industry's first switch supporting the RapidIO® interconnect standard, the Tsi500 incorporates patent-pending technology that allows customers to realize higher throughput while reducing power and overall system cost.
Early in the quarter Tundra announced the development of a serial RapidIO switch fabric. OEM customers building equipment for wireless and communication infrastructure are planning systems using this device. This new serial RapidIO switch fabric will be delivered to customers in the first half of calendar year 2005.
Also in Q2, Tundra announced the development of the Tundra Tsi108TM PowerPC Host Bridge companion device for Freescale Semiconductor's and IBM's high-performance PowerPC processors. This new host bridge will be delivered to customers in the first half of calendar year 2005.
In October, Tundra delivered the Tundra Tsi134TM Host Bridge to full production as part of a co-development agreement with Intel Corporation. Tundra and Intel collaborated to develop the Tsi134, a high-performance System Interconnect host bridge. While Intel is marketing and selling the Tsi134, Tundra owns the intellectual property and is using it as part of the foundation for its growing host bridge product portfolio.
STRENGTHENED CHANNELS TO MARKET
Tundra extended its reach in Europe, Middle East and Africa (EMEA) with a representative agreement with Vista Solutions. Vista's well-established reach into key customers such as Ericsson, Nokia, Alcatel and Nortel Networks, complements Tundra's current presence in the region with its European sales office and distribution agreement with Future Electronics.
The Asia-Pacific region is an important growth market for Tundra. Last year Asia contributed to more than half of Tundra's worldwide growth. In response to growing customer demand in China and Japan, Tundra recently opened an office in Hong Kong and signed distribution agreements with Future Electronics (China), Shinden HighTex Corporation (Japan) to increase its support for large Chinese and Japanese OEM customers, such as Huawei, Fujitsu and ZTE.
THIRD PARTY PARTNER ADDITIONS
Tundra also strengthened its Third Party Partner program in Q2-2005. This program broadens Tundra's offering to customers through a wide range of partner solutions. In September, Tundra announced the availability of the RapidIO Hardware Interoperability Platform (HIP) prototyping system that will be manufactured by new Third Party Partner, Silicon Turnkey Express (news release). In addition, Tundra added a RapidIO diagnostic tool partner to the Program - Fabric Embedded Tools (news release). The Fabric Embedded Tools product, RapidFETTM and the RapidIO HIP help Tundra's RapidIO customers bring their systems to market faster.
CONFERENCE CALL DETAILS
Tundra will host an analyst conference call and audio web cast (www.tundra.com) on December 1, 2004 at 5:00 pm (EST) to discuss this earnings update. To listen by phone, call 416-640-4127. Replay of the call will be available two hours following the call until December 08, 2004. To listen to the conference call replay call 416-640-1917 and enter pass code number: 21102081#.
To view the financial results for Q2-2005 visit www.tundra.com
The difference between pro forma and GAAP earnings is due to stock-based compensation expense, goodwill impairment charges and amortization of intangibles and other assets associated with Tundra's acquisitions. Tundra uses pro forma measures internally to evaluate and manage operating performance as well as to forecast and plan.
Tundra Semiconductor Corporation designs, develops, and markets standards-based System Interconnect for use by the world's leading communications and storage system companies. Tundra supports RapidIO, VME, and PCI/X standards. Tundra System Interconnect is a vital communications technology that enables customers to connect critical system components while compressing development cycles and maximizing performance. Applications include wireless infrastructure, storage networking, network access, military technology, and industrial automation. Tundra headquarters are located in Ottawa, Ontario, Canada. The Company also has a design center in South Portland, Maine, and sales offices in the U.K., across the U.S. and in Asia. Tundra sells its products worldwide through a network of direct sales personnel, independent distributors and manufacturers' representatives. Tundra employs about 200 employees worldwide.
TUNDRA is a registered trademark of Tundra Semiconductor Corporation (Canada, U.S. and U.K.). TUNDRA, the Tundra logo, Tsi108, Tsi134, Tsi500 and Design. Connect. Go. are trademarks of Tundra Semiconductor Corporation.
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