Lattice Semiconductor Reports Second Quarter Financial Results

HILLSBORO, OR -- (MARKET WIRE) -- Jul 26, 2007 -- Lattice Semiconductor Corporation (NASDAQ: LSCC) today announced financial results for the second quarter ended June 30, 2007.

For the second quarter, revenue was $59.2 million, an increase of two percent from the $58.1 million reported in the prior quarter, and a decrease of six percent from the $62.7 million reported in the same quarter a year ago.

FPGA revenue for the second quarter was a record $13.5 million, up 14 percent from the $11.9 million reported in the prior quarter, and an increase of four percent from the $13.1 million reported in the same quarter a year ago. PLD revenue for the quarter was $45.7 million, a one percent decrease over the $46.3 million reported in the prior quarter, and a decrease of eight percent from the $49.7 million reported in the same quarter a year ago.

New product revenue for the second quarter was $6.5 million, up 35% from the $4.8 million reported in the prior quarter, and an increase of 85% from the $3.5 million reported in the same quarter a year ago.

Other income for the second quarter of 2007 was $4.3 million and included a $0.4 million gain related to the extinguishment of outstanding zero coupon convertible notes and a $1.6 million gain related to the sale of a land investment.

Net loss for the second quarter was $1.5 million ($0.01 per share), as compared to a net loss of $4.4 million ($0.04 per share) reported in the prior quarter, and net income of $2.1 million ($0.02 per share) in the same quarter a year ago. These results include non-cash amortization charges, stock-based compensation expense and restructuring charges, which total $4.0 million and $3.4 million for the second quarter of 2007 and 2006, respectively, and $3.9 million for the first quarter of 2007. Excluding these charges net income for the second quarter was $2.6 million as compared to a net loss of $0.5 million for the prior quarter, and net income of $5.5 million for the comparable quarter a year ago.

"We are very pleased by the strong growth in FPGA revenue and the accelerating demand we experienced for our New products in the second quarter. It is particularly rewarding to see that the historic customer design-ins we have won over the past few years are now increasingly moving into production," said Steve Skaggs, Lattice's President and Chief Executive Officer. "Industry conditions, particularly in the communications sector, continued to improve during the quarter, which, together with our increasingly competitive product portfolio, allow us to be optimistic regarding growth of our FPGA revenue."

Second Quarter Business Highlights:

    
--  Introduced the industry's first true 90nm non-volatile FPGA family,
    the LatticeXP2™, which compared to prior generation devices, doubles
    logic capacity to 40K Look-Up Tables (LUTs), improves performance 25%,
    reduces static power consumption by 33%, adds dedicated DSP blocks, and
    lowers the price per function by up to 50%. Designed using the industry's
    most advanced non-volatile FPGA technology, the LatticeXP2 devices provide
    "instant-on" logic functionality and a smaller device footprint, while also
    enhancing design security, RAM back-up and live field update capabilities;
--  Announced the immediate availability of an extensive intellectual
    property ("IP") core portfolio for the LatticeXP2 FPGA family, which will
    enable continued customer adoption of Lattice's industry leading non-
    volatile FPGAs;
--  Announced a new partnership with IP core provider PLD Applications to
    provide a full range of PCIe IP cores and related solutions to our mutual
    customer base. These solutions, targeting the emerging market for high-
    volume, low-cost bridging applications, support the groundbreaking
    LatticeECP2M™ family, the first low cost FPGA to offer SERDES and high
    capacity memory;
--  Delivered major performance and functional enhancements in version 7.0
    of Lattice's ispLEVER® FPGA design tool. This new tool suite delivers
    dramatically improved performance, significantly lower runtime and memory
    utilization as well as powerful new features, including major enhancements
    to our hardware debug and power calculator tools, along with support for
    the new LatticeXP2 FPGAs;
--  Announced industry-leading support for HyperTransport™ technology
    at rates up to 1.6 Gbps, using the LatticeSC™ high performance FPGA
    family. In addition, these advanced FPGA devices offer industry leading
    memory interface support operating at rates up to 667 Mbps for DDR2,
    750Mbps for QDRII+ and 800 Mbps for RLDRAM®II. Support of HyperTransport
    and high-speed memory interfaces are made possible through use of the
    innovative PURESPEED™ I/O technology in the LatticeSC™ family.
    
    

Business Outlook - September 2007 Quarter:

    
--  Sequential quarterly revenue is expected to be flat to up 4%;
--  Gross margin percentage is expected to be approximately 55% to 56%;
--  Total operating expenses are expected to be approximately flat;
--  Intangible asset amortization is expected to be approximately $2.5
    million; and
--  Other income is expected to be approximately $3.0 million.
    
    

Discussion of Non-GAAP Financial Measures:

Management evaluates and makes operating decisions using various performance measures. In addition to our GAAP results, we also consider adjusted net income, which we refer to as non-GAAP net income (loss). This measure is generally based on the revenue of our products and the costs of those operations, such as cost of products sold, research and development, sales and marketing and general and administrative expenses, that management considers in evaluating our ongoing core operating performance. Non-GAAP net income (loss) excludes amortization of intangible assets, stock-based compensation and restructuring charges. Intangible assets relate to assets acquired through acquisitions and consist of technology purchased in connection with the acquisitions. Stock-based compensation charges are related to the adoption of SFAS No. 123(R) effective January 1, 2006, and include expense for items such as stock options and restricted stock units granted to employees, purchases under the employee stock purchase plan and deferred stock compensation issued in connection with acquisitions. Restructuring charges consist of expenses and subsequent adjustments incurred under our corporate restructuring plan that took place in the fourth quarter of fiscal 2005, and include items such as separation packages, costs to vacate space under long-term lease arrangements, the cost to write-off an intellectual property license and other related expenses.

Non-GAAP net income (loss) is a supplemental measure of our performance that is not required by and not presented in accordance with GAAP. Moreover, it should not be considered as an alternative to net (loss) income, operating loss or any other performance measure derived in accordance with GAAP, or as an alternative to cash flow from operating activities or as a measure of our liquidity. Investors and potential investors are encouraged to review the reconciliation of non-GAAP financial measures contained within this press release with our net (loss) income, which is our most directly comparable GAAP financial result. For more information, see the consolidated statement of operations contained in this earnings release.

On July 26, 2007, Lattice will hold a telephone conference call at 2:00 p.m. (Pacific Time) with financial analysts. Investors may listen to our conference call live via the web at www.lscc.com. Replays of the call will also be available at www.lscc.com. On September 13, 2007, we plan to publish a "Business Update Statement" on our website. Our financial guidance will be limited to the comments on our public quarterly earnings call and these public business outlook statements.

The foregoing paragraphs contain forward-looking statements that involve estimates, assumptions, risks and uncertainties. With respect to particular forward-looking statements in the "Business Outlook - September 2007 Quarter" section of this release, Lattice believes the factors identified below in connection with each such statement could cause actual results to differ materially from the forward-looking statements.

Estimates of future revenue are inherently uncertain due to the high percentage of quarterly "turns" business. In addition, revenue is affected by such factors as pricing pressures, competitive actions, the demand for our products, and the ability to supply products to customers in a timely manner. Actual gross margin percentage and operating expenses could vary from the estimates contained herein on the basis of, among other things, changes in revenue levels, changes in product pricing and mix, changes in wafer, assembly and test costs, variations in manufacturing yields, and changes in stock-based compensation charges due to stock price changes.

In addition to the foregoing, other factors that may cause actual results to differ materially from the forward-looking statements herein include the Company's dependencies on its silicon wafer suppliers, technological and product development risks, and the other risks that are described from time to time in our filings with the Securities and Exchange Commission. The Company does not intend to update or revise any forward-looking statements, whether as a result of events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

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