Zarlink Releases Second Quarter Fiscal 2008 Results


                         Zarlink Semiconductor Inc.
                CONSOLIDATED STATEMENTS OF INCOME (LOSS) DATA
      (in millions of U.S dollars, except per share amounts, U.S. GAAP)
                                 (Unaudited)

                               Three months ended          Six months ended
                      --------------------------------- ---------------------
                        Sept. 28,   June 29,  Sept. 29,  Sept. 28,  Sept. 29,
                            2007       2007       2006       2007       2006
                      --------------------------------- ---------------------
    Revenue              $  49.6    $  30.6    $  38.1    $  80.2    $  76.5
    Cost of revenue         27.0       17.4       17.8       44.4       33.9
                      --------------------------------- ---------------------
    Gross margin            22.6       13.2       20.3       35.8       42.6
                      --------------------------------- ---------------------

    Expenses:
      Research and
       development (R&D)    12.0        8.8        7.5       20.8       17.0
      Selling and
       administrative       13.6        9.9        9.5       23.5       19.5
      Acquired in-process
       R&D                  20.3          -          -       20.3          -
      Amortization of
       intangible assets     1.2        0.2        0.1        1.4        0.1
      Contract impairment
       & other               0.7        0.5        0.5        1.2        0.5
                      --------------------------------- ---------------------
                            47.8       19.4       17.6       67.2       37.1
                      --------------------------------- ---------------------
    Operating income
     (loss)                (25.2)      (6.2)       2.7      (31.4)       5.5

    Gain on sale of Mitel
     investment             12.9          -          -       12.9          -
    Interest income          0.9        1.5        1.2        2.4        2.3
    Interest expense        (0.7)         -          -       (0.7)         -
    Amortization of debt
     issue costs            (0.1)         -          -       (0.1)         -
    Foreign exchange gain
     (loss)                 (3.5)      (0.3)       0.2       (3.8)       0.3
                      --------------------------------- ---------------------
    Income (loss) before
     income taxes          (15.7)      (5.0)       4.1      (20.7)       8.1
    Income tax (expense)
     recovery               (0.2)         -        2.8       (0.2)       3.0

                      -------------------------------------------------------
    Net income (loss)    $ (15.9)   $  (5.0)   $   6.9    $ (20.9)   $  11.1
                      -------------------------------------------------------

    Net income (loss)
     attributable to
     common shareholders
     after preferred
     share dividends
     and premiums on
     preferred shares    $ (16.7)   $  (6.1)   $   6.3    $ (22.8)   $   9.8
                      --------------------------------- ---------------------
                      --------------------------------- ---------------------

     Net  income  (loss)
          per  common  share:
            Basic  and  diluted    $  (0.13)      $  (0.05)      $    0.05        $  (0.18)      $    0.08
                                            ---------------------------------  ---------------------
                                            ---------------------------------  ---------------------

        Weighted  average
          number  of  common
          shares  outstanding
          (millions):
            Basic                                127.3            127.3            127.3            127.3            127.3
                                            ---------------------------------  ---------------------
                                            ---------------------------------  ---------------------
            Diluted                            127.3            127.3            127.4            127.3            127.4
                                            ---------------------------------  ---------------------
                                            ---------------------------------  ---------------------

        Percentage  of  revenue:
            Gross  margin                        46%                43%                53%                45%                56%
            Research  and
              development                        24%                29%                20%                26%                22%
            Selling  and
              administrative                  27%                33%                25%                29%                25%



                                                  Zarlink  Semiconductor  Inc.
                                  CONSOLIDATED  STATEMENTS  OF  CASH  FLOWS  DATA
                                      (in  millions  of  U.S.  dollars,  U.S.  GAAP)
                                                                  (Unaudited)

                                                              Three  months  ended                    Six  months  ended
                                            ---------------------------------  ---------------------
                                                Sept.  28,      June  29,    Sept.  29,    Sept.  28,    Sept.  29,
                                                        2007              2007              2006              2007              2006
                                            ---------------------------------  ---------------------
        CASH  PROVIDED  BY  (USED  IN)
        --------------------------
        Operating  activities:
            Net  income  (loss)    $  (15.9)      $    (5.0)      $      6.9        $  (20.9)      $    11.1
            Depreciation                      1.5                1.2                1.3                2.7                2.7
            Amortization  of
              intangible  assets          1.2                0.2                0.1                1.4                0.1
            Stock  compensation
              expense                              0.5                0.5                0.3                1.0                0.6
            Other  non-cash
              changes  in
              operating
              activities                      10.7                    -                    -              10.7              (0.3)
            Deferred  income
              taxes                                  1.8              (0.4)            (1.0)              1.4              (1.2)
            Decrease  (increase)
              in  working  capital:
                Trade  accounts
                  and  other
                  receivables                (5.3)              1.7              (1.0)            (3.6)            (3.8)
                Inventories                  (1.0)            (1.3)              1.9              (2.3)            (0.1)
                Prepaid  expenses
                  and  other                    (0.9)              0.3              (0.1)            (0.6)              0.4
                Payables  and
                  accrued
                  liabilities                  1.8              (3.9)            (0.9)            (2.1)            (8.9)
                Deferred  credits          1.2              (0.1)                  -                1.1                    -
                                            ---------------------------------  ---------------------
        Total                                      (4.4)            (6.8)              7.5            (11.2)              0.6
                                            ---------------------------------  ---------------------

        Investing  activities:
            Acquisition  of
              business                      (135.9)                  -                    -          (135.9)            (7.1)
            Matured  short-term
              investments                      3.3                    -                    -                3.3              24.6
            Expenditures  for
              fixed  assets                  (1.7)            (0.7)            (0.8)            (2.4)            (1.3)
            Proceeds  from  sale
              of  investment                12.9                    -                    -              12.9                    -
            Proceeds  from
              disposal  of
              fixed  assets                        -                    -                    -                    -                0.1
                                            ---------------------------------  ---------------------
        Total                                  (121.4)            (0.7)            (0.8)        (122.1)            16.3
                                            ---------------------------------  ---------------------

        Financing  activities:
            Increase  in
              (repayment  of)
              long  term  debt              74.5                    -                    -              74.5              (0.1)
            Payment  of
              dividends  on
              preferred  shares          (0.6)            (0.6)            (0.6)            (1.2)            (1.2)
            Repurchase  of
              preferred  shares          (1.1)            (0.5)                  -              (1.6)            (0.1)
            Debt  issue  costs            (3.5)                  -                    -              (3.5)                  -
            Decrease  in
              restricted  cash
              and  cash
              equivalents                      0.2                    -                    -                0.2                1.0
                                            ---------------------------------  ---------------------
        Total                                      69.5              (1.1)            (0.6)            68.4              (0.4)
                                            ---------------------------------  ---------------------
        Effect  of  currency
          translation  on  cash          1.1                0.1                0.1                1.2                0.4

        Increase  (decrease)
          in  cash  and  cash
          equivalents                      (55.2)            (8.5)              6.2            (63.7)            16.9

        Cash  and  cash
          equivalents,
          beginning  of  period      102.8            111.3            101.4            111.3              90.7
                                            ---------------------------------  ---------------------

        Cash  and  cash
          equivalents,  end
          of  period                      $    47.6        $  102.8        $  107.6        $    47.6      $    107.6
                                            ---------------------------------  ---------------------
                                            ---------------------------------  ---------------------



                                                  Zarlink  Semiconductor  Inc.
                                              CONSOLIDATED  BALANCE  SHEET  DATA
                                      (in  millions  of  U.S.  dollars,  U.S.  GAAP)
                                                                  (Unaudited)

                                                                                            Sept.  28,      June  29,    March  30,
                                                                                                    2007              2007              2007
                                                                                          ----------  ----------  ----------
        ASSETS

        Current  assets:
            Cash  and  cash  equivalents                                $    47.6        $  102.8        $  111.3
            Short-term  investments                                                  -                3.3                3.3
            Restricted  cash  and  cash  equivalents                15.4              14.8              14.6
            Trade  accounts  receivable  -  net                          27.3              15.6              16.3
            Other  receivables                                                        9.3                5.9                6.6
            Inventories                                                                  30.3              20.5              19.1
            Prepaid  expenses  and  other                                      6.8                5.0                5.4
            Deferred  income  taxes  -  current  portion            1.5                    -                    -
            Assets  held  for  sale                                                  3.4                3.1                3.1
                                                                                          ----------  ----------  ----------
                                                                                                  141.6            171.0            179.7
        Fixed  assets  -  net                                                        24.9              20.2              21.0
        Deferred  income  tax  assets  -  net                              9.4                8.9                4.9
        Goodwill                                                                            46.6                3.8                3.8
        Intangible  assets                                                          60.2                1.4                1.6
        Other  assets                                                                      4.4                1.1                    -
                                                                                          ----------  ----------  ----------
                                                                                              $  287.1        $  206.4        $  211.0
                                                                                          ----------  ----------  ----------
                                                                                          ----------  ----------  ----------

        LIABILITIES  AND  SHAREHOLDERS'  EQUITY

        Current  liabilities:
            Trade  accounts  payable                                      $    15.0          $    5.8          $    6.5
            Employee-related  accruals                                      11.0                8.7              11.5
            Income  and  other  taxes  payable                              0.4                0.3                4.7
            Current  portion  of  provisions  for
              exit  activities                                                          1.8                1.1                0.8
            Other  accrued  liabilities                                        5.7                4.0                3.2
            Deferred  credits                                                          1.7                0.5                0.6
            Deferred  income  tax  liabilities
              -  current  portion                                                      0.1                0.1                0.1
                                                                                          ----------  ----------  ----------
                                                                                                    35.7              20.5              27.4

        Long-term  debt                                                                79.1                    -                    -
        Long-term  portion  of  provisions  for  exit
          activities                                                                        0.5                0.5                0.5
        Pension  liabilities                                                      16.6              16.1              15.9
        Deferred  income  tax  liabilities
          -  long-term  portion                                                      0.3                0.2                0.2
        Long-term  accrued  income  taxes                                  9.5                8.1                    -
        Other  long-term  liabilities                                        0.8                    -                    -
                                                                                          ----------  ----------  ----------
                                                                                                  142.5              45.4              44.0
                                                                                          ----------  ----------  ----------

        Redeemable  preferred  shares,  unlimited
          shares  authorized;  1,193,600  shares
          issued  and  outstanding  as  at
          September  28,  2007                                                      15.3              15.6              16.1
                                                                                          ----------  ----------  ----------

        Shareholders'  equity:
        Common  shares,  unlimited  shares  authorized;
          no  par  value;  127,345,682  shares  issued
          and  outstanding  as  at  September  28,  2007        768.5            768.5            768.5
        Additional  paid-in  capital                                          4.6                4.3                4.3
        Deficit                                                                          (609.7)        (593.2)        (587.6)
        Accumulated  other  comprehensive  loss                  (34.1)          (34.2)          (34.3)
                                                                                          ----------  ----------  ----------
                                                                                                  129.3            145.4            150.9
                                                                                          ----------  ----------  ----------
                                                                                              $  287.1        $  206.4        $  211.0
                                                                                          ----------  ----------  ----------
                                                                                          ----------  ----------  ----------



                                                  Zarlink  Semiconductor  Inc.
                                                      SUPPLEMENTARY  SCHEDULES
                                      (in  millions  of  U.S.  dollars,  U.S.  GAAP)
                                                                  (Unaudited)

        Geographic  Information:
        -----------------------

        Revenue,  based  on  the  geographic  location  of  Zarlink's  customers,  was
        distributed  as  follows:

                                              Three                              Three                              Three
                                            Months                            Months                            Months
                                              Ended                              Ended                              Ended
                                        Sept.  28,      %  of          June  29,      %  of        Sept.  29,      %  of
                                                2007      Total                2007      Total                2006      Total
                                      ----------  --------  ----------  --------  ----------  -------

        Asia  -  Pacific      $    26.3            53%        $    10.6            35%        $    10.2          27%
        Europe                            12.6            25                11.8            38                15.9          42
        Americas                        10.7            22                  8.2            27                12.0          31
                                      ----------  --------  ----------  --------  ----------  -------
                                          $    49.6          100%        $    30.6          100%        $    38.1        100%
                                      ----------  --------  ----------  --------  ----------  -------
                                      ----------  --------  ----------  --------  ----------  -------

                                                                                          Six                                  Six
                                                                                    Months                            Months
                                                                                      Ended                              Ended
                                                                                Sept.  28,      %  of        Sept.  29,      %  of
                                                                                        2007      Total                2006      Total
                                                                              ----------  --------  ----------  -------

        Asia  -  Pacific                                              $    36.9            46%        $    21.7            28%
        Europe                                                                    24.4            30                31.4            41
        Americas                                                                18.9            24                23.4            31
                                                                              ----------  --------  ----------  -------
                                                                                  $    80.2          100%        $    76.5          100%
                                                                              ----------  --------  ----------  -------
                                                                              ----------  --------  ----------  -------


 


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