Lattice Semiconductor Reports Second Quarter Financial Results

HILLSBORO, Ore. - July 28, 2005 - Lattice Semiconductor Corporation (NASDAQ: LSCC) today announced financial results for the second quarter ended June 2005.

Revenue for the second quarter was $52.4 million, an increase of two percent from last quarter's revenue of $51.3 million and down 14 percent from the $60.9 million reported in the same quarter a year ago.

Quarterly revenue from PLD products was $42.6 million, or 81 percent of total revenue, and grew one percent sequentially. Quarterly revenue from FPGA products was $9.8 million, or 19 percent of total revenue, and grew six percent sequentially. Quarterly revenue from New products, now 32 percent of total revenue, grew 17 percent sequentially and 70 percent on a year over year basis.

Other income for the second quarter was $7.4 million and included a $5.8 million gain related to the sale of foundry investments and the repurchase of outstanding zero coupon convertible notes.

Net loss for the second quarter was $8.2 million ($0.07 per share). This loss includes a $4.0 million charge for legal expenses related to the company's ongoing internal investigation and litigation. This loss also includes a $4.1 million charge for amortization of intangible assets. Excluding the amortization charges, net loss for the quarter was $4.0 million ($0.04 per share). These non-cash amortization charges have been highlighted as they are not expected to continue at these levels and are currently expected to be substantially eliminated in 2008. The Company believes exclusion of these charges more closely approximate its cash earnings performance. A reconciliation of non-GAAP net loss to GAAP net loss accompanies the financial tables in this earnings release.

Business Highlights:

Shipped initial samples of the first three devices (XP3, XP6, XP10) of our second next generation FPGA product, the five device LatticeXP family. This innovative family, built on an advanced 0.13 micron embedded flash process technology, offers customers compelling advantages in the areas of design security, instant-on logic functionality and field reprogrammability compared to traditional SRAM based volatile FPGAs.
Received the Electron d'Or award for the outstanding ASIC/FPGA product of 2005. The LatticeXP FPGA family was chosen for this prestigious honor because of the flexibility offered by its embedded flash technology and its low cost and dynamically reconfigurable architecture.
Announced, and delivered first samples, of our MachXO TM family of crossover programmable logic devices. This new product line is designed to support customer applications that traditionally have been addressed by either high-density CPLDs or low-capacity FPGAs. Using an innovative architecture based on an advanced 0.13 micron embedded flash technology and the industry-standard 4-input Look-up Table (LUT) building block, the MachXO TM devices offer increased features, lower power consumption and substantial cost saving when compared to existing programmable solutions.
Upgraded our customer design tool to ispLever 5.0. This latest version of software provides access to both the new LatticeECP and LatticeXP families in addition to delivering a significant functional and performance upgrade.
Announced the immediate availability of the LatticeMico8™ , an 8-bit "soft" microcontroller intellectual property core for the LatticeECP, LatticeXP and MachXO TM product families. In order to encourage the broadest possible customer adoption, the LatticeMico8 is being offered under a new open IP core license, the first such license to be offered by any FPGA supplier.

Business Outlook - September 2005 Quarter:

Revenue is expected to grow 0 to 3 percent sequentially;
Gross margin percentage is expected to be approximately flat;
Total quarterly operating expenses are expected to be approximately $36 to $37 million;
Intangible asset amortization is expected to be approximately $4.0 million; and
Other Income is expected to be approximately $1.7 million.

On June 14, 2005, the Company announced that its Audit Committee, in connection with its responsibilities for financial oversight, is conducting an internal examination. The Audit Committee is examining issues primarily associated with executive compensation and the Company's internal controls. Although the Company is not aware of any required adjustments to its current or historical financial results in connection with the Audit Committee examination, until the examination is completed, there can be no certainty as to whether any adjustments will be required. The Company has furnished information regarding the matters under examination to the Securities and Exchange Commission, which is conducting an ongoing informal inquiry into the Company's prior restatement of financial results. The matters that the Audit Committee is examining were brought to its attention by the Company's Special Litigation Committee, which was established for the purpose of conducting a review and investigation of the claims contained in two previously announced shareholder derivative complaints.

On July 29, 2005, Lattice will hold a telephone conference call at 5:30 a.m. (Pacific Time) with financial analysts. Investors may listen to the conference call live via the web at www.lscc.com. Replays of the call will also be available at www.lscc.com. Lattice will host an investor meeting at its Hillsboro, Oregon, headquarters on Tuesday, August 9, 2005, from 5:00 p.m. - 6:30 p.m. This meeting is part of the August 8-11 Oregon Investors Tour. To register for the meeting, please go to the following link: www.aeanet.org/oregontechtour. On September 15, 2005, Lattice plans to publish a "Business Update Statement" on its website. The Company's financial guidance will be limited to the comments on the public quarterly earnings call and these public business outlook statements.

The foregoing paragraphs contain forward-looking statements within the meaning of the federal securities laws including statements about future quarterly financial results, revenues, customers, product offerings and the Company's ability to compete. Investors are cautioned that actual events and results could differ materially from these statements as a result of a number of factors, including the conclusion of the Audit Committee's ongoing examination, the Special Litigation Committee's investigation and the Securities and Exchange Commission's informal inquiry and any resulting actions, overall semiconductor market conditions, market acceptance and demand for the Company's new products, the Company's dependencies on its silicon wafer suppliers, the impact of competitive products and pricing, technological and product development risks. 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.

Lattice Semiconductor Corporation provides the industry's broadest range of Field Programmable Gate Arrays ( FPGA) and Programmable Logic Devices ( PLD), including Field Programmable System Chips ( FPSC), Complex Programmable Logic Devices ( CPLD), Programmable Mixed-Signal Products ( ispPAC® ) and Programmable Digital Interconnect Devices ( ispGDX® ). Lattice also offers industry leading SERDES products. Lattice is "Bringing the Best Together" with comprehensive solutions for system design, including an unequaled portfolio of non-volatile programmable devices that deliver instant-on operation, security and "single chip solution" space savings.

Lattice products are sold worldwide through an extensive network of independent sales representatives and distributors, primarily to OEM customers in communications, computing, industrial, consumer, automotive, medical and military end markets. Company headquarters are located at 5555 NE Moore Court, Hillsboro, Oregon 97124-6421, USA; telephone 503-268-8000, fax 503-268-8037. For more information about Lattice Semiconductor Corporation, visit http://www.latticesemi.com

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Lattice Semiconductor Corporation, Lattice (& design), L (& design), LatticeECP, LatticeXP, MachXO, ispLever, LatticeMico8 and specific product designations are either registered trademarks or trademarks of Lattice Semiconductor Corporation or its subsidiaries in the United States and/or other countries.