Saifun Semiconductors Reports First Quarter 2006 Results

Netanya, Israel, April 26, 2006 - Saifun Semiconductors Ltd. (NASDAQ: SFUN), a provider of intellectual property solutions for the non-volatile memory (NVM) market, today announced financial results for the first quarter ended March 31, 2006.

Financial Highlights - GAAP: First quarter 2006 compared with first quarter 2005 (including $9.6 million non-cash revenues).

• Revenues for the quarter were $15.8 million, compared to $22.2 million in the previous year.
• Gross profit for the quarter was $12.1 million, compared to $19.6 million in the previous year.
• Operating income for the quarter was $7.7 million, compared to $14.9 million in the previous year.
• Net income for the quarter was $10.0 million, or $0.34 per basic and $0.31 per diluted share, compared to net income in the previous year of $11.8 million.
• Net income for the quarter included $0.6 million of stock-based compensation (including $0.4 million of income due to a cumulative effect of a change in accounting principle relating to the adoption of SFAS 123R) compared to $1.4 million in the previous year.

Saifun reports its results of operation in accordance with GAAP and additionally on a non-GAAP basis, referred to as Non-GAAP.  Non-GAAP information, where applicable, excludes the effect of $9.6 million non-cash revenues resulting from the termination of our former joint venture with Infineon Technologies AG recognized in the first quarter of 2005, excludes the loss from discontinued product operations, and excludes stock based compensation expenses and income.

Financial Highlights - Non-GAAP : First quarter 2006 compared with first quarter 2005.

• Revenues for the quarter were $15.8 million, compared to $12.6 million, an increase of 25% compared to the previous year
• Licensing revenues for the quarter were $10.5 million compared to $9.3 million, an increase of 13%.
• Service revenues for the quarter were $5.3 million, compared to $3.3 million in the previous year, an increase of 59%.
• Gross profit for the quarter was $12.5 million, compared to $10.2 million.
• Operating income for the quarter was $8.7 million or 55% of revenues, compared to $6.6 million or 52% of revenues in the previous year.
• Net income for the quarter was $10.7 million, or $0.36 per basic and $0.33 per diluted share, compared to net income in the previous year of $6.8 million.

Commenting on the results, Kobi Rozengarten, President of Saifun Semiconductors said, “We met or exceeded many of our goals for the quarter, which included achieving an operating profit margin of over 50% excluding stock-based compensation expense. We believe this illustrates the success and profitability of our business model which positions Saifun as an emerging leader in the NVM market.  

“We continued to focus on helping our licensees accelerate product launches and deliver more products incorporating NROM to the market.  This is reflected in the increase in service revenues as a percentage of total sales.

“Finally, our results this quarter were underscored by our ongoing commitment to take NROM technology to a new level.  During the quarter, we taped out Quad NROM designs to two licensees who are working with us on data flash applications.  This is another milestone in our initiative to foster broad adoption of NROM technology.  We have multiple data flash projects underway with our partners and expect to see data flash products incorporating Quad NROM on the market by the end of 2006. The data flash market represents a sizeable opportunity for Saifun and our NROM technology. With a number of NROM-based data flash products currently in development by our licensees, we believe we are well positioned to capture a significant share of this market.”

Lock-Up Agreements
The Company wishes to advise all shareholders that signed a lock-up agreement in connection with the Company's initial public offering that the lock-up agreement will be extended until May 15, 2006 and will not terminate on May 8, 2006 as was previously disclosed.  This is because this earnings release has been issued within the 17-day period leading up to the expiration of the 180-day lock-up period as described in that agreement.

Conference Call
Saifun will host a conference call to discuss its financial results and other matters discussed in this press release at 8:30 a.m. EDT today, April 26, 2006.  The call will be available live on the Internet at http://ir.saifun.com/phoenix.zhtml?c=183096&p=irol-irhome.

About Saifun Semiconductors Ltd.
Saifun is a provider of intellectual property (IP) solutions for the non-volatile memory (NVM) market. The company’s innovative Saifun NROM® technology allows semiconductor manufacturers to deliver high performance, reliable products at a lower cost per megabit, with greater storage capacity, using a single process for all NVM applications. Saifun licenses its IP to semiconductor manufacturers who use this technology to develop and manufacture a variety of stand-alone and embedded NVM products. These include Flash memory for the telecommunications, consumer electronic, networking and automotive markets. The companies currently licensing Saifun NROM technology are Infineon Technologies, Macronix International, Matsushita, SMIC, Sony Corporation, Spansion and Tower Semiconductors.