Saifun Semiconductors Reports Fourth Quarter 2006 Results

NETANYA, Israel, Jan. 31, 2007 -- Saifun Semiconductors Ltd. (Nasdaq: SFUN), a provider of intellectual property solutions for the non-volatile memory (NVM) market, today announced financial results for the fourth quarter ended December 31, 2006.

Financial Highlights -- GAAP: Fourth quarter 2006 compared with fourth quarter 2005 (including $374,000 non-cash revenues in the fourth quarter of 2005).

Revenues for the quarter were $14.0 million, compared to $16.7 million (including $374,000 non-cash revenues) in the previous year.
Operating income for the quarter was $4.0 million, compared to $7.3 million in the previous year.
Net income for the quarter was $6.3 million, or $0.20 per basic and $0.20 per diluted share, compared to net income in the previous year of $8.6 million or $0.16 per basic and $0.15 per diluted share
Net income for the quarter included $1.6 million of stock-based compensation compared to $1.8 million in the previous year.

Saifun reports its results of operations in accordance with GAAP and additionally, on a non-GAAP basis, referred to as Non-GAAP. Non-GAAP net income, where applicable, excludes the effect of $374,000 of non-cash revenues resulting from the termination of our former joint venture with Infineon Technologies AG recognized in the fourth quarter of 2005, excludes the $190,000 profit from discontinued product operations in the fourth quarter of 2005 and excludes stock-based compensation expenses. The Non-GAAP basic and diluted net earnings per ordinary share in 2005 gives effect to the conversion of all of our issued and outstanding preferred shares into ordinary shares at a ratio of 1:1 immediately prior to the completion of our initial public offering on November 8, 2005 as if the conversion occurred at the beginning of the year ended December 31, 2005.

Financial Highlights -- Non-GAAP(1): Fourth quarter 2006 compared with fourth quarter 2005.

Revenues for the quarter were $14.0 million, compared to $16.3 million in the previous year.

Licenses and royalties revenues for the quarter were $9.4 million compared to $12.6 million in the previous year.
Service revenues for the quarter were $4.6 million, compared to $3.7 million in the previous year.

Operating income for the quarter was $5.7 million or 41% of revenues, compared to $8.7 million in the previous year.
Net income for the quarter was $8.0 million, or $0.25 per basic and $0.25 per diluted share, compared to net income in the previous year of $9.9 million or $0.37 per basic and $0.34 per diluted share.

Financial Highlights -- GAAP: Fiscal year 2006 compared with fiscal year 2005 (including $19.2 million non-cash revenues).

Revenues for the year were $62.8 million, compared to $78.6 million in 2005.
Operating income was $26.1 million, compared to $48.0 million in 2005.
Net income for the year was $35.0 million, or $1.14 per basic and $1.08 per diluted share, compared to net income in 2005 of $44.5 million.
Net income for the year ended December 31, 2006 included $4.6 million of stock-based compensation (including $378,000 of income due to a cumulative effect of a change in accounting principle relating to the adoption of SFAS 123R) compared to $4.3 million in 2005.

Non-GAAP Financial Highlights -- Non-GAAP(2): Full year 2006 compared with full year 2005.

Revenues for the year were $62.8 million, compared to $59.4 million in 2005.

Licenses and royalties revenues were $41.0 million compared to $46.6 million in 2005.
Service revenues for the year were $21.8 million, compared to $12.8 million in 2005.

Operating income was $31.1 million or 50% of revenues, compared to $33.1 million in 2005.
Net income for the year was $39.6 million, or $1.29 per basic and $1.22 per diluted share, compared to net income in 2005 of $34.8 million or $1.44 per basic and $1.33 per diluted share.

Full year 2006 and fourth quarter 2006 results include license fees and service revenues from Qimonda. As previously announced, Saifun does not expect to receive from Qimonda any license fees or service revenues, and expects to receive only limited amount of royalty revenues, as from the first quarter of 2007.

Additionally, Saifun announced that after nine years with Saifun, Kobi Rozengarten will resign as President effective July 15, 2007, but will remain as a member of the Board of Directors. Mr. Rozengarten's responsibilities will be assumed by Mr. Ramy Langer, VP of Business Development, Mr. Igal Shany, CFO and Mr. Eduardo Maayan, VP of Research & Development.

"2006 was a year of progress for Saifun, NROM technology and the NVM market as a whole," commented Dr. Boaz Eitan, Chairman and CEO of Saifun. "While the year was not without challenge, we believe that our accomplishments in 2006 have set the stage for execution of our long-term business objectives. NROM accounts for a growing percentage of sales at many of our licensees, and we expect this to continue as our partners incorporate NROM into a growing number of products and applications.

"While we were disappointed with Qimonda's fourth quarter decision to ramp down flash memory production, we remain encouraged by the opportunities that exist with our other licensees, as well as with new potential licensees. We believe that both Spansion and SMIC are progressing with their respective data flash introductions, the success of which will lead to further opportunities in the future."

Dr. Eitan concluded, "As noted, Kobi Rozengarten asked to be relieved of his duties as President of the Company. After building an impressive career of over 20 years in senior management positions at global semiconductor companies, including nine years with Saifun, Kobi has decided to pursue other opportunities and spend more time with his family. I would like to take this opportunity to thank Kobi on behalf of the entire Saifun family for the leading role he has played in the company over the past nine years and I am pleased that he will continue to contribute to the Company as a member of its board."

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(R) 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. Among the companies currently licensing Saifun NROM technology are Qimonda AG, Macronix International, NEC Electronics, Semiconductor Manufacturing International Corporation, Sony Corporation, Spansion, and Tower Semiconductor.