Saifun Semiconductors Reports First Quarter 2007 Results

NETANYA, Israel -- April 26, 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 first quarter ended March 31, 2007

Financial Highlights - GAAP: First quarter 2007 compared with first quarter 2006.

Revenues for the quarter were $9.6 million, compared to $15.8 million in the previous year.
Operating income for the quarter was $1.1 million, compared to $7.7 million in the previous year.
Net income for the quarter was $3.3 million, or $0.10 per basic and $0.10 per diluted share, compared to net income in the previous year of $10.0 million or $0.34 per basic and $0.31 per diluted share.
Net income for the quarter included $1.4 million of stock-based compensation compared to $1.0 million in the previous year (excluding income of $378,000 from cumulative effect of a change in accounting principle).

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 stock-based compensation expenses and income.

Financial Highlights - Non-GAAP(1) First quarter 2007 compared with first quarter 2006.

Revenues for the quarter were $9.6 million, compared to $15.8 million in the previous year.
Licenses and royalties revenues for the quarter were $6.0 million compared to $10.5 million in the previous year.
Service revenues for the quarter were $3.6 million, compared to $5.3 million in the previous year.
Operating income for the quarter was $2.5 million or 26% of revenues, compared to $8.7 million, or 55% of revenues in the previous year.
Net income for the quarter was $4.7 million, or $0.15 per basic and $0.15 per diluted share, compared to net income in the previous year of $10.7 million or $0.36 per basic and $0.33 per diluted share.

The decrease in license revenues for this quarter compared to last year was substantially due to the Qimonda AG decision whereby Saifun received no license fees and only a limited amount of royalties. The decrease in service revenues this quarter due to the Qimonda AG decision was partially offset by an increase in service revenues from other licensees.

"Our results for the quarter were in line with expectations taking into account Qimonda's decision to phase out its NROM-based activities," said Dr. Boaz Eitan, Chairman and CEO of Saifun.

"Although not directly reflected in our results, we saw a number of encouraging signs this quarter. NROM continues to gain share of the Code Flash market driven by Spansion, the leader in the Code flash segment, and Macronix, which continues to emerge as an important player. In addition to building upon its leadership position in the Code market, Spansion is making progress in its efforts to penetrate the Data Flash arena with their first family of solutions based on our Quad NROM. The first quad product is already available, and others, featuring densities of 256Mb to 2Gb, are scheduled to reach market this year. Additionally, Spansion recently launched 128 Mb MirrorBit(R) SPI Flash, a unique Serial Flash product incorporating NROM and developed in conjunction with our design services team.

"Our other licensees, including SMIC and Sony, remain on track with their respective development projects and we expect to see new NROM-based Data and Embedded Flash products on the market later this year."

Dr. Eitan concluded, "We remain committed to our goal of expanding market penetration within our existing licensee base and by bringing new companies on board. In light of the anticipated trends in the NVM industry, we believe Saifun is well positioned to succeed. While we will face challenges in the near-term, we are well equipped to overcome these difficult times and emerge a stronger company than before."

2007 Second Quarter Guidance

Saifun's guidance for the second quarter of 2007 is based on current expectations and is forward looking, and actual results could differ materially depending on market conditions and other factors, including those set forth in the Safe Harbor Statement below:

For the second quarter of 2007, the company expects revenues in the range of $8.7 million to $9.7 million
For the second quarter of 2007, the company expects Non-GAAP(1) operating profit of approximately 20% of revenues

(1) These non-GAAP measures should be considered in addition to, and not as a substitute for, the results prepared in accordance with GAAP. A reconciliation of GAAP statements of operations to Non-GAAP statements of operations is included in the financial statements portion of this release as well as on our website in the Investors section at www.saifun.com.

Saifun's management believes the Non-GAAP information is useful because it can enhance the understanding of the Company's ongoing economic performance and Saifun therefore uses internally the Non-GAAP information to evaluate and manage the Company's operations. Saifun has chosen to provide this information to investors to enable them to perform comparisons of operating results in a manner similar to how the Company analyzes its operating results.

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.