Saifun Semiconductors Reports Second Quarter 2007 Results

NETANYA, Israel -- July 26, 2007 -- Saifun Semiconductors Ltd., a provider of intellectual property solutions for the non-volatile memory (NVM) market, today announced financial results for the second quarter ended June 30, 2007.

Financial Highlights - GAAP: Second quarter 2007 compared with second quarter 2006.

• Revenues for the quarter were $8.7 million, compared to $17.4 million in the previous year.
• Operating income for the quarter was $1 million, compared to $7.8 million in the previous year.
• Net income for the quarter was $3.5 million, or $0.11 per basic and per diluted share, compared to net income in the previous year of $10.1 million or $0.33 per basic and $0.31 per diluted share.
• Net income for the quarter included $1.3 million of stock-based compensation compared to $1.2 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 stock-based compensation expenses and income.

Financial Highlights - Non-GAAP(1): Second quarter 2007 compared with second quarter 2006.

• Revenues for the quarter were $8.7 million, compared to $17.4 million in the previous year.
• Licenses and royalties revenues for the quarter were $6.5 million compared to $11.1 million in the previous year.
• Service revenues for the quarter were $2.2 million, compared to $6.2 million in the previous year.
• Operating income for the quarter was $2.3 million or 26% of revenues, compared to $9.0 million in the previous year.
• Net income for the quarter was $4.8 million, or $0.15 per basic and per diluted share, compared to net income in the previous year of $11.3 million or $0.36 per basic and $0.34 per diluted share.

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

• Revenues for the first six months were $18.3 million, compared to $33.2 million in the previous year.
• Operating income for the first six months was $2.1 million, compared to $15.5 million in the previous year.
• -- Net income for the first six months was $6.8 million, or $0.22 per basic and $0.21 per diluted share, compared to net income in the previous year of 20.1 million, or $0.66 per basic and $0.62 per diluted share.
• Net income for the first six months included $2.7 million of stock- based compensation compared to $1.8 million in the previous year (including $0.4 million of income due to a cumulative effect of a change in accounting principle relating to the adoption of SFAS 123R).

Financial Highlights - Non-GAAP(1): First six months 2007 compared with the first six months 2006.

• Revenues for the first six months were $18.3 million, compared to $33.2 million in the previous year.
• Licensing revenues for the first six months were $12.4 million compared to $21.6 million in the previous year.
• Service revenues for the first six months were $5.9 million, compared to $11.5 million in the previous year.
• Operating income for the first six months was $4.8 million or 26% of revenues, compared to $17.7 million in the previous year.
• Net income for the first six months was $ 9.5 million, or $0.30 per basic and per diluted share, compared to net income in the previous year of $21.9 million, or $0.73 per basic and $0.67 per diluted share.

The decrease in license revenues for the quarter compared to the second quarter of 2006 was due primarily to the Qimonda AG decision to scale down its NVM activities, whereby Saifun received no license fees and only a limited amount of royalties.

"This quarter, we signed important agreements that will help us grow our business and extend our IP offering," said Dr. Boaz Eitan, Chairman and CEO of Saifun. "The first agreement, with Spansion, involves IP licensing and product development on 45nm MirrorBit(TM) process node technology. As part of the agreement, Saifun is expected to design products based on its 4-bit-per-cell technology."

"Two additional agreements will enable us to offer a wider IP portfolio and bring further value to our licensees. As we announced earlier this month, Saifun acquired the IP and know-how of SMIC's 90nm process technology for the sum of $5 million. This IP purchase will enable us to offer IP in the area of manufacturing recipes for 90nm and under.

"The second IP agreement allows us to offer our licensees unique system solutions to enable higher density (above 4-bits per cell) and enhance the performance of NROM-based flash memory products. The new IP is developed in cooperation with DensBits Technologies Ltd., an Israel-based company developing advanced coding for flash memory technology, and is licensed exclusively to Saifun within the field of charge trapping technologies."

Dr. Eitan concluded, "At the end of this quarter, we made several appointments. Eduardo Maayan was appointed Executive Vice President of Business Development. Eduardo joined Saifun in 1998 serving in several senior positions and holding over 20 patents in the field of flash memory. Eduardo takes over from Ramy Langer, who will start a new venture based on Saifun NROM technology. We are pleased to announce that Raz Rafaeli has joined us as Vice President of Business Development. Raz is joining us from Sandisk where he served as Vice President of Global Sales Enterprise Solutions. In addition, Ron Eliyahu was appointed Vice President of Research & Development. Ron joined Saifun in 1999, has served in several management positions and holds several patents. Eduardo, Raz and Ron bring many years of experience to their respective positions and I am confident that and with our new team in place Saifun will emerge even stronger for the challenges ahead."

2007 Third Quarter Guidance

Saifun's guidance for the third 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 third quarter of 2007, the company expects revenues in the range of $8.7 million to $9.5 million
• For the third quarter of 2007, the company expects Non-GAAP(1) operating profit of between 14 % to 20% of revenues

Financial Tables

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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 Macronix International, NEC Electronics, Semiconductor Manufacturing International Corporation, Sony Corporation, Spansion, and Tower Semiconductor.