Saifun Semiconductors Reports Second Quarter 2006 Results

Netanya, Israel, July 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 second quarter ended June 30, 2006.

Financial Highlights - GAAP: Second quarter 2006 compared with second quarter 2005 (including $6.8 million non-cash revenues in the second quarter of 2005).

• Revenues for the quarter were $17.4 million, compared to $21.8 million in the previous year.
• Gross profit for the quarter was $13.9 million, compared to $19.2 million in the previous year.
• Operating income for the quarter was $7.8 million, compared to $15.4 million in the previous year.
• Net income for the quarter was $10.1 million, or $0.33 per basic and $0.31 per diluted share, compared to net income in the previous year of $13.3 million.
• Net income for the quarter included $1.2 million of stock-based compensation compared to $0.5 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 $6.8 million non-cash revenues resulting from the termination of our former joint venture with Infineon Technologies AG recognized in the second quarter of 2005, excludes the loss from discontinued product operations,  and excludes stock based compensation expenses.

Financial Highlights - Non-GAAP1 : Second quarter 2006 compared with second quarter 2005.

• Revenues for the quarter were $17.4 million, compared to $14.9 million, an increase of 16% compared to the previous year.
• Licensing revenues for the quarter were $11.1 million compared to $11.7 million in the previous year.
• Service revenues for the quarter were $6.2 million, compared to $3.2 million in the previous year.
• Gross profit for the quarter was $14.3 million, compared to $12.6 million in the previous year.
• Operating income for the quarter was $9.0 million or 52% of revenues, compared to $9.0 million in the previous year.
• Net income for the quarter was $11.3 million, or $0.36 per basic and $0.34 per diluted share, compared to net income in the previous year of $8.9 million.

Financial Highlights - GAAP: First six months 2006 compared with first six months 2005 (including $16.5 million non-cash revenues).

• Revenues for the first six months were $33.2 million, compared to $44.0 million in the previous year.
• Gross profit for the first six months was $26.0 million, compared to $38.8 million in the previous year.
• Operating income for the first six months was $15.5 million, compared to $30.3 million in the previous year.
• Net income for the first six months was $20.1 million, or $0.66 per basic and $0.62 per diluted share, compared to net income in the previous year of $25.1 million.
• Net income for the first six months included $1.8 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 $1.8 million in the previous year.

Non-GAAP net income, where applicable, excludes the effect of $16.5 million non-cash revenues resulting from the termination of our former joint venture with Infineon Technologies AG recognized in the first six months of 2005, excludes the loss from discontinued product operations,   and excludes stock based compensation expenses and income.

Financial Highlights - Non-GAAP2 : First six months 2006 compared with the first six months 2005.

• Revenues for the first six months were $33.2 million, compared to $27.5 million, an increase of 21% compared to the previous year.
• Licensing revenues for the first six months were $21.6 million compared to $21.0 million in the previous year.
• Service revenues for the first six months were $11.5 million, compared to $6.5 million in the previous year.
• Gross profit for the first six months was $26.7 million, compared to $22.7 million in the previous year.
• Operating income for the first six months was $17.7 million or 53% of revenues, compared to $15.6 million in the previous year.
• Net income for the first six months was $21.9 million, or $0.73 per basic and $0.67 per diluted share, compared to net income in the previous year of $15.7 million.

“We achieved our primary operational and strategic objectives during the second quarter,” said Kobi Rozengarten, President of Saifun Semiconductors. “We realized year-over-year growth in non-GAAP revenues driven by increased service revenue as our partners progress toward mass production of NVM products utilizing our NROM technology.

“During the next six months, we expect to see Saifun’s licensees release engineering samples of new flash products utilizing our Quad NROM technology, with their volume production expected to commence in early 2007,” concluded Mr. Rozengarten.  “The upcoming commercial launch of new 4-bit products represents a major milestone for Saifun, for our licensees and for the NVM market as a whole, and we are proud to be at the center of this revolution in flash memory technology.”

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® 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.