TranSwitch Corporation Announces Second Quarter 2008 Financial Results

Q2 Revenue is up over 18% versus Q1 Results, Revenue Guidance for Q3 is $10.2 million, up 14% from Q2

SHELTON, CT – July 29, 2008 – TranSwitch® Corporation (NASDAQ: TXCC) today announced that it posted second quarter 2008 net revenues of approximately $8.9 million and a net loss of ($4.3) million, or ($0.03) per basic and diluted common share consistent with the update provided earlier this month. This compares to first quarter 2008 net revenues of approximately $7.5 million and a net loss of ($5.4) million, or ($0.04) per basic and diluted common share and second quarter 2007 net revenues of approximately $8.9 million and a net loss of ($4.4) million, or ($0.03) per basic and diluted common share.

During the second quarter of 2008, the Company reported a gross profit of $5.3 million or a gross margin of 60.1% on total revenues. The gross margin for TranSwitch’s core product business was approximately 76.4%.

First half 2008 net revenues were approximately $16.4 million and a net loss of ($9.8) million, or ($0.07) per basic and diluted common share. This compares to first half 2007 net revenues of approximately $18.2 million and a net loss of ($9.6) million, or ($0.07) per basic and diluted common share.

“Our first half 2008 revenue increased approximately 14% over the second half of 2007, and we believe revenues will continue to grow through the rest of the year. We also believe that overall 2008 will be a growth year for the company,” stated Dr. Santanu Das, President and CEO of TranSwitch Corporation.

“Additionally, the gross margin for TranSwitch’s core product business is trending higher as our newer products represent a greater share of our revenue. The lower overall product gross margin this quarter relates to the product mix of our Israel-based business. Starting in the fourth quarter, we anticipate higher margins in our Israel-based business as the mix shifts toward higher margin intellectual property licensing and royalties. Further, growth in TranSwitch’s core product business is also expected to accelerate in that timeframe resulting in increased blended gross margin for our business,” continued Dr. Das.

“In this quarter, we saw strength in Asia for our core business including China, Korea, and India. We also saw strength in ordering from France, Scandinavia, Israel, and North America. Anticipated large infrastructure upgrade projects in the UK, Korea, China, and India are just getting started and, as the year progresses, we expect to see continued strength in these regions.

We are also encouraged by our order book position for our Israel-based business, which continued its growth trend in the second quarter.

During the quarter, we introduced our HDMI 1.3 products for the transport of high-definition video and audio, and the customer response so far has been very encouraging. We recently announced a license agreement for our industry leading 3.5 Gbps/channel IP core and are in active discussions with a variety of potential customers. In early 2006, we acquired Mysticom Ltd., which had made a considerable investment in developing high speed analog solutions for the communications industry. We were able to reposition some of this technology and now have some of the industry’s leading intellectual property for high speed multimedia applications. Our intention is to capture a significant portion of this rapidly growing market by 2010,” stated Dr. Das.

“Based on our total current order position, we are projecting our third quarter 2008 revenue to be around $10.2 million, an increase of 14.6% over our second quarter 2008 results. Our third quarter 2008 net loss is estimated to be roughly ($0.02) per basic and diluted common share,” added Dr. Das.

“We are also enthused by the fact that we have entered into a definitive agreement to acquire Centillium Communications, Inc. We believe that this combination strengthens TranSwitch’s leadership position in the next-generation communications semiconductor space and believe we will benefit from growth drivers inherent in their FTTP and VoIP businesses as well as from the significant incremental revenue stream from Centillium’s existing design wins. The combined companies will have greater scale, a significantly improved expense structure and a truly global reach. Management of TranSwitch has identified approximately $10.5 million of annual expense savings and expects the transaction to be accretive to earnings in the first full quarter after closing and significantly accretive in 2009. We anticipate the transaction to close in the fourth quarter of 2008,” stated Dr. Das.

“While it has been a challenging number of years for our industry, we are encouraged by recent trends and are very optimistic about the future. We believe that 2008 should represent the turning point for TranSwitch as the anticipated infrastructure upgrades in the UK, Korea, China, and India ramp and we close the Centillium acquisition,” concluded Dr. Das.

Additional details on TranSwitch’s second quarter results will be discussed during a conference call regarding this announcement today at 6:00 pm eastern time. To listen to the live call, investors can dial 719-325-4748 and reference confirmation code: 9519409. The call will be recorded and a replay will be available two hours after the conclusion of the live broadcast through August 8, 2008. To access the replay, dial 719-457-0820 and enter confirmation code: 9519409. Investors can also access an audio webcast via www.vcall.com by clicking on the TranSwitch Corporation conference call link. This audio webcast will also be available on a replay basis for 10 business days.

Related Documents: Statement of Operations and Balance Sheet