inSilicon Corporation Reports Fourth Quarter and Annual Results

SAN JOSE, Calif., Oct. 17 /PRNewswire/ -- inSilicon Corporation (Nasdaq: INSN) -- a leading provider of communications technology for complex systems-on-chip (SOC) -- today reported net revenue of $3.9 million for its fiscal fourth quarter ended September 30, 2001, a 48% decrease from its fourth quarter of 2000 net revenue of $7.5 million, and a 35% decrease sequentially. Pro forma net loss for the fourth quarter of 2001 was $1.7 million, or ($0.11) per diluted share, as compared to pro forma net income of $1.1 million, or $0.07 per diluted share, in the fourth quarter of the prior year.

For the year ended September 30, 2001, net revenue was $21.2 million, a 17% decrease from net revenue for fiscal 2000. For fiscal 2001, pro forma net loss was $3.0 million, or ($0.21) per diluted share, as compared to a pro forma net income of $2.1 million or $0.16 per pro forma diluted share, in fiscal 2000.

Pro forma net loss excludes certain non-cash and other charges related to the amortization of purchased intangible assets, stock-related compensation and impairment charges. Including these charges, net loss was $14.4 million, or ($0.96 ) per diluted share, in the fourth quarter of fiscal 2001 as compared to net income of $0.4 million, or $0.02 per diluted share, in the fourth quarter of fiscal 2000. Net loss for the year ended September 30, 2001 was $19.2 million, or ($1.30) per diluted share, as compared to a net loss of $1.3 million, or ($0.10) per diluted share, in the comparable period of 2000.

In the fourth quarter of fiscal 2001 the Company recorded a charge of $9.4 million related to the impairment of goodwill and other intangible assets, as well as charges totaling $0.8 million related to the impairment of equity investments.

``The poorly performing semiconductor and systems markets and events of late continue to impact our business,'' said Wayne Cantwell, President and Chief Executive Officer. ``In particular, during the last month of the quarter our sales activity was down significantly.''

``I am obviously disappointed with our revenue results, but inSilicon is financially strong, and market activity for our new products, particularly USB 2.0 and Ethernet, gives us confidence that we are well positioned to benefit from any improvement in market conditions,'' added Cantwell. ``We intend to continue our spending control measures as we work to bring inSilicon back to revenue growth and profitability.''

About inSilicon

inSilicon Corporation is a leading provider of communications semiconductor intellectual property used by semiconductor and systems companies to design complex systems-on-chip (SOC) technologies that are critical components of innovative wired and wireless products. inSilicon's technology provides customers faster time-to-market and reduced risk and development costs. The Company's broad portfolio of analog and mixed-signal products and enabling communications technologies, including the JVX(TM) and JVXtreme(TM) Accelerators, Bluetooth, Ethernet, USB, PCI, and IEEE-1394, are used in a wide variety of markets encompassing communications, consumer, computing, and office automation. inSilicon is a subsidiary of Phoenix Technologies Ltd. (Nasdaq: PTEC).

Conference Call Webcast

The Company will hold its quarterly conference call with the investment community today, October 17, 2001, at 1:30 p.m. Pacific time. This call will be webcast live and a replay of the call will be available for a 90-day period at http://www.insilicon.com or http://www.broadcast.com .

NOTE: inSilicon and JVX are trademarks of inSilicon Corporation. All other trademarks are the property of their respective owners.

``Safe Harbor'' Statement under the Private Securities Litigation Reform Act of 1995:

The statements contained in this press release that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements are based on management's beliefs as well as on a number of assumptions concerning future events made by and information currently available to management. Readers are cautioned not to put undue reliance on such forward-looking statements, which are not a guarantee of performance and are subject to a number of uncertainties and other factors, many of which are outside inSilicon's control, that could cause actual results to differ materially from such statements. For a more detailed description of the factors that could cause such a difference, please see inSilicon's filings with the Securities and Exchange Commission including its Annual Report on Form 10-K. inSilicon disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. This information is presented solely to provide additional information to further understand the results of inSilicon.

                            inSilicon Corporation

               Pro Forma Consolidated Statements of Operations

                   (in thousands, except per share amounts)

                                 (Unaudited)

                                 Three Months Ended     Twelve Months Ended

                                   September 30,           September 30,

                                 2001         2000       2001         2000

    Revenue:

     License fees               $2,361      $6,256     $15,151      $20,411

     Services                    1,553       1,266       6,078        5,017

      Total revenue              3,914       7,522      21,229       25,428

    Cost of revenue:

     License fees                  442         147       1,544        1,613

     Services                       59         197         333        1,001

      Total cost of revenue        501         344       1,877        2,614

    Gross margin                 3,413       7,178      19,352       22,814

    Operating expenses:

     Research and development    2,774       1,955      11,128        7,753

     Sales and marketing         2,238       3,103       9,342        9,510

     General and administrative  1,168         937       4,951        3,336

      Total operating expenses   6,180       5,995      25,421       20,599

    Income (loss) from

     operations                (2,767)       1,183     (6,069)        2,215

    Interest and other

     income, net                   165         556       1,591        1,225

    Income (loss) before

     income taxes              (2,602)       1,739     (4,478)        3,440

    Provision (benefit)

     for income taxes            (911)         661     (1,430)        1,307

    Net income (loss)         $(1,691)      $1,078    $(3,048)       $2,133

    Net income (loss)

     per share (A):

      Basic                    $(0.11)       $0.08     $(0.21)        $0.17

      Diluted                  $(0.11)       $0.07     $(0.21)        $0.16

    Shares used in per

     share calculation (A):

      Basic                     15,020      14,089      14,772       12,338

      Diluted                   15,020      15,194      14,772       13,017

     (A) Shares are stated on a pro forma basis for the twelve months ended

         September 30, 2000.

                            inSilicon Corporation

         Pro Forma Consolidated Statements of Operations - continued

                   (in thousands, except per share amounts)

                                 (Unaudited)

 The above pro forma statements have been adjusted to eliminate the following

                         non-cash and other charges:

                                  Three Months Ended    Twelve Months Ended

                                      September 30,        September 30,

                                     2001     2000       2001          2000

    Amortization of purchased

     technology                      $322     $314      $1,280       $1,256

    Amortization of

     goodwill                       1,099      555       3,867        2,220

    Stock-related

     compensation                    317       163         978          642

    Loss on write-down of

     investments                     802        --       1,302           --

    Impairment of goodwill

     and other intangible

     assets                         9,393       --       9,393           --

    Non-cash and other

     charges before income

     taxes                          11,933   1,032      16,820        4,118

    Provision (benefit) for

     income taxes                    730     (321)       (623)        (720)

    Net non-cash and other

     charges                       $12,663    $711     $16,197       $3,398

                            inSilicon Corporation

                    Consolidated Statements of Operations

                   (in thousands, except per share amounts)

                                 (Unaudited)

                              Three Months Ended       Twelve Months Ended

                                 September 30,             September 30,

                              2001         2000         2001           2000

    Revenue:

     License fees           $2,361        $6,256      $15,151       $20,411

     Services                1,553         1,266        6,078         5,017

      Total revenue (A)      3,914         7,522       21,229        25,428

    Cost of revenue:

     License fees              442           147        1,544         1,613

     Services                   59           197          333         1,001

     Amortization of

     purchased technology      322           314        1,280         1,256

      Total cost of revenue    823           658        3,157         3,870

    Gross margin             3,091         6,864       18,072        21,558

    Operating expenses:

     Research and

      development            2,774         1,955       11,128         7,753

     Sales and

      marketing              2,238         3,103        9,342         9,510

     General and

      administrative         1,168           937        4,951         3,336

     Amortization of

      goodwill               1,099           555        3,867         2,220

     Stock-related

      compensation             317           163          978           642

     Impairment of goodwill

      and other intangible

      assets                 9,393            --        9,393            --

       Total operating

        expenses            16,989         6,713       39,659        23,461

    Income (loss)

      from operations     (13,898)           151     (21,587)       (1,903)

    Interest and other

     income, net               165           556        1,591         1,225

    Loss on write-down

     of investments          (802)            --      (1,302)            --

    Income (loss)

     before income taxes  (14,535)           707     (21,298)         (678)

    Provision (benefit)

     for income taxes        (181)           340      (2,053)           587

    Net income (loss)    $(14,354)          $367    $(19,245)      $(1,265)

    Net income (loss)

     per share (B):

      Basic                $(0.96)         $0.03      $(1.30)       $(0.10)

      Diluted              $(0.96)         $0.02      $(1.30)       $(0.10)

    Shares used in

     per share

     calculation (B):

      Basic                 15,020        14,089       14,772        12,338

      Diluted               15,020        15,194       14,772        12,338

    (A) Revenue from

        Phoenix

        Technologies Ltd.     $219           $60       $2,150          $752

    (B) Shares are stated on a pro forma basis for the

        twelve months ended September 30, 2000.

                            inSilicon Corporation

                    Condensed Consolidated Balance Sheets

                                (in thousands)

                                                          September 30,

    Assets                                            2001           2000

                                                   (Unaudited)

    Current Assets:

     Cash and short-term investments                 $32,040        $38,181

     Accounts receivable, net                          2,606          6,699

     Receivable from Phoenix Technologies Ltd.            --          1,054

     Other current assets                              2,367          1,992

       Total current assets                           37,013         47,926

    Property and equipment, net                        1,405          1,231

    Computer software costs, net                       6,912          5,385

    Goodwill and other intangible assets, net          6,879          8,000

    Other assets                                       1,929          1,168

    Total assets                                     $54,138        $63,710

    Liabilities and Stockholders' Equity

    Current Liabilities:

     Accounts payable                                   $658         $1,243

     Payroll and related liabilities                   1,791          2,307

     Payable to Phoenix Technologies Ltd.              1,143             --

     Deferred revenue                                  3,124          2,692

     Purchase consideration payable                    1,226            756

     Other accrued liabilities                         1,764          1,630

       Total current liabilities                       9,706          8,628

    Deferred tax liabilities                           2,374          2,955

    Stockholders' equity                              42,058         52,127

Total liabilities and stockholders' equity $54,138 $63,710