Silicon Image Reports Record Revenues and Significant Increase in Pre-Tax Income for the Third Quarter 2005

SUNNYVALE, Calif., Oct. 25 /PRNewswire-FirstCall/ -- Silicon Image, Inc. (NASDAQ: SIMG), a leader in the secure distribution, presentation and storage of high definition content, today reported financial results for its third quarter ended September 30, 2005.

    * Revenue for the third quarter was at a record $56.0 million, an increase
      of 10.4% from $50.7 million in the second quarter of 2005 and an
      increase of 17.0% from $47.9 million in the third quarter of 2004.
    * Revenue from Consumer Electronics IC's grew 23% from the prior quarter
      to $31 million
    * Licensing revenue increased 65% from the prior quarter to $5.6 million
    * IC bookings grew to a record of over $76 million
    * HDMI signed 49 new adopters to a total of over 290
    * Bill George, VP of Operations at On Semiconductor, joined the Silicon
      Image board of directors
    * Pre-tax income for the third quarter was $15.7 million, an increase of
      47.0% from $10.7 million in the second quarter of 2005 and an increase
      of 90.8% from $8.2 million in the third quarter of 2004.  Pre-tax
      income for the third quarter includes a stock compensation benefit of
      $1.4 million, as compared to a stock compensation expense of $1.3
      million in the second quarter of 2005 and a stock compensation expense
      of $1.5 million in the third quarter of 2004.

During the quarter the Company determined that, based on favorable operating results in 2005, it may be appropriate to release a portion of the valuation allowance against certain deferred tax assets. As a result the Company is performing an analysis to determine the extent to which the allowance should be released. Because this analysis has not been completed, the Company has limited this release to a discussion of income before provision for income taxes.

Cash, cash equivalents and short-term investments, at the end of the third quarter was $134.1 million, an increase of $40.6 million from December 31, 2004.

"We continue to achieve record revenue, earnings, bookings, and growth in cash from operations as we enable digital content delivery systems in the home," stated Steve Tirado, president and chief executive officer of Silicon Image.

"While our ongoing evaluation of the deferred tax allowance prevented us from reporting net income in this release, the fact that we are undertaking this task at this time is an affirmation of our continuing profitable performance and our confidence that we will be able to use this deferred tax asset to offset future income," added Robert Freeman, interim chief financial officer.

The company will host a conference call at 2:00 p.m. Pacific time today to discuss its third quarter 2005 results and business outlook. The call will be broadcast over the Internet and can be accessed on the investor relation site located at www.siliconimage.com. To access the conference call, dial (719) 457-2625 and enter pass code 1471991. A replay of the conference call will be available until midnight (PT), November 3, 2005. To access the replay, dial (719) 457-0820 or (888) 203-1112, and enter pass code 1471991.

About Silicon Image

Headquartered in Sunnyvale, Calif., Silicon Image, Inc. is a leader in the secure distribution, presentation and storage of high-definition content. Silicon Image creates and drives industry standards for digital content delivery such as DVI, HDMI and SATA, leveraging strategic partnerships with global leaders in consumer electronics and personal computing. Silicon Image offers robust, high-bandwidth semiconductors in the global PC/display, consumer electronics and storage arenas based on its innovative digital interconnect technology and has become one of the top ten IP licensing vendors in the world. For more information on Silicon Image, visit www.siliconimage.com.

Safe Harbor Statement

This news release contains forward-looking information within the meaning of federal securities regulations. These forward-looking statements include statements related to future financial results and business outlook. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those anticipated by these forward- looking statements. In particular, future demand in PC, display, consumer electronics and storage markets may differ from current expectations, adversely affecting expected future results for the company, new product introductions may not be timely or successful, and standards may not be adopted at the rates anticipated. In addition, see "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Factors Affecting Future Results" included in the Form 10-Q for the quarter ended June 30, 2005, and Form 10-K for the year ended December 31, 2004 which are on file with the Securities and Exchange Commission. Silicon Image, Inc. assumes no obligation to update this forward-looking information.


    SILICON IMAGE, INC.
    CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (PRE-TAX GAAP BASIS)

                                   Three Months Ended      Nine Months Ended
                                       (unaudited)            (unaudited)
                              Sept. 30, June 30, Sept. 30, Sept. 30, Sept. 30,
    (In thousands)             2005      2005     2004      2005      2004

    Revenue:
      Product                 $50,443  $47,323  $41,474   $138,574  $110,350
      Development, licensing
       and royalties            5,559    3,398    6,394     12,469    16,737
        Total revenue          56,002   50,721   47,868    151,043   127,087

    Cost and operating
     expenses:
      Cost of product revenue
       (1)                     20,868   20,987   18,204     57,360    50,414
      Research and
       development (2)         12,309   11,903   12,180     32,334    45,223
      Selling, general and
       administrative (3)       7,722    8,873    9,028     20,548    31,009
      Amortization of
       intangible assets          274      274      357        822     1,070
        Total cost and
         operating
         expenses              41,173   42,037   39,769    111,064   127,716

    Income (loss) from
     operations                               14,829        8,684        8,099          39,979            (629)
        Interest  income  and  other,
          net                                                    908            641            211            2,166              399
        Gain  (loss)  on  investment
          security                                            --        1,382            (64)          1,263              926
        Income  before  provision  for
          income  taxes                            15,737      10,707        8,246          43,408              696
 


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