Lattice Semiconductor Reports Second Quarter Financial Results

HILLSBORO, OR -- (MARKET WIRE) -- Jul 24, 2008 -- Lattice Semiconductor Corporation (NASDAQ: LSCC) today announced financial results for the second quarter of fiscal 2008 ended June 28, 2008.

For the second quarter, revenue was $58.1 million, an increase of three percent from the $56.6 million reported in the prior quarter, and a decrease of two percent from the $59.2 million reported in the same quarter a year ago.

FPGA revenue for the second quarter was $13.4 million, down two percent from the $13.7 million reported in the prior quarter, and down one percent from the $13.5 million reported in the same quarter a year ago. PLD revenue for the quarter was $44.7 million, an increase of four percent over the $42.9 million reported in the prior quarter, and a two percent decrease from the $45.7 million reported in the same quarter a year ago.

New product revenue for the second quarter was $12.3 million, up 10 percent from the $11.2 million reported in the prior quarter, and up 90 percent from the $6.5 million reported in the same quarter a year ago.

Other (expense) income, net for the second quarter was an expense of $10.5 million compared to income of $1.3 million reported in the prior quarter and income of $4.3 million reported in the same quarter a year ago. Other expense for the second quarter of 2008 included an impairment charge of $11.3 million primarily related to an other-than-temporary decline in fair value of auction rate securities held in Long-term marketable securities. Other income for the second quarter of 2007 included a $0.4 million gain related to the extinguishment of our Zero Coupon Convertible Notes and a $1.6 million gain related to the sale of land.

Net loss for the second quarter was $13.6 million ($0.12 per share), as compared to a prior quarter net loss of $3.3 million ($0.03 per share), and a net loss of $1.5 million ($0.01 per share) reported in the same quarter a year ago. These results include amortization charges, stock-based compensation expense, an impairment charge, restructuring charges, and gain on sale of land which totaled $14.9 million and $4.6 million for the second quarter of 2008 and prior quarter, respectively, and $2.4 million for the second quarter of 2007. Excluding these items, non-GAAP net income for the second quarter of 2008 was $1.3 million as compared to non-GAAP net income of $1.4 million for the first quarter of 2008 and non-GAAP net income of $1.0 million for the same quarter a year ago. The Company believes exclusion of these items more closely approximates its ongoing operational performance.

"I'm honored and excited that the board of Lattice entrusted me to take the lead of our company moving forward," stated Bruno Guilmart, President and CEO, who joined Lattice July 7, 2008. "In the near term, I am working closely with my management team to comprehensively review Lattice's business in order to formulate a new cost structure and a refined product strategy. We intend to implement a new business model that better aligns our operating costs with near-term revenue expectations and to deliver improved operating results."

Business Outlook -- September 2008 Quarter:

--  Revenue is expected to be flat to down three percent on a sequential
    basis;
--  Gross margin percentage is expected to be approximately 55% to 56% of
    revenue;
--  Total operating expenses are expected to be approximately $33 million;
--  Intangible asset amortization is expected to be approximately $1.4
    million; and
--  Interest and other income is expected to be approximately $0.7
    million.
    

Discussion of Non-GAAP Financial Measures:

Management evaluates and makes operating decisions using various performance measures. In addition to our GAAP results, we also consider adjusted net income, which we refer to as non-GAAP net income. This measure is generally based on the revenue of our products and the costs of those operations, such as cost of products sold, research and development, sales and marketing and general and administrative expenses, that management considers in evaluating our ongoing core operating performance. Non-GAAP net income excludes amortization of intangible assets, stock-based compensation, impairment of Long-term marketable securities and Other current assets, restructuring charges and gain on sale of land. Intangible assets relate to assets acquired through acquisitions and consist of technology purchased in connection with the acquisitions. Stock-based compensation charges include expense for items such as stock options and restricted stock units granted to employees and purchases under the employee stock purchase plan. Impairment of Long-term marketable securities relates to an other-than-temporary decline in fair value of our auction rate securities that continue to experience unsuccessful auctions. Impairment of Other current assets relates to an other-than-temporary decline in fair value of common stock of one of our foundry partners. Restructuring charges consist of expenses and subsequent adjustments incurred under corporate restructuring plans that were initiated in the fourth quarter of 2005 and in the third quarter of 2007, and include items such as severance costs, costs to vacate space under long-term lease arrangements, and other related expenses. Gain on sale of land relates to a gain resulting from the sale of real property during the relevant period.

Non-GAAP net income is a supplemental measure of our performance that is not required by and not presented in accordance with GAAP. Moreover, it should not be considered as an alternative to net loss, operating loss or any other performance measure derived in accordance with GAAP, or as an alternative to cash flow from operating activities or as a measure of our liquidity. Investors and potential investors are encouraged to review the reconciliation of non-GAAP financial measures contained within this press release with our net loss, which is our most directly comparable GAAP financial result. For more information, see the Consolidated Statement of Operations contained in this earnings release.

Conference Call and Business Update:

On July 24, 2008, Lattice will hold a telephone conference call at 2:00 p.m. (Pacific Time) with financial analysts. Investors may listen to our conference call live via the web at www.lscc.com. Replays of the call will also be available at www.lscc.com. On September 11, 2008, we plan to publish a "Business Update Statement" on our website. Our financial guidance will be limited to the comments on our public quarterly earnings call and these public business outlook statements.

Forward-Looking Statements Notice:

The foregoing paragraphs contain forward-looking statements that involve estimates, assumptions, risks and uncertainties, including statements relating to the implementation of a new business model and the expected results produced by that model, the timing of related announcements and statements relating to our business outlook. The forward-looking statements in the "Business Outlook - September 2008 Quarter" section of this release do not include the effects of any restructuring charges or other accounting adjustments that may be required by actions taken in connection with the formulation of a new cost structure or refinement of product strategy. Lattice also believes the factors identified below in connection with each such statement could cause actual results to differ materially from the forward-looking statements.

Estimates of future revenue are inherently uncertain due to the high percentage of quarterly "turns" business. In addition, revenue is affected by such factors as pricing pressures, competitive actions, the demand for our Mature, Mainstream, and New products, and the ability to supply products to customers in a timely manner. Actual gross margin percentage and operating expenses could vary from the estimates contained herein on the basis of, among other things, changes in revenue levels, changes in product pricing and mix, changes in wafer, assembly and test costs, variations in manufacturing yields, and changes in stock-based compensation charges due to stock price changes.

In addition to the foregoing, other factors that may cause actual results to differ materially from the forward-looking statements herein include the disruption of our business activities due to the transition to our new Chief Executive Officer, the Company's dependencies on its silicon wafer suppliers, technological and product development risks, and the other risks that are described from time to time in our filings with the Securities and Exchange Commission. The Company does not intend to update or revise any forward-looking statements, whether as a result of events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

About Lattice Semiconductor:

Lattice Semiconductor Corporation provides the industry's broadest range of Programmable Logic Devices (PLD), including Field Programmable Gate Arrays (FPGA), Complex Programmable Logic Devices (CPLD), Mixed-Signal Power Management and Clock Generation Devices, and industry-leading SERDES products.

Lattice continues to deliver "More of the Best" to its customers with comprehensive solutions for system design, including an unequaled portfolio of high performance, non-volatile and low cost FPGAs.

Lattice products are sold worldwide through an extensive network of independent sales representatives and distributors, primarily to OEM customers in communications, computing, industrial, consumer, automotive, medical and military end markets. For more information, visit http://www.latticesemi.com.

Lattice Semiconductor Corporation, Lattice (& design), L (& design), ispLever, LatticeECP2/M, LatticeSCM, LatticeXP, LatticeXP2, LatticeMico32 and specific product designations are either registered trademarks or trademarks of Lattice Semiconductor Corporation or its subsidiaries in the United States and/or other countries. GENERAL NOTICE: Other product names used in this publication are for identification purposes only and may be trademarks of their respective holders.





                                Lattice  Semiconductor  Corporation
                                Consolidated  Statement  of  Operations
                                (in  thousands,  except  per  share  data)
                                                          (unaudited)


                                                      Three  months  ended                      Six  months  ended
                                          -------------------------------    --------------------
                                          June  28,      March  29,    June  30,      June  28,      June  30,
                                              2008              2008              2007              2008              2007
                                          ---------    ---------    ---------    ---------    ---------
Revenue                            $    58,079    $    56,604    $    59,243    $  114,683    $  117,350

Costs  and  expenses:
      Cost  of  products
        sold                                25,551          25,160          26,593          50,711          52,811
      Research  and
        development                  17,937          17,668          20,752          35,605          42,760
      Selling,  general
        and
        administrative            15,195          14,999          14,785          30,194          29,351
      Amortization  of
        intangible
        assets  (1)                      1,368            1,481            2,665            2,849            5,332
      Restructuring  (2)              858            1,790                  27            2,648              (103)
                                          ---------    ---------    ---------    ---------    ---------
                                                60,909          61,098          64,822        122,007        130,151
                                          ---------    ---------    ---------    ---------    ---------
Loss  from  operations        (2,830)        (4,494)        (5,579)        (7,324)      (12,801)

Other  (expense)
  income,  net  (3)              (10,520)          1,333            4,299          (8,195)          7,307
                                          ---------    ---------    ---------    ---------    ---------
Loss  before
  provision  from
  income  taxes                    (13,350)        (3,161)        (1,280)      (15,519)        (5,494)
Provision  for  income
  taxes                                          221                  93                181                314                350
                                          ---------    ---------    ---------    ---------    ---------
Net  loss                          $  (13,571)  $    (3,254)  $    (1,461)  $  (15,833)  $    (5,844)
                                          =========    =========    =========    =========    =========

Net  loss  per  share
  (4):
Basic  and  diluted        $      (0.12)  $      (0.03)  $      (0.01)  $      (0.14)  $      (0.05)
                                          =========    =========    =========    =========    =========

Shares  used  in  per
  share  calculations:
Basic  and  diluted            115,171        115,146        114,827        115,159        114,758
                                          =========    =========    =========    =========    =========


Notes:

(1)  Intangible  assets  subject  to  amortization  aggregate  $3.0  million,  net,
        at  June  28,  2008  and  relate  to  the  acquisition  of  the  FPGA  business  of
        Agere  Systems,  Inc.  on  January  18,  2002.  Intangible  assets  related  to
        the  acquisition  of  Cerdelinx  Technologies,  Inc.,  became  fully  amortized
        in  the  third  quarter  of  2007.  Amortization  charges  are  expected  to  be
        eliminated  after  the  first  quarter  of  2009.

(2)  Represents  costs  and  adjustments  incurred  under  the  corporate
        restructuring  plans  initiated  in  the  fourth  quarter  of  2005  and  the
        third  quarter  of  fiscal  2007.  During  the  second  quarter  of  fiscal  2008,
        the  Company  recorded  a  charge  of  $0.9  million,  primarily  comprised  of
        severance  costs  related  to  the  resignation  of  our  former  President  and
        Chief  Executive  Officer  effective  on  May  31,  2008.    During  the  first
        quarter  of  fiscal  2008,  the  Company  incurred  costs  of  $1.8  million,  of
        which  $1.3  million  related  primarily  to  costs  to  vacate  leased  space
        and  $0.5  million  related  to  severance  costs  for  the  resignation  of  our
        former  President  and  Chief  Executive  Officer.

(3)  Includes  an  $11.3  million  loss  recorded  during  the  three  months  ended
        June  28,  2008  as  a  result  of  the  Company  recognizing  an  impairment
        charge  related  to  an  other-than-temporary  decline  in  fair  value  of
        auction  rate  securities  held  in  Long-term  marketable  securities
        ($10.3  million)  and  our  common  stock  investment  in  a  foundry  partner
        held  in  Other  current  assets  ($1.0  million).    Includes  a  $1.6  million
        gain  recorded  during  the  three  months  ended  June  30,  2007  as  a  result
        of  the  Company  selling  a  parcel  of  undeveloped  land  near  its  corporate
        headquarters.

(4)  For  all  periods  presented,  the  computation  of  diluted  earnings  per
        share  excludes  the  effects  of  stock  options,  restricted  stock  units,
        warrants  and  Convertible  Notes,  as  they  are  antidilutive.



                                        Reconciliation  of  GAAP  Net  Loss
                                              to  Non-GAAP  Net  Income
                                                      (in  thousands)
                                                          (unaudited)

                                                      Three  months  ended                      Six  months  ended
                                          -------------------------------    --------------------
                                          June  28,      March  29,    June  30,      June  28,      June  30,
                                              2008              2008              2007              2008              2007
                                          ---------    ---------    ---------    ---------    ---------
GAAP  net  loss                $  (13,571)  $    (3,254)  $    (1,461)  $  (16,825)  $    (5,844)
Reconciling  items:
    Amortization  of
      intangibles  (1)              1,368            1,481            2,665            2,849            5,332
    Stock-based
      compensation                    1,294            1,368            1,325            2,662            2,714
    Impairment  of
      Long-term
      marketable
      securities
      and  Other
      current  assets  (2)      11,337                    -                    -          11,337                    -
    Gain  on  sale  of
      land                                            -                    -          (1,604)                  -          (1,604)
    Restructuring  (3)                858            1,790                  27            2,648              (103)
                                          ---------    ---------    ---------    ---------    ---------
Non-GAAP  net  income    $      1,286    $      1,385    $          952    $      2,671    $          495
                                          =========    =========    =========    =========    =========

                                  Reconciliation  of  GAAP  Net  Loss  per  Share
                                        to  Non-GAAP  Net  Income  per  Share
                                                              (unaudited)

                                                        Three  months  ended                    Six  months  ended
                                          -------------------------------    --------------------
                                              June  28,    March  29,    June  30,      June  28,      June  30,
                                                2008              2008            2007              2008              2007
                                          ---------    ---------    ---------    ---------    ---------
Basic  and  Diluted:
GAAP  net  loss                $      (0.12)  $      (0.03)  $      (0.01)  $      (0.15)  $      (0.05)
Reconciling  items:
  Amortization  of
    intangibles  (1)                  0.01              0.01              0.02              0.02              0.05
  Stock-based
    compensation                        0.01              0.01              0.01              0.02              0.02
  Impairment  of
    Long-term
    marketable
    securities
    and  Other
    current  assets  (2)            0.10                    -                    -              0.10                    -
  Gain  on  sale  of
    land                                              -                    -            (0.01)                  -            (0.01)
  Restructuring  (3)                0.01              0.02              0.00              0.02            (0.00)
                                          ---------    ---------    ---------    ---------    ---------
Non-GAAP  net
  income  (5)                    $        0.01    $        0.01    $        0.01    $        0.02    $        0.00
                                          =========    =========    =========    =========    =========
Shares  used  in  per
  share  calculations
  (in  thousands):
        Basic                            115,171        115,146        114,827        115,159        114,758
                                          =========    =========    =========    =========    =========
        Diluted  (4)                119,083        119,227        122,611        119,211        123,290
                                          =========    =========    =========    =========    =========

Notes:

(1)  Intangible  assets  subject  to  amortization  aggregate  $3.0  million,  net,
        at  June  28,  2008  and  relate  to  the  acquisition  of  the  FPGA  business  of
        Agere  Systems,  Inc.  on  January  18,  2002.  Intangible  assets  related  to
        the  acquisition  of  Cerdelinx  Technologies,  Inc.,  became  fully  amortized
        in  the  third  quarter  of  2007.  Amortization  charges  are  expected  to  be
        eliminated  after  the  first  quarter  of  2009.

(2)  Includes  an    $11.3  million  loss  recorded  during  the  three  months  ended
        June  28,  2008  as  a  result  of  the  Company  recognizing  an  impairment
        charge  related  to  an  other-than-temporary  decline  in  fair  value  of
        auction  rate  securities  held  in  Long-term  marketable  securities
        ($10.3  million)  and  our  common  stock  investment  in  a  foundry  partner
        held  in  Other  current  assets  ($1.0  million).

(3)  Represents  costs  and  adjustments  incurred  under  the  corporate
        restructuring  plans  initiated  in  the  fourth  quarter  of  2005  and  the
        third  quarter  of  2007.  During  the  second  quarter  of  fiscal  2008,  the
        Company  recorded  a  charge  of  $0.9  million,  primarily  comprised  of
        severance  costs  related  to  the  resignation  of  our  former  President
        and  Chief  Executive  Officer  effective  on  May  31,  2008.  During  the
        first  quarter  of  fiscal  2008,  the  Company  incurred  costs  of
        $1.8  million,  of  which  $1.3  million  related  primarily  to  costs  to
        vacate  leased  space  and  $0.5  million  related  to  severance  costs  for  the
        resignation  of  our  former  President  and  Chief  Executive  Officer.

(4)  For  all  periods  presented,  the  computation  of  diluted  earnings  per
        share  includes  the  effects  of  stock  options,  restricted  stock  units,
        warrants  and  Convertible  Notes,  as  they  are  dilutive.

(5)  Per  share  amounts  may  not  add  up  due  to  rounding.




                    Lattice  Semiconductor  Corporation
                          Consolidated  Balance  Sheet
                                    (in  thousands)


                                                                                                June  28,          December  29,
                                                                                                    2008                      2007
                                                                                            --------------  --------------
                                                                                              (unaudited)
                                              Assets
Current  assets:
    Cash,  cash  equivalents  and  short-term
      marketable  securities  (1)  (4)                            $              96,286  $              85,063
    Accounts  receivable,  net                                                        29,334                  29,293
    Inventories                                                                                  39,071                  40,005
    Other  current  assets  (2)                                                        35,438                  37,185
                                                                                            --------------  --------------
            Total  current  assets                                                      200,129                191,546

Property  and  equipment,  net                                                      44,113                  43,617
Long-term  marketable  securities  (1)                                      34,555                  44,900
Foundry  advances,  investments  and  other
  assets                                                                                              78,933                  90,407
Intangible  assets,  net  (3)                                                          2,965                    5,815
                                                                                            --------------  --------------
                                                                                            $            360,695  $            376,285
                                                                                            ==============  ==============

                  Liabilities  and  Stockholders'  Equity
Current  liabilities:
    Accounts  payable  and  other  accrued
      liabilities                                                                $              32,449  $              32,978
    Deferred  income  and  allowances  on  sales  to
      distributors                                                                                7,521                    8,033
    Zero  Coupon  Convertible  Notes  due  in  2010
      (4)                                                                                                40,000                  40,000
                                                                                            --------------  --------------
            Total  current  liabilities                                              79,970                  81,011

Other  long-term  liabilities                                                        7,600                    9,042
                                                                                            --------------  --------------
            Total  liabilities                                                              87,570                  90,053

Stockholders'  equity  (1)                                                          273,125                286,232
                                                                                            --------------  --------------
                                                                                            $            360,695  $            376,285
                                                                                            ==============  ==============
Notes:

(1)  Long-term  marketable  securities  include  auction  rate  securities  that
        were  reclassified  from  Cash,  cash  equivalents  and  short-term  marketable
        securities  because  recent  auctions  have  been  unsuccessful,  and  as  a
        result,  such  securities  are  presently  considered  to  be  illiquid.  As  a
        result  of  an  other-than-temporary  decline  in  fair  value  for  the
        securities,  we  recorded  an  impairment  charge  of  $10.3  million  to  Net
        loss  for  the  quarter  ended  June  28,  2008.

(2)  An  impairment  charge  of  $1.0  million  was  recorded  to  Net  loss  for  the
        quarter  ended  June  28,  2008  for  an  investment  in  a  foundry  partner
        which  is  held  in  Other  current  assets.

(3)  At  December  29,  2007,  the  Company  performed  an  impairment  test  on
        Goodwill.  As  a  result,  Goodwill  related  to  the  acquisition  of  Vantis
        Corporation  on  June  15,  1999,  the  acquisition  of  Integrated
        Intellectual  Properties,  Inc.  on  March  16,  2001,  and  the  acquisition
        of  the  FPGA  business  of  Agere  Systems,  Inc.  on  January  18,  2002,  was
        determined  to  have  no  implied  fair  value  and  the  entire  balance  of
        $223.6  million  was  recorded  as  a  Goodwill  impairment  charge.  As  a
        result,  we  no  longer  have  Goodwill  recorded  on  our  Consolidated
        Balance  Sheet.

(4)  Subsequent  to  June  28,  2008,  the  Company  completed  the  purchase  of
        $40.0  million  in  principal  amount  of  its  Zero  Coupon  Convertible  Notes
        ("Notes")  due  July  1,  2010.  The  Notes  were  purchased  on  July  2,  2008
        pursuant  to  the  exercise  by  the  noteholders  of  their  repurchase  rights.
        Based  on  these  purchases,  no  such  Notes  remain  outstanding.



                                              Lattice  Semiconductor  Corporation
                                -  Supplemental  Historic  Financial  Information  -


                                                                                      Q208            Q108          Q207
                                                                                      -----        -----        -----
Operations  Information
Percent  of  Revenue
Gross  Margin                                                                56.0%        55.6%        55.1%
R&D  Expense                                                                  30.9%        31.2%        35.0%
SG&A  Expense                                                                26.2%        26.5%        25.0%

Depreciation  Expense  (in  thousands)                3,379        3,249        3,396
Capital  Expenditures  (in  thousands)                3,917        3,207        2,914

Balance  Sheet  Information
Current  Ratio                                                                2.5            2.6            5.9
A/R  Days  Revenue  Outstanding                                    46              47              46
Inventory  Months                                                          4.6            4.7            4.3

Revenue%  (by  Product  Family)
FPGA                                                                                    23%            24%            23%
PLD                                                                                      77%            76%            77%

Revenue%  (by  Product  Classification)
New                                                                                      21%            20%            11%
Mainstream                                                                        49%            48%            50%
Mature                                                                                30%            32%            39%

Revenue%  (by  Geography)
Americas                                                                            20%            22%            24%
Europe  (incl.  Africa)                                                  20%            22%            18%
Asia                                                                                    60%            56%            58%

Revenue%  (by  End  Market)
Communications                                                                52%            54%            52%
Industrial  &  Other                                                        23%            24%            24%
Computing                                                                          14%            12%            11%
Consumer  &  Automotive                                                  11%            10%            13%

Revenue%  (by  Channel)
Direct                                                                                67%            63%            64%
Distribution                                                                    33%            37%            36%



New:                LatticeXP2,  LatticeSC,  LatticeECP2/M,  LatticeECP,  LatticeXP,
                        MachXO,  Power  Manager,  ispClock

Mainstream:  FPSC,  ispXPLD,  ispGDX2,  ispMACH  4/LV,  ispGDX/V,  ispMACH  4000/Z,
                        ispXPGA,  Software  and  IP

Mature:          ORCA  2,  ORCA  3,  ORCA  4,  ispPAC,  ispLSI  8000V,  ispMACH  5000B,
                        ispMACH  2LV,  ispMACH  5LV,  ispLSI  2000V,  ispLSI  5000V,  ispMACH
                        5000VG,  all  5  Volt  CPLDs,  all  SPLDs
 





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