Cypress Reports Third Quarter 2005 Results


-- Cypress inaugurated a regional design center in Shanghai -- its first in China. The new center complements Cypress's two design centers in India, expanding support for the company's Asia-Pacific customer base, which contributes approximately 45% of its revenue. Cypress's Shanghai center will focus initially on USB and PSoC designs.

-- Cypress celebrated its 10th anniversary in India. The company currently operates design centers in Hyderabad and Bangalore, employing more than 200 workers. Cypress's India design teams have earned more than 40 U.S. patents and have played an important role in the design of Cypress products, including PSoC, USB and spread-spectrum clock generators.

Conclusion

Rodgers concluded, "We are pleased with our return to profitability in the third quarter. Based on accelerating demand for proprietary Cypress products -- including PSoC, WirelessUSB and our high-performance QDR SRAMs -- we expect gains in both revenue and profit in the fourth quarter."

About Cypress

Cypress solutions are at the heart of any system that is built to perform: consumer, computation, data communications, automotive, industrial, and solar power. Leveraging a strong commitment to customer service and performance-based process and manufacturing expertise, Cypress's product portfolio includes a broad selection of wired and wireless USB devices, CMOS image sensors, timing solutions, network search engines, specialty memories, high-bandwidth synchronous and micropower memory products, optical solutions, and reconfigurable mixed-signal arrays. Cypress stock is traded on the New York Stock Exchange under the ticker symbol CY. More information about the company is available online at www.cypress.com.

Statements herein that are not historical facts and that refer to Cypress and its subsidiaries' plans and expectations for the fourth quarter of 2005 and the future are forward-looking statements made pursuant to the Private Securities Litigation Reform Act of 1995. Such statements are based on our current expectations as of the date of the release. Our actual results may differ materially due a variety of uncertainties and risk factors, including but not limited to the business and economic conditions and growth trends in the semiconductor and solar power industries, the state of the global economy, our ability to roll-out new products, the rate of customer acceptance of Cypress and its subsidiaries' products, our ability to increase factory utilization, our ability to manage the consequences of natural events such as storms, hurricanes or other extreme weather events, the financial and operational performance of our subsidiaries and other risks described in our filings with the Securities and Exchange Commission. We assume no responsibility to update any such forward-looking statements. We use words such as "anticipates," "believes," "expects," "future," "look forward," "planning," "intends" and similar expressions to identify forward-looking statements that include, but are not limited to, statements related to prices, growth, supply, shipments, new products, profit and revenue.

To supplement the consolidated financial results prepared under GAAP, Cypress uses adjusted-GAAP measures which are adjusted from the most directly comparable GAAP results to exclude items related to acquisitions, including amortization of intangibles, in-process research and development and stock-based compensation, employee loan reserves, off-balance sheet lease guarantee impairment, restructuring, impairment on investments, gains or losses on investments and other non-recurring costs. Management does not consider these charges part of the day-to-day business or reflective of the core operational activities of the Company as they result from corporate transactions outside the ordinary course of business. Management uses these adjusted-GAAP measures internally to make strategic decisions, forecast future results and evaluate the Company's current performance. Most analysts covering Cypress use the adjusted-GAAP measures as well. Given management's use of these adjusted-GAAP measures, Cypress believes these measures are important to investors in understanding the Company's current and future operating results as seen through the eyes of management. In addition, management believes these adjusted-GAAP measures are useful to investors in enabling them to better assess changes in Cypress' core business across different time periods. These adjusted-GAAP measures are not in accordance with, or an alternative for, GAAP and may be different from adjusted-GAAP measures used by other companies.

Cypress, PSoC, and the Cypress logo are registered trademarks of Cypress Semiconductor Corporation. Programmable System-on-Chip, WirelessUSB, CapSense, HOTLink, EZ-USB, EZ-USB FX2LP, KISSBind, EZ-USB NX2LP-Flex, TouchWake, C8, YLink and enCoRe are trademarks of Cypress Semiconductor Corporation.

SunPower is a registered trademark of SunPower Corporation.

Microsoft is a registered trademark of Microsoft Corporation.

All other trademarks or registered trademarks are the property of their respective owners.

                   CYPRESS SEMICONDUCTOR CORPORATION
                 CONDENSED CONSOLIDATED BALANCE SHEETS
                 (In thousands, except per share data)

                              (Unaudited)

                                                 Oct 02,     Jan 02,
                                                  2005        2005
                                               ----------- -----------

                                ASSETS

  Cash, cash equivalents, and
   investments (a)                               $272,696    $307,640
  Accounts receivable, net                        137,831     107,288
  Inventories                                      77,053      99,709
  Property and equipment, net                     443,582     444,651
  Goodwill and other intangible assets            454,844     447,003
  Other assets                                    167,238     166,703
                                               ----------- -----------

     Total assets                              $1,553,244  $1,572,994
                                               =========== ===========

                 LIABILITIES AND STOCKHOLDERS' EQUITY
 
  Accounts payable and accrued
   liabilities                                   $163,361    $179,282
  Deferred income                                  28,462      33,426
  Convertible subordinated notes                       599,997          599,998
    Income  tax  liabilities                                                      73,958            71,992
    Other  liabilities                                                                51,454            27,938
                                                                                              -----------  -----------

          Total  liabilities                                                        917,232          912,636

Stockholders'  equity  (b)                                                    636,012          660,358
                                                                                              -----------  -----------

          Total  liabilities  and  stockholders'
            equity                                                                      $1,553,244    $1,572,994
                                                                                              ===========  ===========


(a)  Cash,  cash  equivalents,  and  investments  includes  restricted
        amounts  totaling  $62.9  million  and  $62.7  million  as  of  October  02,
        2005  and  January  02,  2005,  respectively.

(b)  Common  stock,  $.01  par  value,  650,000  and  650,000  shares
        authorized;  135,361  and  128,493  shares  outstanding  as  of  October
        02,  2005  and  January  02,  2005,  respectively.  


                                    CYPRESS  SEMICONDUCTOR  CORPORATION
                      CONDENSED  CONSOLIDATED  STATEMENTS  OF  OPERATIONS
                                                    (On  a  GAAP  basis)
                                (In  thousands,  except  per  share  data)

                                                    THREE  MONTHS  ENDED                NINE  MONTHS  ENDED
                                                            (Unaudited)                            (Unaudited)
                                        ------------------------------  -------------------

                                          Oct  02        Sep  26        Jul  03          Oct  02        Sep  26
                                            2005            2004            2005              2005            2004
                                        ---------  ---------  ----------  ---------  ---------

Revenues                        $227,112    $219,595      $220,506    $647,922    $738,257

Costs  of  revenues        131,673      112,401        129,556      387,878      360,616
                                        ---------  ---------  ----------  ---------  ---------

Gross  margin                    95,439      107,194          90,950      260,044      377,641

Operating  expenses:
Research  and
  development                    56,068        64,764          57,043      171,151      194,719
Selling,  general  and
  administrative              40,045        37,239          36,791      115,245      104,758
Amortization  of
  intangibles                      6,504          9,739            7,113        22,017        29,537
In-process  research
  and  development
  charge                                        -        15,600                    -        12,300        15,600
Restructuring  costs
  (credits)                              713            (326)          4,986        28,407            (407)
                                        ---------  ---------  ----------  ---------  ---------

        Total  operating
          costs                      103,330      127,016        105,933      349,120      344,207
                                        ---------  ---------  ----------  ---------  ---------

Operating  income
  (loss)                              (7,891)    (19,822)      (14,983)    (89,076)      33,434

Net  interest  income
  (expense)  and  other      1,853        (2,470)            (792)      (1,221)      (3,897)
                                        ---------  ---------  ----------  ---------  ---------

Income  (loss)  before
  income  tax                      (6,038)    (22,292)      (15,775)    (90,297)      29,537

Income  tax  benefit                92        26,628                521              302        23,259
                                        ---------  ---------  ----------  ---------  ---------


Net  income  (loss)        $(5,946)      $4,336      $(15,254)  $(89,995)    $52,796
                                        =========  =========  ==========  =========  =========

Basic  net  income
  (loss)  per  share          $(0.04)        $0.03          $(0.12)      $(0.68)        $0.43
Diluted  net  income
  (loss)  per  share          $(0.04)        $0.02          $(0.12)      $(0.68)        $0.33

Shares  used  in
  calculation:
          Basic                      134,175      125,172        132,081      132,254      123,652
          Diluted                  134,175      130,961        132,081      132,254      167,788


Reconciliation  of  GAAP  net  income
  (loss)  to  adjusted-GAAP  net  income
  (loss):

GAAP  net  income
  (loss)                            $(5,946)      $4,336      $(15,254)  $(89,995)    $52,796
Reconciling  items:
Cost  of  revenues
  (acquisition  and
  stock  compensation
  expenses)                              101                29                139              359                80
Restructuring  costs
  (credits)                              713            (326)          4,986        28,407            (407)
Amortization  of
  intangibles                      6,504          9,739            7,113        22,017        29,537
In-process  research
  and  development
  charge                                        -        15,600                    -        12,300        15,600
Acquisition  and
  stock  compensation
  expenses                            2,612          2,180            1,838          3,539          7,831
Synthetic  lease  -
  guarantee  accrual              304                  -                304              912                  -
Employee  loan
  reserve                                      -                  -                    -                  -        (7,752)
Damages  claim
  settlement                                -                  -                    -                  -          2,000
Impairments  and
  other                                          -          1,344                276              697              683
Tax  effects  on
  adjusted-GAAP
  adjustments                        (440)        1,163          (1,211)      (1,340)            990
                                        ---------  ---------  ----------  ---------  ---------
Adjusted-GAAP  net
  income  (loss)                $3,848      $34,065        $(1,809)  $(23,104)  $101,358
                                        =========  =========  ==========  =========  =========

Adjusted-GAAP  basic
  net  income  (loss)
  per  share                          $0.03          $0.27          $(0.01)      $(0.17)        $0.82
Adjusted-GAAP
  diluted  net  income
  (loss)  per  share            $0.03          $0.22          $(0.01)      $(0.17)        $0.64

Shares  used  in
  calculation:
          Basic                      134,175      125,172        132,081      132,254      123,652
          Diluted                  142,403      164,064        132,081      132,254      167,788


                                    CYPRESS  SEMICONDUCTOR  CORPORATION
  RECONCILIATION  OF  GAAP  NET  INCOME  (LOSS)  PER  SHARE  TO  ADJUSTED-GAAP
                                            NET  INCOME  (LOSS)  PER  SHARE
                                (In  thousands,  except  per  share  data)

                                                                THREE  MONTHS  ENDED      NINE  MONTHS  ENDED
                                                                        (Unaudited)                  (Unaudited)
                                                                  -------------------------------------
                                                                  Oct  02    Sep  26  Jul  03    Oct  02    Sep  26
                                                                    2005        2004      2005        2005        2004
                                                                  -------  ------  -------  -------  ------

Basic:
------

GAAP  net  income  (loss)  per
  share                                                      $(0.04)  $0.03    $(0.12)  $(0.68)  $0.43
Reconciling  items:
Cost  of  revenues  (acquisition
  and  stock  compensation
  expenses)                                                        -            -              -              -            -
Restructuring  costs                                0.01            -        0.04        0.21            -
Amortization  of  intangibles                0.05      0.08        0.06        0.17      0.24
In-process  research  and
  development  charge                                      -      0.12              -        0.09      0.12
Acquisition  and  stock
  compensation  expenses                          0.02      0.02        0.02        0.03      0.06
Synthetic  lease  -  guarantee
  accrual                                                            -            -              -        0.01            -
Employee  loan  reserve                                  -            -              -              -    (0.06)
Damages  claim  settlement                            -            -              -              -      0.01
Impairments  and  other                                  -      0.01              -        0.01      0.01
Tax  effects  on  adjusted-GAAP
  adjustments                                            (0.01)    0.01      (0.01)    (0.01)    0.01
                                                                  -------  ------  -------  -------  ------
Adjusted-GAAP  net  income
  (loss)  per  share                                  $0.03    $0.27    $(0.01)  $(0.17)  $0.82
                                                                  =======  ======  =======  =======  ======

Diluted:
--------

GAAP  net  income  (loss)  per
  share                                                      $(0.04)  $0.02    $(0.12)  $(0.68)  $0.33
Reconciling  items:
Cost  of  revenues  (acquisition
  and  stock  compensation
  expenses)                                                        -            -              -              -            -
Restructuring  costs                                0.01            -        0.04        0.21            -
Amortization  of  intangibles                0.05      0.07        0.06        0.17      0.18
In-process  research  and
  development  charge                                      -      0.12              -        0.09      0.10
Acquisition  and  stock
  compensation  expenses                          0.02      0.02        0.02        0.03      0.05
Synthetic  lease  -  guarantee
  accrual                                                            -            -              -        0.01            -
Employee  loan  reserve                                  -            -              -              -    (0.05)
Damages  claim  settlement                            -            -              -              -      0.01
Impairments  and  other                                  -      0.01              -        0.01      0.01
Tax  effects  on  adjusted-GAAP
  adjustments                                            (0.01)    0.01      (0.01)    (0.01)    0.01
Difference  in  shares  count
  between  diluted  GAAP  and
  diluted  adjusted-GAAP                                -    (0.03)            -              -            -
                                                                  -------  ------  -------  -------  ------
Adjusted-GAAP  net  income
  (loss)  per  share                                  $0.03    $0.22    $(0.01)  $(0.17)  $0.64
                                                                  =======  ======  =======  =======  ======


                                    CYPRESS  SEMICONDUCTOR  CORPORATION
                                      SUPPLEMENTAL  SEGMENT  INFORMATION
                  (In  thousands,  except  per  share  and  percentage  data)

                                                                  Three  Months  Ended
                                                                      October  2,  2005
                              -------------------------------------------------------
                                    CCD            DCD            MID        SunPower      Other        Total
                              --------  --------  ---------  ---------  -------  ---------
                                                                          (Unaudited)

Revenues              $82,244    $37,139      $76,478      $21,882    $9,369    $227,112
Gross  margin  %        51.0%        63.2%          25.4%          18.1%      71.9%          42.1%
Adjusted-GAAP
  net  income
  (loss)                $12,533      $2,356    $(10,324)          $133      $(850)      $3,848
Adjusted-GAAP
  basic  EPS
  Contribution
  (1)                          $0.10        $0.02        $(0.08)        $0.00    $(0.01)        $0.03
Adjusted-GAAP
  diluted  EPS
  Contribution
  (1)                          $0.09        $0.02        $(0.07)        $0.00    $(0.01)        $0.03

Reconciliation
  of  adjusted-GAAP  
  EPS  to  GAAP  EPS:

Basic:
------

Adjusted-GAAP
  net  income  per
  share                                                                                                                      0.03
Reconciling
  items:  (2)
    Restructuring
      costs                                                                                                                (0.01)
    Amortization  of
      intangibles                                                                                                    (0.05)
    Acquisition  and
      stock
      compensation
      expenses                                                                                                          (0.02)
    Tax  effects  on
      adjusted-GAAP
      adjustments                                                                                                      0.01
                                                                                                                          ---------
GAAP  net  loss
  per  share                                                                                                            (0.04)
                                                                                                                          =========


Diluted:
--------

Adjusted-GAAP
  net  income  per
  share                                                                                                                      0.03
Reconciling
  items:  (2)
Restructuring
  costs                                                                                                                    (0.01)
Amortization  of
  intangibles                                                                                                        (0.05)
Acquisition  and
  stock
  compensation
  expenses                                                                                                              (0.02)
Tax  effects  on
  adjusted-GAAP
  adjustments                                                                                                          0.01
                                                                                                                          ---------
GAAP  net  loss
  per  share                                                                                                            (0.04)
                                                                                                                          =========


(1)  Adjusted-GAAP  EPS  by  segment  is  calculated  using  the  diluted
weighted  average  share  count  utilized  for  the  consolidated  reported
results.  Management  evaluates  the  company  utilizing  the  same  weighted
average  share  count  as  utilized  for  consolidated  reporting  purposes.

(2)  The  Company  does  not  allocate  GAAP  reconciling  items  to  the
        segments.  Management  uses  the  adjusted-GAAP  measures  internally
        for  strategic  decision  making,  forecasting  future  results  and
        evaluating  the  Company's  current  performance.  These  adjusted-GAAP
        measures  exclude  the  GAAP  items  listed  within  the  reconciling
        section  and  are  not  allocated  to  the  segments  as  management  does
        not  evaluate  the  company  including  these  GAAP  measures.  In
        addition,  the  adjusted-GAAP  EPS  by  segment  is  calculated  utilizing
        the  consolidated  weighted  average  share  count  used  for
        consolidated  adjusted-GAAP  EPS  -  see  (1)  above.  As  such  there  is
        not  a  directly  comparable  GAAP  measure  for  the  segment
        adjusted-GAAP  EPS  and  one  is  not  presented.  The  most  directly
        comparable  GAAP  measure  is  at  the  consolidated  results  level  which
        is  presented  above.  
 


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