SiRF Technology Holdings Inc. Announces Financial Results for Fourth Quarter and Fiscal 2006

SiRF Reports Record Revenues for Fourth Quarter and Fiscal 2006

SAN JOSE, Calif., Jan. 30 /PRNewswire-FirstCall/ -- SiRF Technology Holdings, Inc. (NASDAQ: SIRF), a leading provider of GPS-enabled silicon and premium software location platforms, today reported unaudited financial results for its fourth quarter and year ended December 31, 2006.

Net revenue in the fourth quarter of fiscal 2006 was $74.2 million, an increase of 37 percent from $54.3 million reported in the fourth quarter of 2005. Net revenue in fiscal 2006 was $247.7 million, an increase of 50 percent from $165.1 million in fiscal 2005. Gross margin in the fourth quarter of 2006 was 55.3 percent, as compared to 54.5 percent in the fourth quarter of 2005. Gross margin in fiscal 2006 was 55.6 percent, as compared to 55.4 percent in fiscal 2005.

Beginning in the fourth quarter of fiscal 2006, SiRF determined that due to business circumstances it could no longer reliably estimate royalty revenues for sales by certain licensees. As such, SiRF began recognizing all royalty revenues based solely on royalties reported by licensees during the quarter. This change in timing of recognizing royalty revenue was made prospectively and had an initial one-time effect of reducing royalty revenues recorded in the fourth quarter of fiscal 2006.

Net income for the fourth quarter of fiscal 2006 was $9.1 million or $0.16 per diluted share based on 56.1 million weighted average shares outstanding. This compares with net income of $10.2 million or $0.19 per diluted share based on 55.2 million weighted average shares outstanding in the fourth quarter of fiscal 2005. The decrease in net income for the fourth quarter of fiscal 2006 as compared to the fourth quarter of fiscal 2005 is primarily attributable to increased employee stock compensation expense as a result of the adoption of Statement of Financial Accounting Standard 123R, Share-Based Payment (SFAS No. 123R) on January 1, 2006, as well as increased acquisition-related contingent payments and compensation expense related to share-based payments associated with SiRF's acquisitions. These increased expenses were partially offset by a one-time research and development tax credit recognized in the fourth quarter of fiscal 2006. SiRF recognized $3.4 million in research and development tax credits as a result of the reinstatement of the federal research and development tax credit that was signed into law in December 2006 with retroactive effect to the beginning of 2006. Of the $3.4 million tax credit recorded in the fourth quarter of fiscal 2006, approximately $2.6 million related to the first nine months of the fiscal year. In addition, during the fourth quarter of fiscal 2005, SiRF recognized a one-time charge related to acquired in-process research and development associated with the acquisition of Impulsesoft, with no similar charge during the fourth quarter of fiscal 2006.

Net income for fiscal 2006 was $2.4 million or $0.04 per diluted share based on 56.0 million weighted average shares outstanding. This compares with net income of $30.0 million or $0.56 per diluted share based on 53.6 million weighted average shares outstanding in fiscal 2005. The decrease in net income for fiscal 2006 as compared to fiscal 2005 is primarily attributable to the same reasons as the decrease for the fourth quarter of fiscal 2006 as compared to the fourth quarter of fiscal 2005, as well as an increase in one- time charges related to acquired in-process research and development associated with the acquisition of TrueSpan of $13.3 million during the first quarter of fiscal 2006. In fiscal 2005, SiRF recognized cumulative one-time benefits of approximately $6.8 million associated with previously unrecognized income tax assets related to research and development tax credit benefits available for the 1997 - 2004 years, an acquisition-related tax benefit and the reversal of a litigation settlement obligation with no similar benefits recorded during fiscal 2006.

SiRF reports net income (loss) and basic and diluted net income (loss) per share in accordance with GAAP and additionally on a non-GAAP basis. Non-GAAP net income, where applicable, excludes the effect of amortization of acquisition-related intangibles, employee stock compensation expense, acquired in-process research and development, expenses related to acquisition-related contingent payments, benefits related to acquisition-related tax benefits, the reversal of a litigation settlement obligation and certain one-time benefits related to research and development tax credits. Non-GAAP net income for the fourth quarter of fiscal 2006 was $15.7 million or $0.28 per diluted share, as compared to non-GAAP net income of 12.2 million or $0.22 per diluted share for the fourth quarter of fiscal 2005. Non-GAAP net income for the fourth quarter of fiscal 2006 excludes $1.1 million in amortization of acquisition-related intangibles, $7.3 million in employee stock compensation expense, $0.8 million of expenses related to acquisition-related contingent payments and a one-time tax benefit of approximately $2.6 million for the first nine months of the fiscal year related to research and development tax credits, which were recognized in the fourth quarter as a result of the reinstatement of the federal research and development tax credit. Non-GAAP net income for the fourth quarter of fiscal 2005 excludes $1.6 million in amortization of acquisition-related intangibles, $1.7 million in employee stock compensation expense, $0.9 million of acquired in-process research and development and an acquisition-related tax benefit of $2.3 million. Weighted average shares outstanding used in computing diluted non-GAAP net income per share for the fourth quarter of fiscal 2006 were 56.1 million, compared to 55.2 million for the fourth quarter of fiscal 2005. Refer to the itemized reconciliation between net income on a GAAP basis and non-GAAP basis for the fourth quarter of fiscal 2006 and 2005 below.

Non-GAAP net income for fiscal 2006 was $50.3 million or $0.90 per diluted share, as compared to non-GAAP net income of $36.4 million or $0.68 per diluted share for fiscal 2005. Non-GAAP net income for fiscal 2006 excludes $5.2 million in amortization of acquisition-related intangibles, $26.2 million in employee stock compensation expense, $3.2 million of expenses related to acquisition-related contingent payments and a one-time charge of $13.3 million for acquired in-process research and development. Non-GAAP net income for fiscal 2005 excludes $5.6 million in amortization of acquisition-related intangibles, $5.8 million in employee stock compensation expense, a one-time charge of $1.7 million for acquired in-process research and development, tax benefits of $2.3 million from acquisition-related tax credits, $3.2 million from research and development tax credits resulting from a research and development tax credit study for cumulative unrecorded tax benefits for the years 1997 - 2004, and a one-time reversal of a litigation settlement obligation of $1.2 million. Weighted average shares outstanding used in computing diluted non-GAAP net income per share for fiscal 2006 were 56.0 million, compared with 53.6 million for fiscal 2005. Refer to the itemized reconciliation between net income on a GAAP basis and non-GAAP basis for fiscal 2006 and 2005 below.

Total cash, cash equivalents and short-term investments were $170.2 million at December 31, 2006, compared with $117.9 million at December 31, 2005. Long-term investments were $26.4 million at December 31, 2006, compared with $20.8 million at December 31, 2005.

"Demand for products with SiRF GPS was very strong at the retail level in Q4 resulting in an exceptional quarter for SiRF. We have recorded record revenues, shipments and operating income plus a strong order backlog for Q1," said Dr. Michael Canning, President and CEO.

Q4'2006 Highlights and Business Outlook:

The holiday season was quite strong for the portable navigation devices with other market segments also showing healthy growth. Consumer response to both enhanced functionality, as well as attractively priced portable navigation systems from our customers was extremely positive. Some of the quarter's highlights include:

    -- SiRFstarIII based portable navigation devices were highlighted in
       holiday promotions in US and Europe with sale prices hitting sub $200
       mark for entry level products;
    -- A broad range of SiRFstarIII based products were available at
       mainstream retailers from major suppliers in the portable navigation
       market, including Garmin, Magellan, Mio, Navman and TomTom;
    -- Magellan, a leading provider of consumer GPS systems, ramped up volumes
       on a range of products based on the SiRFstarIII architecture;
    -- Nokia entered the portable navigation device market with  SiRFstarIII
              based  Nokia  330  system;
        --  Sony  launched  two  new  personal  navigation  devices  (PND)  (NV-U51  &  NV-
              U71T)  based  on  SiRFstarIII  in  Europe;  and
        --  Sanyo  entered  the  US  PND  market  with  the  launch  of  SiRFstarIII  based
              EasyStreet  NVM-4030  system.
 


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