EZchip Presents Record Revenues in Fourth Quarter 2008

Annual Revenues up 72% With Growth in All Non-GAAP Financial Parameters

YOKNEAM, Israel, February 11 /PRNewswire-FirstCall/ -- EZchip Semiconductor Ltd. (NASDAQ: EZCH) (formerly LanOptics Ltd.), a provider of network processors, today announced its results for the fourth quarter and full year ended December 31, 2008.

    Fourth Quarter and Full Year 2008 Highlights:

    - Annual revenues increased 72% year-over-year, reaching $33.6 million

    - Fourth quarter revenues increased 67% year-over-year and 6%
      sequentially, reaching $9.6 million

    - Gross margin for the quarter reached 63.0% on GAAP basis and 69.2% on
      non-GAAP basis

    - Net income for the quarter of $1.0 million on GAAP basis and $2.6
      million on non-GAAP basis

    - Operating cash flow for the quarter was $2.6 million, year-end cash
      position reached $48.1 million

Fourth Quarter 2008 Results:

Total revenues in the fourth quarter of 2008 were $9.6 million, an increase of 67% compared to $5.7 million in the fourth quarter of 2007, and an increase of 6% compared to $9.0 million in the third quarter of 2008.

Net income on a GAAP basis for the fourth quarter of 2008 was $1.0 million, or $0.04 per share (diluted), compared to a net loss of $0.6 million, or $0.03 per share, in the fourth quarter of 2007, and net income of $0.8 million, or $0.03 per share (diluted), in the third quarter of 2008.

Net income on a non-GAAP basis for the fourth quarter of 2008 was $2.6 million, or $0.10 per share (diluted), compared with non-GAAP net income of $0.4 million, or $0.02 per share (diluted), in the fourth quarter of 2007, and non-GAAP net income of $2.4 million, or $0.09 per share (diluted), in the third quarter of 2008.

Cash, cash equivalents and marketable securities as of December 31, 2008, totaled $48.1 million compared to $44.4 million as of September 30, 2008. Cash generated from operations during the quarter was $2.6 million, with additional $1.1 million resulting from unrealized gains in marketable securities.

Full Year 2008 Results:

Total revenues for the year 2008 were $33.6 million, an increase of 72% compared to $19.5 million in 2007. Net loss on a GAAP basis for the year 2008 was $4.6 million, or $0.20 per share, compared to a net loss of $4.1 million, or $0.25 per share, in 2007. Net income on a non-GAAP basis for the year 2008 was $6.8 million, or $0.27 per share (diluted), compared with non-GAAP net income of $0.4 million, or $0.02 per share (diluted), in 2007.

Eli Fruchter, CEO of EZchip Semiconductor commented, "2008 was a milestone year for EZchip in which we continued to reinforce our leading position in the high-speed network processors market, with two of the world's leading networking vendors incorporating EZchip processors in their strategic CESR platforms. We believe we offer the best and safest long term choices for network processors, especially in the current economic environment where customers need to lower R&D expensses and minimize risks by focusing on best of breed and financially sound suppliers. We are fully committed to continue offering technologically superior network processors that range from 1-Gigabit to 100-Gigabit with common architecture and software."

"In the fourth quarter we continued to increase revenues, despite the challenging economic environment, and presented strong growth in our financial parameters. We continued to ramp up shipments of our NP-2 processor and shipped NP-3 in limited pre-production volume. In terms of our next generation products, we also experienced substantial progress, with the development of both our NP-4 and NPA family of processors. We continue to work closely with our key customers, adding advanced features, such as video processing that enhance the quality of video on the Internet, to ensure our chips become a primary component of our customers' next generation products."

"Looking ahead, 2009 commenced with both versions of our NP-3 processors moving into production and customers shipping NP-3-based boxes. We are entering 2009 with our two market-leading customers in production, yet early in their ramp. We believe this will be instrumental in expanding our business in 2009 and beyond in this challenging economic environment," concluded Mr. Fruchter.

Conference Call

The Company will be hosting a conference call today, February 11, 2009, at 10:00am ET, 07:00am PT, 03:00pm UK time and 05:00pm Israel time. On the call, management will review and discuss the results, and will be available to answer investor questions.

To participate through live webcast, please access the corporate website, http://www.ezchip.com, at least 10 minutes before the conference call commences.

To participate through dial-in, please call one of the following teleconferencing numbers. Please begin placing your calls at least 10 minutes before the conference call commences. If you are unable to connect using the toll-free numbers, please try the international dial-in number.

US Dial-in Number: 1-888-935-4577;

International Dial-in Number (US): +1-718-354-1389;

Israel Dial-in Number: +1-809-246-002.

For those unable to listen to the live call, a replay of the call will be available the day after the call under the 'Investor Relations' section of the website.

Use of Non-GAAP Financial Information

In addition to disclosing financial results calculated in accordance with United States generally accepted accounting principles (GAAP), this release of operating results also contains non-GAAP financial measures, which EZchip Semiconductor believes are the principal indicators of the operating and financial performance of its business. The non-GAAP financial measures exclude the effects of stock-based compensation expenses recorded in accordance with SFAS 123R, amortization of intangible assets, in-process research and development charge and minority interest in loss of EZchip Technologies. Management believes the non-GAAP financial measures provided are useful to investors' understanding and assessment of the Company's on-going core operations and prospects for the future, as the charges eliminated are not part of the day-to-day business or reflective of the core operational activities of the Company. Management uses these non-GAAP financial measures as a basis for strategic decisions, forecasting future results and evaluating the Company's current performance. However, such measures should not be considered in isolation or as substitutes for results prepared in accordance with GAAP. Reconciliation of the non-GAAP measures to the most comparable GAAP measures are provided in the schedules attached to this release.

About EZchip

EZchip is a fabless semiconductor company that provides Ethernet network processors for networking equipment. EZchip provides its customers with solutions that scale from 1-Gigabit to 100-Gigabits per second with a common architecture and software across all products. EZchip's network processors provide the flexibility and integration that enable triple-play data, voice and video services in systems that make up the new Carrier Ethernet networks. Flexibility and integration make EZchip's solutions ideal for building systems for a wide range of applications in telecom networks, enterprise backbones and data centers. For more information on our company, visit the web site at http://www.ezchip.com.

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are statements that are not historical facts and may include financial projections and estimates and their underlying assumptions, statements regarding plans, objectives and expectations with respect to future operations, products and services, and statements regarding future performance. These statements are only predictions based on EZchip's current expectations and projections about future events. There are important factors that could cause EZchip's actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by the forward-looking statements. Those factors include, but are not limited to, the impact of general economic conditions, competitive products, product demand and market acceptance risks, customer order cancellations, reliance on key strategic alliances, fluctuations in operating results, delays in development of highly-complex products and other factors indicated in EZchip's filings with the Securities and Exchange Commission (SEC). For more details, refer to EZchip's SEC filings and the amendments thereto, including its Annual Report on Form 20-F/A filed on September 18, 2008 and its Current Reports on Form 6-K. EZchip undertakes no obligation to update forward-looking statements to reflect subsequent occurring events or circumstances, or to changes in our expectations, except as may be required by law.

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