Electronics IP Industry View - A May 2004 update

On April 26, 2004, LogicVision reported on its results for the first quarter. Revenues were $2.2 million, down 40% sequentially and 8% year-over-year. However, the actual $2.2 million in revenues were above original guidance of $2 million. The sequential drop in license revenue was 57%, while service revenue actually rose 7%. License revenue was much higher in the previous quarter due to certain renewal orders where revenue was recognized in its entirety at the time of invoice. Gross margins for the quarter were 71 percent, compared with 85 percent for the previous quarter. The decrease in gross margins reflected a change in mix between higher margin license revenues and lower margin service revenues. LogicVision exited the quarter with a backlog of $17.7 million, including $6.5 million of deferred revenues.

Net loss in the quarter was $2.2 million compared to losses of $1.7 million and $3 million in the previous and year earlier quarters, respectively. Operating expenses improved by approximately $1 million in the first quarter of 2004. The decrease in operating expenses was primarily due to the fact that the fourth quarter costs related to headcount reductions and facilities closures did not repeat in the first quarter of 2004. Quarterly operating expenses were the lowest since June of 2000.

In December 2003 LogicVision hired Jim Healy as president and CEO, replacing founder Dr. Vinod Agarwahl who continues as Executive Chairman and Chief Strategist. On March 1, 2004 the company hired George Swan as vice president of engineering.

"We continue to see strong interest from our current and potential customer base in our yield enhancement products, which allow integrated circuit designers to embed test functionality that is used during semiconductor production and throughout the useful life of the chip," said Jim Healy, president and CEO of LogicVision.

"In addition, during the first quarter, we announced the formation of our D2X Solutions, a service organization that provides IC supply chain management consultation to our customers. D2X will help facilitate the integration of LogicVision's IP into our customers' process flows, which we anticipate will lead to higher revenues," said Healy.

On April 21, 2004, MIPS Technology Inc reported the results for its third fiscal quarter ending March 31, 2004. Total revenue for the quarter was $12.6 million compared to $10.7 million the previous quarter and compared to $9.5 million for the same quarter a year ago. Royalties were $5.9 million, an increase of 18% sequentially and an increase of 37% from the same quarter a year ago. Contract revenue was $6.7 million, an increase of 40% sequentially and an increase of 29% compared to the same quarter a year ago. Net income for the third quarter of fiscal 2004 was $1.2 million compared to a net loss of $4.1 million for the same quarter a year ago. Earnings in the current quarter were nearly a 150% increase from a net profit of $477K last quarter.

“As the market continues to recover, we have again posted strong financial results and exceeded our guidance for revenue and profitability for the quarter," said Casey Eichler, chief financial officer at MIPS Technologies. "Moving forward, the company is well positioned to take advantage of the ongoing demand in the consumer market, which is helping to drive our better-than-expected contract revenue growth."

"This was the fourth consecutive quarter of revenue growth for MIPS Technologies," said John Bourgoin, president and CEO of MIPS Technologies. "We closed a record number of license agreements and continued to see demand for multi-product licenses from customers. During the third quarter the company not only exceeded financial expectations but also delivered the 24K core family for general availability and licensing on time and to a welcoming market.”

On May 6, 2004, MoSys, Inc. (Monolithic Systems Technology, Inc.) reported its results for the first quarter. Total revenue was $4.5 million, up 34% from $3.3 million in the previous quarter but down 43% from $7.9 million for the same quarter a year ago. Licensing revenue for the current quarter from 17 chip development projects increased from the $1.9 million reported in previous quarter and decreased from the $4.5 million reported in the same period last year. Royalty revenue from 10 companies increased from $1.1 million last quarter but decreased from the $2.9 million in the prior year. The year-over-year drop is primarily due to the decline of Game Boy royalties. Fujitsu accounted for 40% of total revenue.

Net loss for the quarter was $521K, which included approximately $900K of operating expenses ($700K on a net tax basis) associated with the planned acquisition of MoSys by Synopsys. Excluding expenses associated with the Synopsys acquisition, pro forma net income for the quarter was $190K. The results for the quarter compare to net income of $2.7 million in the same period last year and a loss of $415K last quarter.

Commenting on the results of the first quarter, Dr. Fu-Chieh Hsu, CEO of MoSys stated, "We are pleased with the increases in both licensing and royalty revenue over the previous quarter which brought total revenue in line with our previously stated guidance. Additionally, excluding expenses associated with the anticipated acquisition of our company by Synopsys, MoSys has returned to profitability."

On April 30, 2004, UniRAM Technology, Inc. ("UniRAM") sought permission from the court to drop its infringement claims related to one of two patents that UniRAM had previously alleged were infringed by MoSys. This development came only one month after UniRAM filed suit, and is apparently in response to MoSys' Answer and Counterclaim filed April 21, 2004. MoSys management believes that UniRAM's remaining patent-infringement claim and trade secret allegations are without merit and MoSys will ultimately prevail.

On April 19, 2004, the firm announced that its board of directors authorized the purchase up to $25 million of its common stock over the next year.

On April 14, 2004, Rambus Inc. reported financial results for its first quarter of 2004. Revenue for the first quarter was $32.5 million, up 16% over the same quarter last year and up 1% from the previous quarter. Contract revenues were up 55% over the same period last year and up 10% from the previous quarter. This year-over-year increase in contract revenues reflects contracts signed in 2003 for the XDR memory interface and Redwood interface technologies. First quarter revenue also included $27.5 million in royalties, up 11% over the same period last year and down 1% from the previous quarter. Net income for the first quarter was $8.3 million (26% of revenue), compared to $5.1 million in the first quarter last year and $8.6 million in the previous quarter. Earnings reflect a $2.1 million after-tax gain on the sale of 85% of investment in Tesera Tech. Total costs and expenses in the first quarter increased 12% from last quarter primarily as a result of a $1.9 million increase in litigation expense. However, litigation expense was down 38% year-over-year. Cash and cash equivalents increased $51 million thanks to $28 million from the exercise of employee stock options.

"During the first quarter we made significant progress on several fronts," said Geoff Tate, chief executive officer of Rambus. "Among these was a favorable initial decision by the administrative law judge of the Federal Trade Commission. Product developments included demonstrations of XDR DRAM working samples operating at 3.2 GHz, as well as first working samples of our PCI Express* cell created on a 90 nanometer process. This quarter also marked an important milestone as we surpassed 300 patents issued while we have over 300 patent applications pending. These cover important innovations in memory interfaces and, we believe, in serial and parallel interfaces."

On May 5, 2004, Rambus filed an anti-trust suit in the Superior Court of the State of California. In the suit, Rambus charges that defendants Hynix Semiconductor, Infineon Technologies, Micron Technology and Siemens AG engaged in a concerted and unlawful effort to eliminate competition and stifle innovation in the market for computer memory technology and computer memory chips. Rambus is asking for actual, treble and punitive damages. The complaint has asked for actual damages that potentially will exceed $1 billion. Rambus expects to spend between $5 million and $7 million in the upcoming quarter on this litigation. This is already reflected in budgeting and forecast.

On April 20, 2004, Virage Logic announced results for its second quarter of fiscal 2004. Total revenues were $13.0 million, up 20% sequentially from $10.9 million and up 35% from the $9.6 million for the second quarter last fiscal year. License revenue was $11.2 million, up 18% sequentially and 24% year over year. Royalty revenue was a record $1.8 million, up 27% sequentially and a whopping 205% from $579K a year ago. Net income was $189K compared to a net loss of $359K the previous quarter and a net loss of $1.5 million a year earlier.

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