SigmaTel Reports First Quarter 2006 Results

AUSTIN, Texas—(BUSINESS WIRE)—April 25, 2006— SigmaTel, Inc. (NASDAQ: SGTL), a leader in mixed-signal multimedia semiconductors, today announced first quarter 2006 results for the period ended March 31, 2006. Revenues for the first quarter of 2006 were $33.0 million, a decrease of 67% compared to revenues for first quarter of 2005 of $99.3 million. GAAP (generally accepted accounting principles) gross margin was 44.6% for the first quarter of 2006 and pro forma gross margin was 47.0%. SigmaTel reported a GAAP net loss for the first quarter of 2006 of $24.7 million, a diluted loss per share of $0.69. Pro forma net loss for the first quarter of 2006 was $21.8 million, a diluted loss per share of $0.61, versus pro forma net income of $25.4 million or $0.67 per diluted share for the comparable period in 2005. The reconciling charges are set forth in the reconciliation of GAAP to non-GAAP financial measures table provided below.

"The results for the first quarter are disappointing and we have re-focused our business strategy and management team to regain our market leading position in the portable multimedia market," said Ron Edgerton, chairman, CEO and president of SigmaTel. "The company must execute to reverse this setback. To remain competitive, our customers not only need the best multimedia solutions on the market for their products, but we also need to provide them with a roadmap of leading edge features for the next generation of products."

As of March 31, 2006, SigmaTel had cash, cash equivalents and short-term investments of $51.4 million, which declined from $118.9 million as of December 31, 2005. The reduction during the quarter was primarily due to a $30 million share repurchase and $21 million in changes to working capital and capital expenditures.

Business Summary

The product mix during the first quarter was more diversified than in the past. Revenue from portable SoCs accounted for approximately 64% of total revenues in the first quarter. More than 10% of total revenue came from the STMP3600. The software development kit, or SDK for the STMP3600, is available and a video SDK is expected in the second quarter. "We continue to see design wins across many SigmaTel products and customer interest on increasing functionality at lower bill of material costs," said Phil Pompa, senior vice president of the Portable Systems Group. Contribution from the Integrated Components Group grew at a healthy pace in the first quarter and the company expects to see growth from this group throughout the year.

Additional Highlights

-- SigmaTel launched its new Software Development Kit for its STMP3600, providing customers with Microsoft(R) PlaysForSure(TM) version 1.2 support for Windows(R) Media(WM) DRM10.

-- SigmaTel entered into an agreement with Infineon Technologies to jointly develop a Bluetooth chip that is optimized for use in digital multimedia devices.

-- SigmaTel introduced the SGTV5800 family of solutions with a cost effective high fidelity TV audio processor whose feature rich design can be integrated into all analog, digital and hybrid TVs.

-- An Administrative Law Judge in the International Trade Commission, or ITC, ruled that Actions Semiconductor Co., Ltd. infringed two SigmaTel patents. Included in the ruling was a recommendation that the ITC issue an order barring any MP3 players based on infringing Actions chips and containing two gigabytes or less of flash memory from being imported into the United States.

-- Techsplosion joined the SigmaTel global licensing program and plans to transition all of its product to SigmaTel solutions in the near future.

-- MP Man is switching its entire portfolio of MP3 player offerings to SigmaTel-based solutions. MP Man provides MP3 players to many of Europe's major retail chain stores.

-- DSG International PLC, the largest specialist electrical retailer in Europe, agreed to use SigmaTel solutions in its branded players including Matsui, Napa and Logik lines.

-- SigmaTel filed a lawsuit in Federal District Court alleging Telechips, Inc. is infringing three SigmaTel patents and plans to initiate an investigation against Telechips products at the ITC.

-- SigmaTel announced a new family of 8 and 10 channel High Definition Audio Codecs providing theater quality audio codec solutions that enable systems to simultaneously play 7.1 channel audio and VoIP or a second stereo audio stream.

-- Swissbit and Victorinox, makers of the world-renowned Swiss Army Knife, introduce the SWISSMEMORY(TM) s.beat digital audio player powered by the SigmaTel STMP3550.

Second Quarter 2006 Business Outlook

"We expect to see better results for the second quarter of 2006 and a more efficient use of our resources. It is imperative that we focus on our market strengths that will drive growth in revenue and our bottom-line," said Mr. Edgerton.

Specific guidance for the second quarter of 2006:

-- Revenues are expected to be between $40 to $46 million.

-- Pro forma gross margins are expected to be approximately 48% on a pro forma basis plus or minus a couple of points. SigmaTel's gross margin percentage varies primarily with product mix, pricing, and unit costs.

-- Stock-based compensation under FAS 123R is expected to be $2.4 million after tax or $0.07 per diluted share.

-- Diluted pro forma loss per share is expected to be between $0.50 to $0.57, excluding approximately $0.07 per diluted share of stock-based compensation expense and approximately $0.02 per diluted share of expense related to amortization of acquired intangibles.

-- GAAP diluted loss per share is expected to be between $0.59 to $0.66.

-- EPS guidance is based on 35 million weighted average shares outstanding.

Conference Call Today

A conference call will be held today, April 25, 2006, beginning at 3:30 P.M. Central time. The call will be simulcast over the Internet at and A replay of the conference call will be available at the websites listed above or by calling 888-203-1112 (U.S.) or 719-457-0820 (international) and entering pass code number 9004294. These replays will be available through May 25, 2006.

For more information on SigmaTel, please visit

About SigmaTel:

SigmaTel, Inc., a fabless semiconductor company headquartered in Austin, Texas, designs, develops, and markets proprietary, analog intensive, mixed-signal ICs for a variety of digital multimedia products in the consumer electronics and computing markets, including portable compressed audio players, such as MP3 players, notebook and desktop PCs, digital video cameras, multi-function peripheral products, digital televisions, and set-top boxes. SigmaTel provides complete, system-level solutions that include highly-integrated ICs, customizable firmware and software, software development tools, reference designs, and applications support. The Company's focus is on providing system-level solutions that enable customers to rapidly introduce and offer electronic products that are small, light-weight, power-efficient, reliable, and cost-effective. SigmaTel is ISO 9001:2000 certified and is committed to providing customers with high performance, quality products along with superior customer service.

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