Vimicro Reports Second Quarter 2007 Financial Results

BEIJING, Aug. 23 /Xinhua-PRNewswire/ -- Vimicro International Corporation (NASDAQ: VIMC), a leading fabless semiconductor company that designs and develops multimedia semiconductor products and solutions, today announced its financial results for the second quarter of 2007 ended June 30, 2007.

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Second Quarter of 2007 - (Unaudited)

Net revenue in the second quarter of 2007 was $26.5 million as compared to $16.9 million reported in the first quarter of 2007 and $32.9 million in the second quarter of 2006.

Second quarter 2007 net income was $0.2 million, compared with a net loss of $3.8 million in the first quarter of 2007 and net income of $1.8 million in the second quarter of 2006. Earnings per ADS (each representing four ordinary shares) were $0.01, compared with a loss per ADS of ($0.11) in the first quarter of 2007 and earnings per ADS of $0.05 in the second quarter of 2006.

Non-GAAP net income in the second quarter, which excluded $1.4 million in share-based compensation expense, was $1.6 million compared to a net loss of $2.5 million in the first quarter of 2007 and net income of $2.6 million in the second quarter of 2006. Non-GAAP earnings per ADS for the second quarter of 2007 were $0.04, compared with a loss of ($0.07) in the first quarter of 2007 and earnings per ADS of $0.07 in the second quarter of 2006.

Business Outlook

"I am pleased to see the strong pick up in our results this quarter. Our increased efforts on global sales and marketing as well as our new R&D initiatives have resulted in better revenue and net profit," said Dr. John Deng, Chairman and Chief Executive Officer of Vimicro. "I am positive on the continual growth of our core PC/Notebook multimedia products as the market continues to expand. Additionally, we remain excited about the new multimedia opportunities related to the 3G rollout in China, which will further drive the long-term growth of Vimicro."

Second Quarter 2007 Financial Results Conference Call and Web Cast

Vimicro will host a conference call and Web cast today, August 23, 2007, at 5:00 p.m., Eastern Time, to discuss the Company's second quarter 2007 financial results. Investors and other interested parties may access the call by dialing 866-356-4279 (or +1-617-597-5394 outside of the U.S.), with the pass code 21800344, at least 10 minutes prior to the start of the call.

In addition, an audio Web cast will be available in the Investor Relations section of the Company's Web site at . Following the live Web cast, an archived version will be available on the Company's Web site. A telephone replay of the call will also be available approximately two hours after the call and will be available until August 30, 2007 at midnight (ET). The replay number is 888-286-8010 with a pass code of 79542796. International callers should dial +1-617-801-6888 and enter the same pass code at the prompt.

About Vimicro International Corporation

Vimicro International Corporation is a worldwide leading fabless semiconductor company that designs, develops and markets proprietary embedded multimedia signal processing chips and solutions that enable multimedia applications for mobile phones over 2.5G/3G networks and PCs over broadband Internet. Vimicro's ADSs, each of which represents four ordinary shares, are currently trading on the NASDAQ Global Market under the ticker symbol "VIMC."

Disclosure of Home Country Practice

Vimicro followed home country practice with respect to distribution of annual reports in 2006 and 2007. Vimicro has posted its annual reports on and will send its shareholders a written notice containing the website address for its annual reports and informing them that upon receipt of request from any of its shareholders, Vimicro would deliver a hard copy of the annual report to such shareholder.

Forward-Looking Statements

This announcement contains forward-looking statements. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates," "confident" and similar statements. Among other things, the quotations from management in this announcement, as well as Vimicro's expectations and forecasts, contain forward-looking statements. Vimicro may also make written or oral forward- looking statements in its periodic reports to the U.S. Securities and Exchange Commission on forms 20-F and 6-K, etc., in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including statements about Vimicro's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward- looking statement, including but not limited to the following: our limited history of achieving net profit; our growth strategies; our future business development, results of operations and financial condition; our ability to develop and sell mobile multimedia processors that meet changing consumer preferences and industry standards; decrease in the demand for our notebook and PC camera multimedia processors and third-party image sensors which we bundle with some of our PC camera multimedia processors; that multimedia opportunities associated with the 3G build out in China will make a significant contribution to our longer-term growth; our ability to increase our penetration of the PC and notebook multimedia markets; our ability to secure sufficient foundry capacity in a timely manner; our ability to maintain existing customers and attract new customers; and the expected growth of the mobile multimedia processor market. Further information regarding these and other risks is included in our annual report on Form 20-F filed with the Securities and Exchange Commission. Vimicro does not undertake any obligation to update any forward-looking statement, except as required under applicable law. All information provided in this press release is as of August 23, 2007, and Vimicro undertakes no duty to update such information, except as required under applicable law.

Non-GAAP Measures

To supplement the consolidated financial statements presented in accordance with GAAP, Vimicro uses non-GAAP measures of non-GAAP net income and non-GAAP diluted net earnings per ADS, which are adjusted from the most directly comparable financial measures calculated and presented in accordance with GAAP to exclude amortization of share-based compensation expenses. These non-GAAP financial measures are provided to enhance investors' overall understanding of the company's financial performance as they exclude share- based expenses that are not expected to result in future cash payments. The non-GAAP measures should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for or superior to GAAP results. A limitation of using these non-GAAP financial measures is that these non-GAAP measures exclude share-based compensation charges that have been and will continue to be significant recurring expenses in our business for the foreseeable future. We compensate for these limitations by providing the relevant disclosure of our share-based compensation charges in our reconciliations to the GAAP measures. For more information on the non-GAAP financial measures, please see the tables captioned "Reconciliation of non-GAAP results of operations measures to the nearest comparable GAAP measures" set forth at the end of this release.

Vimicro believes that both management and investors benefit from referring to these non-GAAP measures in assessing the performance of Vimicro's liquidity and when planning and forecasting future periods. These non-GAAP financial measures also facilitate management's internal comparisons to Vimicro's historical liquidity. Vimicro computes its non-GAAP financial measures using the same consistent method from quarter to quarter. The accompanying tables have more details on the GAAP financial measures that are most comparable to non-GAAP financial measures and the related reconciliations between financial measures.

Currency Translation

This announcement contains translations of certain RMB amounts into U.S. dollars. Unless otherwise noted, all translations from RMB to U.S. dollars are based on the applicable exchange rates quoted by the Bank of China as of June 30, 2007, depending on the period discussed (the second quarter of 2007), which were RMB 7.6155 to US$1.00.

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