Tundra Semiconductor Releases Q2-Fiscal 2008 Financial Results



    Revenue in Line with Revised Guidance

    OTTAWA, Nov. 29 /CNW Telbec/ - Tundra Semiconductor Corporation
(TSX:TUN), a leader in System Interconnect, today reported financial results
for the second quarter of fiscal 2008, which ended October 28, 2007. On
October 23, the Company provided updated revenue guidance for the quarter in
the range of $17.0 million to $18.0 million.

    Q2-2008 RESULTS:

    - Q2 Revenue: $17.9 million
    - Q2 Pro forma earnings: $0.9 million
    - Q2 Pro forma diluted earnings per share: $0.05
    - Q2 GAAP results: loss of $0.7 million or $0.04 per diluted share

    Revenue for the second quarter of fiscal year 2008 was $17.9 million, a
19% decrease over the second quarter in fiscal year 2007, and an 11% decrease
from the first quarter of fiscal year 2008. Pro forma earnings of $0.9 million
represent a 61% decrease compared to the second quarter of fiscal year 2007,
and a 52% decrease over the first quarter of fiscal year 2008. On a GAAP basis
the Company had a loss for the quarter of $0.7 million or $0.04 per diluted
share, compared to a loss of $0.2 million or $0.01 per diluted share in the
second quarter of fiscal year 2007, up from a loss of $1.0 million or
$0.05 per diluted share in the first quarter of fiscal year 2008.
    "Although our business environment has been challenging this quarter, we
were able to generate cash and remain profitable on a pro forma basis. Two
factors, however, negatively impacted our revenues; the communications
infrastructure market slowdown resulted in lower than expected sales of our
communications products, and the continued appreciation of the Canadian dollar
has decreased our top line revenue by close to 15% in the last several
quarters," said Daniel Hoste, President and Chief Executive Officer. "Our
short term revenue outlook continues to be challenging as the economic
environment is uncertain. However, we are confident in our mid to long term
growth strategy. Increased design win activity in the second quarter within
our key product lines such as RapidIO, PCI Express, and VME, substantiates our
expectations for future growth", continued Hoste.

    Management offers the following outlook for the third quarter of fiscal
year 2008:

    
    - Revenues are expected to be in the range of $14.0 million to
      $16.5 million
    - Pro forma diluted earnings per share are expected to be in the range of
      a loss of $0.01 per share to earnings of $0.03 per share

    "We've made decisions to quickly align our costs with adjusted revenue
expectations based on the current business and economic environment. These
decisions were made with the expectation that we will continue to be
profitable on a pro forma basis and drive positive cashflow from operations,"
said David Long, Chief Financial Officer, Tundra Semiconductor.

    Q2-2008 Highlights:

    - Tundra and IBM recently announced the extension of a technology
      collaboration and signing of a license agreement with IBM to bring new
      Power Architecture(TM) solutions to market as part of Tundra's smart
      System Interconnect strategy. In August, Tundra announced that it had
      entered into a product acquisition agreement to bring to market the
      first product in its smart System Interconnect strategy. This product,
      defined by Tundra, will include a Power processor core in 90nm
      technology. Tundra and IBM moved a step further in their partnership
      and signed a license agreement for a 65nm Power processor core. The new
      cores will be the processing engines of the future smart System
      Interconnect Solutions designed by the Tundra research and development
      team.

    - GE Fanuc Intelligent Platforms recently announced that it has selected
      Tundra's Tsi578(TM), the industry's highest performance serial
      RapidIO(R) switch, to enable their DSP220, DSP230 and CRX800 system
      blades designed for defence and aerospace applications. GE Fanuc
      selected the Tundra Tsi578 for its industry-leading performance and
      multi-port configurability to provide the level of connectivity
      required to support a range of system architectures including VPX and
      VXS. The wide-spread adoption of the Tundra RapidIO switch portfolio
      across multiple vertical markets made GE Fanuc confident Tundra
      switches would be the best choice for this range of innovative system
      blades. In addition, Tundra's long-standing presence in the defence and
      aerospace markets with de facto standard VME bridges gave GE Fanuc
      assurance that Tundra was the optimum partner to enable their next-
      generation system blades.

    - Tundra introduced the Tsi620(TM) in October, an innovative multi-
      standard serial RapidIO switch that lowers 3G baseband costs by
      bridging RapidIO-based DSP clusters to low cost embedded processors and
      FPGAs. This new RapidIO switch allows customers to both increase their
      baseband performance and significantly reduce overall system cost.
      Endorsed by both Texas Instruments and Altera, this solution has gained
      significant interest from Tier 1 communications customers.

    - In September, Tundra added to its PCI Express(R) (PCIe) portfolio with
      the launch of the Tsi381(TM), a new single lane PCIe to PCI Bridge. Pin
      compatible with competing PCIe bridge products, this new product offers
      Tundra customers a superior solution with lower latency and better
      throughput than competitive offerings. Tundra entered the PCIe market
      in May, 2007 with the launch of the Tsi384(TM), a four-lane PCIe to
      PCI-X Bridge, and continues to broaden this important portfolio. The
      Tsi381 was designed by Tundra's Hyderabad, India design team to compete
      with and beat PCIe bridges currently in the market, on performance and
      quality.

    Corporate Announcements:

    - GE Fanuc has awarded Tundra a "Preferred Supplier Award", recognizing
      Tundra's strategic business partner relationship and competitive
      technological edge. GE Fanuc continues to rely on Tundra's dedication
      to service, quality, and product knowledge and this award reflects the
      intimate relationship between Tundra and GE Fanuc.

    - In November, Tundra announced a restructuring plan to address a
      decrease in quarterly revenue caused by a slowdown in the
      communications market and strong Canadian dollar. The restructuring
      initiative will reduce Tundra's headcount by approximately 30 positions
      and result in approximately $1.5 million in cost savings on a quarterly
      basis, the full impact of savings will be in effect in Q1 FY09
      financial results. The restructuring charge of $4.0 million, associated
      with this initiative, will impact third quarter GAAP results. Third
      quarter pro forma guidance, given today, reflects some operating
      expense savings resulting from the restructuring.

    CONFERENCE CALL AND WEBCAST

    Tundra management will be holding a conference call today, November 29,
2007 at 5:00 p.m. EST to discuss additional details regarding this earnings
update. You may access the conference call via any of the following:
    Teleconference: +1.416.644.3415
    Replay: +1.416.640.1917 Passcode: 21253090#. The replay will be available
through December 6, 2007.
    Web Cast: http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=2090220

    About Tundra Semiconductor

    Tundra Semiconductor Corporation (TSX:TUN) supplies the world's leading
communications, computing and storage companies with smart System Interconnect
products and design services backed by world-class customer service and
technical support. Tundra's track record of product leadership includes over a
decade of bridges and switches enabling key industry standards: RapidIO(R),
PCI, PCI-X, PCI Express(R), PowerPC(R), VME, HyperTransport(TM), Interlaken,
and SPI4.2. Tundra's products deliver high functional quality and simplified
board design and layout, with specific focus on system level signal integrity.
Tundra's design services division, Silicon Logic Engineering, Inc., offers
industry-leading ASIC and FPGA design services, semiconductor intellectual
property and product development consulting. Tundra's smart System
Interconnect products connect critical components in high performance embedded
systems around the world. For more information, please visit www.tundra.com.

    The difference between pro forma and GAAP earnings is due to stock-based
compensation expense, goodwill impairment charges and amortization of
intangibles and backlog associated with Tundra's acquisitions. Tundra uses pro
forma measures internally to evaluate and manage operating performance as well
as to forecast and plan.

    Tundra Semiconductor Corporation is a public company with common shares
listed for trading on the Toronto Stock Exchange (TSX:TUN) in Canada. All
figures, unless otherwise noted, are stated in Canadian dollars in accordance
with accounting principles generally accepted in Canada.

    The Company cautions that the forward-looking information in this release
is based on certain assumptions made by the Company that may prove to be
inaccurate. Assumptions made include, but are not limited to; customer demand
for the Company's products and services, the Company's ability to maintain and
enhance existing customer relationships, and leverage existing partnerships,
as well as the Company's ability to bring to market the products currently
under development.
    Furthermore, the Company cautions that the forward-looking statements in
this release are based on current expectations that are subject to risks and
uncertainties. Actual results may differ due to factors such as customer
demand, customer and partner relationships, new product development, new
services offerings, product shipping schedules, product mix, competitive
products and services, pricing pressure, exchange rate fluctuations, and
changes in the embedded systems market specifically. Additional information
identifying risks and uncertainties is contained in the Company's filings with
the various provincial securities commissions.

    TUNDRA is a registered trademark of Tundra Semiconductor Corporation
(Canada, U.S. and U.K.). TUNDRA and the Tundra logo are registered marks of
Tundra Semiconductor Corporation in Canada, European Union, People's Republic
of China and the United States. Tsi578, Tsi620, Tsi381, Tsi384, and
Design.Connect.Go. are trademarks of Tundra Semiconductor Corporation. RapidIO
is a trademark of the RapidIO Trade Association, Inc. The Power Architecture
and Power.org word marks and the Power and Power.org logos and related marks
are trademarks and service marks licensed by Power.org. Other registered and
unregistered trademarks are the property of their respective owners.

    Development of the Tundra Tsi578, Tsi574(TM) and Tsi576(TM) was made
    possible in part with the assistance of the Technology Partnerships
    Canada Program.

    (C) Copyright 2007 Tundra Semiconductor Corporation. All rights reserved.
    Information subject to change without notice.


    TUNDRA SEMICONDUCTOR CORPORATION
    PRO FORMA CONSOLIDATED STATEMENTS OF EARNINGS
    (Canadian dollars, amounts in thousands except per share data)
    (Unaudited)

                                  Three months ended        Six months ended
                              ----------------------  ----------------------
                              October 28  October 29  October 28  October 29
                                    2007        2006        2007        2006
    Revenue:
      Product                  $  15,716   $  19,074   $  33,669   $  37,017
      Service                      2,176       2,891       4,281       4,409
    -------------------------------------------------------------------------
                                  17,892      21,965      37,950      41,426

    Cost of revenue:
      Product                      5,033       5,842      10,641      11,720
      Service                      1,367       1,359       2,541       2,440
    -------------------------------------------------------------------------
                                   6,400       7,201      13,182      14,160

    -------------------------------------------------------------------------
    Gross margin                  11,492      14,764      24,768      27,266

    Expenses:
      Sales and marketing          2,895       3,371       5,923       6,915
      General and
       administration              2,081       3,469       4,489       5,250
      Research and
       development                 5,905       5,992      11,867      11,928
    -------------------------------------------------------------------------

                                  10,881      12,832      22,279      24,093

    Pro forma earnings
     from operations                 611       1,932       2,489       3,173

    Interest and other income        346         529       1,032       1,292

    -------------------------------------------------------------------------

    Pro forma earnings before
     income taxes                    957       2,461       3,521       4,465

    Income tax provision
                                      32          67         661          92

    -------------------------------------------------------------------------

    PRO FORMA EARNINGS         $     925   $   2,394   $   2,860   $   4,373

    -------------------------------------------------------------------------

    Pro forma earnings
     per share
      Basic                    $    0.05   $    0.12   $    0.14   $    0.22
      Diluted                  $    0.05   $    0.12   $    0.14   $    0.22

    Weighted average number
     of common shares
     outstanding
      Basic                       19,894      19,964      19,974      19,881
      Diluted                     19,907      20,057      20,023      20,071

    -------------------------------------------------------------------------


    TUNDRA SEMICONDUCTOR CORPORATION
    CONSOLIDATED STATEMENTS OF LOSS AND DEFICIT
    (Canadian dollars, amounts in thousands except per share data)
    (Unaudited)

                                  Three months ended        Six months ended
                              ----------------------  ----------------------
                              October 28  October 29  October 28  October 29
                                    2007        2006        2007        2006

    Revenue:
      Product                  $  15,716   $  19,074   $  33,669   $  37,017
      Service                      2,176       2,891       4,281       4,409
    -------------------------------------------------------------------------
                                  17,892      21,965      37,950      41,426

    Cost of revenue:
      Product                      5,033       5,842      10,641      11,720
      Service                      1,367       1,359       2,541       2,440
    -------------------------------------------------------------------------
                                   6,400       7,201      13,182      14,160

    -------------------------------------------------------------------------
    Gross margin                  11,492      14,764      24,768      27,266

    Expenses:
      Sales and marketing          2,895       3,371       5,923       6,915
      General and
       administration              2,081       3,469       4,489       5,250
      Research and development     5,905       5,992      11,867      11,928
      Stock-based compensation       619       1,363       1,107       1,995
      Amortization of
       purchased intangibles
       and other assets            1,017       1,242       2,099       2,617
      Restructuring charges            -           -       1,659           -
    -------------------------------------------------------------------------

                                  12,517      15,437      27,144      28,705

    Loss from operations          (1,025)       (673)     (2,376)     (1,439)

    Interest and other income        346         529       1,032       1,292
    -------------------------------------------------------------------------

    Loss before income taxes        (679)       (144)     (1,344)       (147)

    Income tax provision              32          67         340         727
    -------------------------------------------------------------------------

    NET LOSS                        (711)       (211)     (1,684)       (874)

    Deficit, beginning of
     period                      (25,774)    (27,509)    (24,801)    (26,846)

    -------------------------------------------------------------------------

    DEFICIT, END OF PERIOD     $ (26,485)  $ (27,720)  $ (26,485)  $ (27,720)

    -------------------------------------------------------------------------
    Loss per share
      Basic                    $   (0.04)  $   (0.01)  $   (0.08)  $   (0.04)
      Diluted                  $   (0.04)  $   (0.01)  $   (0.08)  $   (0.04)

    Weighted average number
     of common shares
     outstanding
      Basic                       19,894      19,964      19,974      19,881
      Diluted                     19,907      20,057      20,023      20,071

    -------------------------------------------------------------------------


    TUNDRA SEMICONDUCTOR CORPORATION
    CONSOLIDATED BALANCE SHEETS
    (Canadian dollars, amounts in thousands)
                                                      October 28    April 30
                                                            2007        2007
                                                      (Unaudited)   (Audited)

    ASSETS

    Current assets

      Cash and cash equivalents                       $  60,692    $  18,340
      Short-term investments                                  -       42,379
      Accounts receivable                                 6,361        7,745
      Inventories                                         7,184        9,282
      Prepaid expenses and other current assets           3,262        4,497
      Future income tax asset                             2,886        2,997
    -------------------------------------------------------------------------

                                                         80,385       85,240

    Long-term prepaids                                    1,919        1,895

    Capital assets                                       23,728       22,343

    Purchased intangibles and other assets                4,021        5,174

    Goodwill                                             50,571       50,571

    Future income tax asset                              13,389       11,407
    -------------------------------------------------------------------------

                                                      $ 174,013    $ 176,630

    -------------------------------------------------------------------------
    CURRENT LIABILITIES AND SHAREHOLDERS' EQUITY

    Current liabilities
      Accounts payable and accrued liabilities        $   9,249    $  11,125
      Income tax payable                                      -          105
    -------------------------------------------------------------------------
                                                          9,249       11,230

    Shareholders' equity
      Share capital                                     183,416      183,204
      Contributed surplus                                 7,833        6,997
      Deficit                                           (26,485)     (24,801)
    -------------------------------------------------------------------------

                                                        164,764      165,400

    -------------------------------------------------------------------------

                                                      $ 174,013    $ 176,630

    -------------------------------------------------------------------------

    TUNDRA SEMICONDUCTOR CORPORATION
    CONSOLIDATED STATEMENTS OF CASH FLOWS
    (Canadian dollars, amounts in thousands)
    (Unaudited)

                                  Three months ended        Six months ended
                              ----------------------  ----------------------
                              October 28  October 29  October 28  October 29
                                    2007        2006        2007        2006

    Operating activities:
      Loss                     $    (711)  $    (211)  $  (1,684)  $    (874)

      Items not affecting
       cash:
        Amortization of
         capital assets and
         asset impairments         2,049       2,332       4,046       4,694
      Amortization of
       purchased intangibles
       and other assets            1,017       1,242       2,099       2,617
      Stock-based compensation       518       1,363       1,006       1,995
      Future income taxes           (686)     (1,020)     (1,872)     (1,918)

    -------------------------------------------------------------------------
                                   2,187       3,706       3,595       6,514

      Cash effect of changes in:
        Accounts receivable        2,444         402       1,384       1,653
        Inventories                  636      (1,900)      2,098      (3,674)
        Prepaid expenses and
         other current assets      1,043         780       1,211       1,077
        Accounts payable and
         accrued liabilities        (602)      1,190      (1,865)        981
        Income taxes payable           -         352        (115)        282
    -------------------------------------------------------------------------

                                   5,708       4,530       6,308       6,833

    Investing activities:
      Acquisition of capital
       assets                     (1,283)     (1,992)     (5,431)     (6,977)
      Purchased intangibles         (947)          -        (947)          -
      Proceeds on disposal
       of short-term investments       -      11,393      42,379      11,393
      Acquisition of business          -           -           -     (18,528)
    -------------------------------------------------------------------------
                                  (2,230)      9,401      36,001     (14,112)

    Financing activities:
      Net proceeds on the issue
       of common shares              176         196         426       1,464
      Share repurchase              (383)          -        (383)          -
      Repayment of debt                -           -           -        (650)
    -------------------------------------------------------------------------
                                    (207)        196          43         814

    Increase (decrease) in cash
     and cash equivalents          3,271      14,127      42,352      (6,465)


    Cash and cash equivalents,
     beginning of period          57,421      44,322      18,340      64,914
    -------------------------------------------------------------------------

    Cash and cash equivalents,
     end of period             $  60,692   $  58,449   $  60,692   $  58,449
    -------------------------------------------------------------------------
    




For further information:

For further information: David Long, Chief Financial Officer, Tundra
Semiconductor Corporation, (613) 592-0859 x1704, david.long@tundra.com; Keri
Zeran, Director Marketing Communications, Tundra Semiconductor Corporation,
(613) 697-6788, keri.zeran@tundra.com

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TUNDRA SEMICONDUCTOR CORPORATION

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