Revenues for the second quarter of fiscal 2007 were $19.6 million, up 21% from $16.3 million in the second quarter of fiscal 2006. Revenues for the current quarter were higher primarily due to the signing of patent license arrangements with Infineon Technologies AG and Qimonda AG. Net income for the second quarter was $4.7 million or $0.42 per diluted share, up from $4.3 million or $0.37 per diluted share in the second quarter of fiscal 2006. Second quarter net income was reduced by unusual expenses of approximately $1.1 million related to activities of the Special Committee of the Board, including supervision of the proxy contest prior to the Annual General Meeting and oversight of MOSAID's ongoing review of strategic alternatives.
For the first six months of fiscal 2007, revenues reached $42.6 million, up 40% from $30.5 million for the comparable period in fiscal 2006. Net income in the first six months of the current fiscal year was $11.4 million or $1.00 per diluted share, a gain of 30% from $8.7 million or $0.75 per diluted share in the first half of fiscal 2006.
The Company's cash balance and marketable securities at the end of the second quarter of fiscal 2007 totaled $67.2 million, compared with $68.7 million at the end of the first quarter of fiscal 2007. Working capital at the end of the second quarter was $74.8 million compared with $78.1 million at the end of the first quarter.
"The Company recorded strong financial results in the second quarter and first half of fiscal 2007," said George Cwynar, President and Chief Executive Officer, MOSAID. "This quarter we continued to broaden the reach of our patent portfolio by acquiring the right to license certain patents from Caltech, which followed the purchase of 50 patents from Infineon Technologies in the first quarter. We also strengthened the patent licensing business by hiring John Lindgren, a 20-year veteran of Texas Instruments, as MOSAID's Senior Vice President Patent Licensing, General Counsel and Corporate Secretary. Our Semiconductor IP products gained traction with customers, yielding stronger revenues than in the first quarter and the comparable quarter for last year, yet they remain below our expectations."
"We are on track to achieving the best financial year in MOSAID's 30 year history, and continue to balance reinvestment in the Company with returns to shareholders," said Richard Boadway, Executive Vice President and Chief Financial Officer, MOSAID. "To date in fiscal 2007, we have paid $5.6 million in dividends and repurchased 3.3% of our shares for $10 million. We have met our earnings guidance, despite incurring over $1 million in unusual expenses related to the proxy contest and review of strategic alternatives. Without the Special Committee expenses our net income would have been $5.4 million or $0.48 per diluted share. MOSAID's management and its investment bankers have vigorously pursued the strategic alternatives review and action program, and the level of activity remains high."
Operating Highlights
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The Intellectual Property Division was very profitable during the fiscal 2007 second quarter, posting revenue of $16.5 million and segment profit of $8.2 million or 50% of segment revenues. During the quarter and year to date, revenues from the licensing of semiconductor intellectual property blocks, while falling short of expectations, more than quadrupled as compared to the same period in fiscal 2006.
Results for the Systems Division in the second quarter of fiscal 2007 were lower than the same period last year due to the sale of fewer test systems, offset partially by a higher average selling price. The segment loss for the Systems Division was $717,000 on revenues of $3.1 million for the fiscal 2007 second quarter, compared to a profit of $852,000 on revenues of $5.9 million for the same quarter last year. MOSAID anticipates a recovery in tester sales during the second half of fiscal 2007 but has reduced revenue expectations for the Division for the year.
The Company also made three senior management appointments in the last three months. John Lindgren was named Senior Vice President Patent Licensing, General Counsel and Corporate Secretary. Mr. Lindgren joins MOSAID from Texas Instruments (TI) in Dallas, Texas, where he served as Vice President and Assistant General Counsel. In this position, Mr. Lindgren headed a team of 28 lawyers who provided legal counsel to TI's US$3.5 billion Application Specific Products group, which includes the company's global Digital Signal Processor business.
In addition, Michael Vladescu, formerly Director, Intellectual Property, was named Vice President, Patents and Joseph Brown, formerly Director, Financial Services and Corporate Controller, was appointed Vice President, Finance.
MOSAID Expands Board, Wins Motion to Dismiss Micron's Complaint for
Declaratory Judgment, Forms Patent Licensing Partnership with Caltech
At the Company's Annual General Meeting on September 22, MOSAID announced that the Board of Directors had been expanded from six to ten members. Carl Schlachte, President and CEO of ARC International, and Emmett Murtha, President and CEO of Fairfield Resources International, bring further intellectual property expertise to the Board, while Gideon King, Executive Vice President of Loeb Partners Corporation, and Eugene Davis, Chairman and CEO of Pirinate Consulting Group, bring additional financial acumen and merger and acquisitions experience.
On October 25, the Company announced that the Northern District of California Court, San Jose Division, had issued an order granting MOSAID's motion to dismiss Micron Technology's Complaint for Declaratory Judgment. The Company's ongoing litigation for patent infringement against Micron, ProMOS Technologies Inc. and Powerchip Semiconductor Corporation is currently proceeding in the Eastern District of Texas, Marshall Division.
During the quarter, MOSAID continued to broaden the reach of its patent program by obtaining exclusive licensing rights to certain patents from the
At the end of the second quarter, MOSAID's portfolio grew to 687 patents issued or pending, up from 654 at the end of the first quarter. Approximately 40% of MOSAID's issued or pending patents relate to memory technology and 60% to other technology areas.
MOSAID currently has 15 companies on notice for patent infringement and is currently in discussions with several of these companies.
Guidance
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Guidance for the Company's revenues in the third quarter of fiscal 2007 is $19 million to $20 million and for net earnings is $3.5 million to $4.0 million. Guidance for fiscal 2007 is lowered slightly, as a result of lower than expected Semiconductor IP and Systems Division revenues. Revenues for fiscal 2007 are now forecast to range between $80 million and $85 million, down from the previous guidance of $83 million to $85 million. Net earnings are expected to range from $18 million to $20 million, down from earlier guidance of $21 million to $23 million, as a result of the lower revenues and the now anticipated pre-tax costs of the strategic alternatives initiative of approximately $2.3 million. MOSAID anticipates that approximately 80% of fiscal 2007 revenues will be generated by the Intellectual Property Division.
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Conference Call and Webcast
Management will hold a conference call and webcast on Thursday,
November 30, 2006 at 5:00 p.m. (ET). Participants wishing to access the
conference call should dial 1-800-814-4941. The conference call will be
webcast live at
www.mosaid.com and
www.newswire.ca, and subsequently
archived on MOSAID's web site. A replay of the conference call will be
available until midnight on Thursday, December 7, 2006. To access the
replay, please dial 1-877-289-8525 and enter passcode
21209267(pound key).
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About MOSAID
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MOSAID Technologies Incorporated makes semiconductors better through the development and licensing of intellectual property and the supply of memory test and analysis systems. MOSAID counts many of the world's largest semiconductor companies among its customers. Founded in 1975, MOSAID is based in Ottawa, Ontario, with offices in Santa Clara, California; Newcastle upon Tyne, U.K; and Tokyo, Japan. For more information, visit
www.mosaid.com .
