Silicon Image Reports Fourth Quarter and 2008 Financial Results

Silicon Image, Inc. (NASDAQ:SIMG), a leader in semiconductors and intellectual property for the secure distribution, presentation and storage of high-definition content, today reported financial results for its fourth quarter and full year ended December 31, 2008.

Revenue for the fourth quarter of 2008 was $59.4 million, compared to $77.8 million for the third quarter of 2008 and $85.3 million for the fourth quarter of 2007. Revenue for 2008 totaled $274.4 million, compared with $320.5 million for 2007.

GAAP net income for the fourth quarter of 2008 was $5.0 million, or $0.07 per diluted share, compared to $6.1 million, or $0.08 per diluted share, for the third quarter of 2008 and $7.6 million, or $0.09 per diluted share, for the fourth quarter of 2007. GAAP net income for the fourth quarter of 2008 includes pre-tax restructuring expenses of $4.0 million, compared with $1.9 million in the third quarter of 2008. GAAP net income for 2008 was $10.1 million, or $0.13 per diluted share, compared to $19.0 million, or $0.22 per diluted share for 2007.

Non-GAAP net income for the fourth quarter of 2008 was $15.7 million, or $0.21 per diluted share, compared to $17.7 million, or $0.23 per diluted share, for the third quarter of 2008 and $9.5 million, or $0.11 per diluted share, for the fourth quarter of 2007. Non-GAAP net income for 2008 was $41.7 million, or $0.54 per diluted share, compared to $32.7 million, or $0.37 per diluted share for 2007. Non-GAAP net income excludes stock-based compensation expense, amortization of intangible assets and restructuring charges.

A reconciliation of GAAP and non-GAAP items is provided in a table following the Condensed Consolidated Statements of Income.

"2008 was a challenging year for the industry and Silicon Image responded in a strategic and disciplined manner,” said Steve Tirado, Silicon Image's president and chief executive officer. "We focused on development of our technology to expand the breadth of our product offering, and the continued improvement of the efficiency of our operating model by enhancing our gross margin and lowering operating expenses. During the last twelve months, we have introduced industry-leading new technology developments such as Mobile High-Definition Link and LiquidHD along with supporting products. Going forward we are well positioned to grow revenue and earnings when the economy and the consumer electronics industry rebound.”

Fourth Quarter Highlights

• Introduction of LiquidHD™ - a new personal entertainment technology designed to quickly and easily connect TVs, consumer electronics (CE) devices, personal computers (PCs), portable media devices (PMD) and home theaters into a seamless network where consumers can enjoy digital content from any source device on any LiquidHD-enabled display in the home.
• Introduction of the Sil6100 HD display processor – the world’s first device supporting the newly introduced LiquidHD™ technology.
  • The Sil6100 is a highly integrated system-on-chip (SoC) that incorporates a multi-standard high-definition and standard-definition video decoder for H.264, MPEG-2 and VC-1 formats.
• Introduction of LiquidPlay™ - a key component of LiquidHD technology that provides comprehensive digital security and content protection – endorsed by the Fox Group, a major Hollywood studio.
• Silicon Image was awarded the Technology & Engineering Emmy® Award by The National Academy of Television Arts & Sciences (NATAS) for its contribution to the development and implementation of the High-Definition Multimedia Interface ™ (HDMI™) technology standard.
• Silicon Image and Scalado AB collaborated to integrate Scalado SpeedTag™ technology into the Silicon Image mobile phone camera processor IP core product line allowing high-resolution images to be processed and displayed more quickly than standard JPEG images.
• New R&D center and sales office opened in Shanghai, China.

The following is Silicon Image's financial performance estimates for the first quarter of 2009:

Use of Non-GAAP Financial Information

Silicon Image presents and discusses gross margin, operating expenses, net income and basic and diluted net income per share in accordance with Generally Accepted Accounting Principles (GAAP) and on a non-GAAP basis for informational purposes only. Silicon Image believes that non-GAAP reporting, giving effect to the adjustments shown in the attached reconciliation, provides meaningful information and therefore uses non-GAAP reporting to supplement its GAAP reporting and internally in evaluating operations, managing and monitoring performance, and determining bonus compensation. Further, Silicon Image uses non-GAAP information as certain non-cash charges such as amortization of intangibles and stock based compensation do not reflect the cash operating results of the business. Silicon Image has chosen to provide this supplemental information to investors, analysts and other interested parties to enable them to perform additional analyses of its operating results and to illustrate the results of operations giving effect to such non-GAAP adjustments. The non-GAAP financial information presented herein should be considered supplemental to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP.

Conference Call

The company will host an investor conference call today to discuss its fourth quarter and fiscal year 2008 results at 2:00 p.m. Pacific Time and will web cast that event. To access the conference call, dial 719-457-2558 and enter pass code 9443022. The webcast will be accessible on Silicon Image's investor relations website at http://www.SiliconImage.com. A replay of the conference call will be available within two hours of the conclusion of the conference call though February 10, 2009. To access the replay, please dial 888-203-1112 or 719-457-0820 and enter pass code 9443022.

About Silicon Image, Inc.

Silicon Image, Inc. is a leading provider of semiconductor and intellectual property products for the secure distribution, presentation and storage of high-definition content. With a rich history of technology innovation that includes creating industry standards such as DVI and HDMI, the company’s solutions facilitate the use of digital content amongst consumer electronics, personal computer (PC) and storage devices, with the goal to securely deliver digital content anytime, anywhere and on any device. Founded in 1995, the company is headquartered in Sunnyvale, California, with regional engineering and sales offices in China, Germany, Japan, Korea, Taiwan and the United Kingdom. For more information, please visit www.siliconimage.com.

NOTE: Silicon Image, the Silicon Image logo, LiquidHD, LiquidPlay, and MHL are trademarks, registered trademarks or service marks of Silicon Image, Inc. in the United States and/or other countries. HDMI is a trademark or registered trademark of HDMI Licensing, LLC in the United States and/or other countries. All other trademarks and registered trademarks are the property of their respective owners in the Unites States and/or other countries.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of federal securities laws and regulations. These forward-looking statements include, but are not limited to, statements related to Silicon Image's future operating results, including revenue, gross margin, operating expenses, interest income, tax rates and use of cash. These forward-looking statements involve risks and uncertainties, including the risks of uncertain economic conditions, competition in our markets, the Company's ability to deliver financial performance in-line with its stated goals and other risks and uncertainties described from time to time in Silicon Image's filings with the Securities and Exchange Commission (SEC). These risks and uncertainties could cause the actual results to differ materially from those anticipated by these forward-looking statements. In addition, see the Risk Factors section of the most recent Form 10-K and 10-Q filed by Silicon Image with the U.S. Securities and Exchange Commission. These forward-looking statements are made of the date of this press release, and Silicon Image assumes no obligation to update any such forward-looking information.