Tessera Technologies Announces Third Quarter 2005 Results

Third Quarter 2005 Highlights

-- Total revenue was $19.7 million.

-- Royalties and License Fees revenue were $14.1 million.

-- Services revenue was $4.5 million.

-- GAAP earnings per diluted share were $0.11.

-- Pro Forma earnings per diluted share were $0.17.

According to generally accepted accounting principles (GAAP), netincome was $5.0 million. Pro forma net income for the third quarter of2005 was $7.9 million. Pro forma net income is defined as incomeadjusted for non-cash tax expense and stock-based compensation. Proforma net income per diluted share equals pro forma net income dividedby the weighted diluted share count as of that period end.

Bruce McWilliams, Tessera's chairman and chief executive officer,stated, "We had another strong quarter with total revenues of $19.7million, which included the highest royalties and license fees revenuein the history of the company. The ever greater use of chip scalepackaging technology in the semiconductor industry continues to driveour revenue growth. Historically, Tessera's technology has been usedin mobile handsets. Over the years, we have diversified our revenuestreams, demonstrating the benefits of our technology in additionalend markets such as small form factor consumer electronics and nowcomputing. We expect the transaction with Shellcase announcedseparately today, once completed, will expand our expertise andtargeted end markets further, launching us into image sensor and waferlevel packaging. We expect our revenue streams will grow at a rategreater than our served markets for years to come."

Nine-month Period Ended September 30th Highlights: 2005 Comparedto 2004

-- Total revenues were $70.1 million, up 29 percent.

-- Royalties and License Fees were $39.2 million, up 43 percent.

-- Services revenue was $12.0 million, up 33 percent.

-- GAAP earnings per diluted share were $0.52, down 10 percent.

-- Pro Forma earnings per diluted share were $0.75, up 29 percent.

"During the first nine months of 2005, Tessera generatedapproximately $38 million in cash," said Doug Norby, senior vicepresident and chief financial officer. "Consequently, cash fromoperations generated through the third quarter will fund today'sannounced Shellcase transaction for $33 million."

2005 Financial Guidance

Tessera expects fourth quarter 2005 total revenues to be in therange of $24 million to $26 million. Royalties and License Fees areanticipated to grow approximately 18 percent sequentially. Expenses,which include cost of revenue, research and development, and sales,general and administrative, are expected to be approximately $14.5million. The book-tax rate is projected to be 36 percent of pre-taxincome with cash taxes paid approximately 3 percent of revenue duringthis fourth quarter. Tessera estimates a fully diluted share countusing the treasury method of approximately 48.0 million in the fourthquarter 2005 as compared to approximately 47.6 million in the thirdquarter of 2005.

For the full year 2005, Tessera continues to expect total revenuesto be in the range of $94 million to $96 million. Expenses, whichinclude cost of revenue, research and development, and sales, generaland administrative, are projected to be $47.5 million. The company'sbook-tax rate is projected to be 36 percent of pre-tax income withcash taxes paid ranging from four percent to five percent of revenuefor the year as a whole. Diluted share count for the year as a wholeis projected to be 48.0 million.

Norby continued, "We wish to point out that the fourth quarter andfull year revenue guidance ranges include revenues only fromagreements existing as of today, November 1st."

Conference Call Information

Tessera will host an investor conference call today at 1:30 P.M.Pacific (4:30 P.M. Eastern). To access the call in the U.S., pleasedial 877-866-5534, and for international callers dial 706-679-0753approximately 10 minutes prior to the start of the conference call.The conference call will also be broadcast live over the Internet andavailable for replay for 90 days at www.tessera.com. In addition, areplay of the call will be available via telephone for 2 businessdays, beginning two hours after the call. To listen to the telephonereplay in the U.S., please dial 800-642-1687 and for internationalcallers, dial 706-645-9291. Enter access code 1242007.

About Tessera Technologies, Inc.

Tessera Technologies, through its wholly-owned subsidiary Tessera,Inc., is a leading provider of miniaturization technologies for theelectronics industry. Tessera enables new levels of miniaturizationand performance by applying its unique expertise in the electrical,thermal and mechanical properties of materials and interconnect. As aresult, Tessera's technologies are widely adopted in high-growthmarkets including consumer, computing, communications, medical anddefense. Tessera's customers include the world's top semiconductorcompanies such as Intel, Samsung, Renesas, Toshiba and TexasInstruments. The company's stock is traded on the Nasdaq NationalMarket under the symbol TSRA. Tessera is headquartered in San Jose,California. www.tessera.com.

Note: Tessera and the Tessera logo are registered trademarks. Allother company, brand and product names may be trademarks or registeredtrademarks of their respective companies.

Safe Harbor Statement

This press release contains forward-looking statements, which aremade pursuant to the safe harbor provisions of the Private SecuritiesLitigation Reform Act of 1995. Forward-looking statements involverisks and uncertainties that could cause actual results to differsignificantly from those projected. Factors that might cause orcontribute to such differences include, but are not limited to,fluctuations in Tessera's operating results due to the timing of newlicense agreements and royalties, Tessera's ability to protect itsintellectual property and the risk of a decline in demand forsemiconductor products. You are cautioned not to place undue relianceon the forward-looking statements, which speak only as of the date ofthis release. Tessera's filings with the Securities and ExchangeCommission, including its Annual Report on Form 10-K for the yearended December 31, 2004, and its Quarterly Report on Form 10-Q filedfor the quarter ended June 30, 2005 include more information aboutfactors that could affect the company's financial results.

TESSERA TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
------------------------------
(in thousands, except per share amounts)
(unaudited)


Three Months Ended Nine Months Ended
September 30, September 30,
2005 2004 2005 2004
--------- -------- --------- --------
Revenues:
Royalty and license fees $14,113 $10,399 $39,238 $27,431
Past production payments 1,161 9,350 18,830 17,930
Service revenues 4,470 3,896 12,036 9,051
--------- -------- --------- --------
Total revenues 19,744 23,645 70,104 54,412
--------- -------- --------- --------
Operating expenses:
Cost of revenues 3,059 2,610 9,309 6,497
Research and development 1,882 1,490 4,937 5,566
Selling, general and
administrative 7,411 4,954 18,826 13,833
Stock-based compensation 525 20 840 206
--------- -------- --------- --------
Total operating
expenses 12,877 9,074 33,912 26,102
--------- -------- --------- --------
Operating income 6,867 14,571 36,192 28,310
Other income, net 1,067 233 2,427 475
--------- -------- --------- --------
Income before taxes 7,934 14,804 38,619 28,785
Income tax provision 2,904 999 13,921 2,219
--------- -------- --------- --------
Net income attributable to
common stockholders $5,030 $13,805 $24,698 $26,566
========= ======== ========= ========
Basic and diluted net income
per share attributable to
common stockholders:
Net income per common share;
basic $0.11 $0.34 $0.56 $0.67
========= ======== ========= ========
Net income per common share;
diluted $0.11 $0.30 $0.52 $0.57
========= ======== ========= ========
Weighted average number of
shares used in per share
calculations; basic 44,452 40,448 43,720 39,482
========= ======== ========= ========
Weighted average number of
shares used in per share
calculations; diluted 47,632 46,655 47,727 46,537
========= ======== ========= ========

---------
(1) Operating expense line item detail excludes stock-based
compensation, as follows:

Research and development $192 $5 $288 $52
Selling, general and
administrative 333 15 552 154
--------- -------- --------- --------
Total $525 $20 $840 $206
========= ======== ========= ========


SUPPLEMENTAL CONSOLIDATED FINANCIAL DATA
------------------------------
(in thousands)
(unaudited)

Non-cash income tax
expense $2,369 $66 $10,434 $343




TESSERA TECHNOLOGIES, INC.
CONSOLIDATED SUMMARY BALANCE SHEET INFORMATION
----------------------------------------------
(in thousands)


September 30, December 31,
2005 2004
------------- ------------
(unaudited) (audited)
ASSETS
Current assets:
Cash and cash equivalents $146,142 $108,339
Accounts receivable 5,794 3,263
Other current assets 14,870 16,475
------------- ------------
Total current assets 166,806 128,077

Property and equipment, net 4,486 2,484
Other assets 6,266 9,121
------------- ------------
Total assets $177,558 $139,682
============= ============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $1,673 $984
Accrued liabilities 4,424 3,615
Deferred revenue 149 107
------------- ------------
Total current liabilities 6,246 4,706
------------- ------------



Stockholders' equity:

Common Stock 44 42
Additional paid-in capital 181,230 167,359
Deferred stock-based compensation (2,649) (414)
Accumulated deficit (7,313) (32,011)
------------- ------------
Total stockholders' equity 171,312 134,976
------------- ------------

Total liabilities and stockholders'
equity $177,558 $139,682
============= ============



TESSERA TECHNOLOGIES, INC.
RECONCILIATION OF PRO FORMA NET INCOME TO NET INCOME
-----------------------------------------------------
(in thousands, except per share amounts)
(unaudited)


Three Months Ended Nine Months Ended
September 30, September 30,
2005 2004 2005 2004
--------- -------- --------- --------


Pro forma net income $7,924 $13,891 $35,972 $27,115


Less:
Stock-based compensation 525 20 840 206
Non-cash income tax expense 2,369 66 10,434 343

--------- -------- --------- --------
Net income, as reported $5,030 $13,805 $24,698 $26,566
========= ======== ========= ========

Pro forma net income per common
share; diluted $0.17 $0.30 $0.75 $0.58
========= ======== ========= ========
Weighted average number of
shares used in per share
calculations; diluted 47,632 46,655 47,727 46,537
========= ======== ========= ========