SST Reports Third Quarter 2009 Financial Results

• Press Release
• Source: Silicon Storage Technology, Inc.
• On 4:05 pm EDT, Tuesday October 27, 2009

SUNNYVALE, Calif., Oct. 27 /PRNewswire-FirstCall/ -- SST (Silicon Storage Technology, Inc.) (Nasdaq: SSTI - News), a leader in flash memory technology, today announced results for the third quarter, ended September 30, 2009.

Net revenues for the third quarter were $71.3 million compared with $58.1 million in the second quarter of 2009 and with $92.4 million in the third quarter of 2008. Product revenues for the third quarter of 2009 were $61.8 million, compared with $51.8 million in the second quarter of 2009 and with $79.8 million in the third quarter of 2008. Revenues from technology licensing for the third quarter of 2009 were $9.5 million, compared with $6.3 million in the second quarter of 2009 and with $12.6 million in the third quarter of 2008.

Income from operations for the third quarter of 2009 was $1.5 million compared with a loss from operations of $7.5 million in the second quarter of 2009 and with income from operations of $4.1 million in the third quarter of 2008.

Net income for the third quarter of 2009 was $3.1 million, or $0.03 per share, based on approximately 95.9 million diluted shares. By comparison, the company recorded a net loss of $6.4 million, or $0.07 per share, based on approximately 95.7 million diluted shares in the second quarter of 2009. For the third quarter of 2008, SST reported net income of $4.9 million, or $0.05 per share based on approximately 99.7 million diluted shares.

SST finished the third quarter of 2009 with $143.8 million in cash, cash equivalents, short-term investments, and long-term marketable debt securities, up approximately $8.5 million from $135.3 million at June 30, 2009.

Management Qualitative Comments

"This was a productive quarter for SST as we executed well on our strategy and returned the company to profitability ahead of our expectations," said Bing Yeh, chief executive officer. "Seasonally strong demand in NOR flash memory, as well as a stabilizing pricing environment, resulted in healthy sequential growth in unit shipments and improved product revenues across all four of our application segments. Over the past few quarters, we have signed several new licensing agreements for our embedded SuperFlash program, which will begin to contribute upfront fee revenue in the fourth quarter as we make progress on deliverables. These new licensing agreements will help drive royalty growth in our licensing business in future years. We continue to manage our expenses closely and operate our business conservatively, but we are optimistic about the opportunities in our markets and we believe that we are laying a solid foundation for growth in 2010."

Fourth Quarter 2009 Outlook

Taking into account normal seasonality, SST expects its fourth quarter revenues to be between $67 million and $72 million. Gross margin is expected to be between 30 and 32 percent, subject to the risk of changing market conditions. Total operating expenses are expected to be between $21 million and $23 million. Our net income per share is expected to be between $0.00 and $0.03.

Conference Call Dial-in Information

SST will hold a conference call to discuss its financial results today at 1:30 p.m. PT. Those wishing to participate in the conference call should dial (800) 288-8960, international participants please dial (612) 288-0337, using the password "SST" at approximately 1:20 p.m. PT. A replay of the call will be available for one week by dialing (800) 475-6701, international participants dial (320) 365-3844, using the access code 119429. A webcast replay of the conference call will be available for three months on the company's Web site at http://www.sst.com/about_sst/events/current_upcoming/.

About Silicon Storage Technology, Inc.

Headquartered in Sunnyvale, California, SST designs, manufactures and markets a diversified range of memory and non-memory products for high volume applications in the digital consumer, networking, wireless communications and Internet computing markets. Leveraging its proprietary, patented SuperFlash technology, SST is a leading provider of nonvolatile memory solutions with product families that include various densities of high functionality flash memory components and flash mass storage products. The company also offers its SuperFlash technology for embedded applications through its broad network of world-class manufacturing partners and technology licensees, including TSMC, which offers it under its trademark Emb-FLASH. SST's non-memory products include NAND controller-based products, smart card ICs and modules, flash microcontrollers and radio frequency ICs and modules. Further information on SST can be found on the company's Web site at http://www.sst.com.

Forward-Looking Statements

Except for the historical information contained herein, this news release contains forward-looking statements regarding memory and non-memory market conditions, SST's future financial performance, the ability to control expenses, manage inventory and generate cash, the launch, design cycle and performance of new products, SST's licensing business, SST's ability to diversify its business, the transition of SST's products to smaller geometrics, and SST's ability to bring new products to market, all of which involve risks and uncertainties. These risks may include timely development, acceptance and pricing of new products, the terms, conditions and revenue recognition issues associated with licensees' royalty payments, the impact of competitive products and pricing, and general economic conditions as they affect SST's customers, as well as other risks detailed from time to time in the company's periodic reports, including the Annual Report on Form 10-K for the year ended December 31, 2008, Quarterly Report on Form 10-Q for the quarter ended June 30, 2009 and other reports filed from time to time with the Securities and Exchange Commission. These forward-looking statements are not guarantees of future performance and speak only as of the date hereof, and, except as required by law, SST disclaims any obligation to update these forward-looking statements to reflect future events or circumstances.

For more information about SST and the company's comprehensive list of product offerings, please call 1-888/SST-CHIP. Information can also be requested via email to literature@sst.com or through SST's Web site at http://www.sst.com. SST's head office is located at 1171 Sonora Court, Sunnyvale, Calif.; telephone: 408/735-9110; fax: 408/735-9036.

The SST logo and SuperFlash are registered trademarks of Silicon Storage Technology, Inc. All other trademarks or registered trademarks are the property of their respective holders.

-- FINANCIAL TABLES TO FOLLOW --

                    Silicon Storage Technology, Inc. and Subsidiaries
                     Condensed Consolidated Statements of Operations
                                      (unaudited)
                         (in thousands, except per share data)

                                      Three Months Ended    Nine Months Ended
                                        September 30,         September 30,
                                        -------------         -------------
                                        2008     2009       2008        2009
                                        ----     ----       ----        ----

    Net revenues:
      Product revenues                $79,801  $61,766   $220,572    $152,319
      Technology licensing             12,597    9,487     36,611      27,146
                                       ------    -----     ------      ------
        Total net revenues             92,398   71,253    257,183     179,465
    Cost of revenues                   61,421   48,790    176,548     127,899
                                       ------   ------    -------     -------
    Gross profit                       30,977   22,463     80,635      51,566
                                       ------   ------     ------      ------
    Operating expenses:
      Research and development         14,260   10,583     45,095      33,247
      Sales and marketing               6,713    5,147     21,114      15,273
      General and administrative        5,931    5,252     20,835      15,048
      Other                                 -        -          -         329
                                          ---      ---        ---         ---
        Total operating expenses       26,904   20,982     87,044      63,897
                                       ------   ------     ------      ------
    Income (loss) from operations       4,073    1,481     (6,409)    (12,331)
    Other income, net                   2,313    3,376      4,163       4,076
                                        -----    -----      -----       -----
    Income (loss) before provision
     for (benefit from) income taxes
     and pro rata share of loss from
     equity investments                 6,386    4,857     (2,246)     (8,255)
    Provision for (benefit from)
     income taxes                        (438)   1,643     (5,098)      3,371
                                         ----    -----     ------       -----
    Income (loss) before pro rata share
     of loss from equity investments    6,824    3,214      2,852     (11,626)
    Pro rata share of loss from
     equity investments                 1,903      122      6,040         971
                                        -----      ---      -----         ---
    Net income (loss)                  $4,921   $3,092    $(3,188)   $(12,597)
                                       ======   ======    =======    ========

    Net income (loss) per share -
     basic                              $0.05    $0.03     $(0.03)     $(0.13)
                                        =====    =====     ======      ======
    Shares used in per share
     calculation - basic               99,186   95,852    101,527      95,768
                                       ======   ======    =======      ======

    Net income (loss) per share -
     diluted                            $0.05    $0.03     $(0.03)     $(0.13)
                                        =====    =====     ======      ======
    Shares used in per share
     calculation - diluted             99,676   95,866    101,527      95,768
                                       ======   ======    =======      ======



                    Silicon Storage Technology, Inc. and Subsidiaries
                         Condensed Consolidated Balance Sheets
                                     (unaudited)
                                    (in thousands)

                                               December 31,  September 30,
                                                    2008           2009
                                                    ----           ----
                       ASSETS
    Current assets:
      Cash and cash equivalents                   $50,880        $75,251
      Short-term investments                       48,997         40,607
      Trade accounts receivable, net               20,117         35,943
      Inventories                                  54,159         30,643
      Other current assets                          4,153          4,016
                                                    -----          -----
        Total current assets                      178,306        186,460

    Long-term marketable debt securities           31,848         27,915
    Long-term marketable equity investments        18,196         34,941
    Equity investments, others                     24,619         32,888
    Property and equipment, net                    18,913         13,365
    Goodwill and intangible assets, net            14,794         12,993
    Other assets                                    1,807          4,215
                                                    -----          -----
        Total assets                             $288,483       $312,777
                                                 ========       ========

                     LIABILITIES
    Current liabilities:
      Trade accounts payable                      $19,146        $25,973
      Accrued expenses and other liabilities       14,200         23,284
      Deferred revenue                              3,841          2,025
                                                    -----          -----
        Total current liabilities                  37,187         51,282

    Other liabilities                               8,082          9,742
                                                    -----          -----
        Total liabilities                          45,269         61,024
                                                   ------         ------

                SHAREHOLDERS' EQUITY
    Common stock                                  412,312        414,774
    Accumulated other comprehensive income         14,308         32,982
    Accumulated deficit                          (183,406)      (196,003)
                                                 --------       --------
      Total shareholders' equity                  243,214        251,753
                                                  -------        -------
        Total liabilities and shareholders'
         equity                                  $288,483       $312,777
                                                 ========       ========



                Silicon Storage Technology, Inc. and Subsidiaries
                             Supplemental Data

                                          Percentage of
                                          Gross Product        Change in
                                             Revenue            Revenue
                                             -------            -------
                                                           3Q08 to   2Q09 to
                                        3Q08  2Q09  3Q09     3Q09      3Q09
                                        ----  ----  ----     ----      ----

    Product Revenue By Ship-To Location
      North America                       4%    4%    4%     (22%)      30%
      Total International                96%   96%   96%     (23%)      21%
        Europe                            7%    4%    4%     (60%)      22%
        Japan                             8%   11%   12%      14%       30%
        Korea                             5%    7%    7%      25%       26%
        China and Taiwan                 66%   66%   64%     (26%)      16%
        Other Far East                   10%    8%    9%     (31%)      41%

    Product Revenue by Application
      Digital Consumer                   30%   23%   24%     (42%)      22%
      Internet Computing                 20%   21%   24%      (9%)      38%
      Networking                         10%   15%   16%      28%       35%
      Wireless Communications            40%   41%   36%     (33%)       4%
      Total                             100%  100%  100%     (23%)      21%

    Licensing Revenue as a % of
     Total Revenue                       13%   11%   13%     (25%)      50%





    For More Information Contact:
    Leslie Green
    Green Communications Consulting, LLC
    (650) 312-9060

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