Zoran Corporation (NASDAQ: ZRAN), a leading provider of digital
solutions for applications in the digital entertainment and digital
imaging markets, today reported results for its third quarter ended
September 30, 2010.
Revenues for the third quarter were $99.3 million, compared to
$93.4 million last quarter and $115.5 million for the third quarter
of 2009. The Company reported a third quarter GAAP net loss of $4.1
million, or $0.08 per share, which compares with a GAAP net loss of
$6.7 million, or $0.13 per share, for the previous quarter and GAAP
net income of $4.9 million, or $0.09 per diluted share, for the
third quarter of the prior year.
Non-GAAP net loss for the third quarter was $810 thousand, or
$0.02 per share, which excludes $109 thousand of amortization of
acquired intangible assets, $2.0 million of acquisition related
expenses, $2.5 million of stock-based compensation expenses, and an
adjustment of $1.3 million for the tax provision to a non-GAAP
rate. This compares with non-GAAP net loss of $4.0 million, or
$0.08 per share, for the previous quarter, and a non-GAAP net
income of $8.7 million, or $0.17 per diluted share for the same
period last year.
"During the third quarter, strong and widespread demand for our
COACH processors drove growth in digital cameras, and we continued
to see solid signs of recovery in Printer Imaging," said Dr. Levy
Gerzberg, president and chief executive officer of Zoran. "DTV was
impacted by share loss by our customers to tier-1 brands combined
with severe price erosion in the segments they serve. We were also
impacted by one of our customers' decision to add a second source
supplier, causing additional share loss for Zoran. In addition, we
are seeing rising channel inventory and softening consumer demand.
DVD is also showing signs of weakening demand, causing a modest
inventory build of red-laser products.
"As a result of these developments, we are reducing our outlook
for the remainder of 2010 and are carefully evaluating our current
strategies against existing and potential growth opportunities. We
are also in the process of working on restructuring alternatives
with an emphasis on operating expenses to right size the business.
Management remains committed to returning Zoran to a growing and
profitable business with a sound financial model, and we are
working to take whatever steps are necessary to achieve this
objective.
"Also during the quarter, Zoran signed a definitive agreement to
acquire Microtune, Inc. (NASDAQ: TUNE), a pioneer in the
development and deployment of silicon tuners, a technology that is
complementary and synergistic to Zoran's strategic objectives in
both the set-top-box and DTV markets. We believe this acquisition
will enable Zoran to become a complete provider of solutions for
consumer home entertainment, immediately accelerating our position
in the STB market and ultimately strengthen our DTV position as
global markets transition from analog to digital and to more
efficient single-chip TV tuners over the next several years."
Recent Highlights
-- Revenues by product line for the third quarter of 2010 were 50 percent
Digital Camera, 23 percent DTV (includes set-top-box), 16 percent
Printer Imaging and 11 percent DVD
-- Zoran demonstrated new 3D, IPTV and Blu-Ray technologies at CEATEC and
IFA 2010
-- Zoran's COACH 13 processors have been designed into multiple new models
-- Zoran's COACH 12P processors are now shipping in first-tier Full HD
digital video cameras
-- Zoran announced Irdeto certification for Pay-TV satellite set-top-box
products
-- Zoran demonstrated new set-top box platforms for worldwide
manufacturers at IBC 2010
-- Zoran announced agreement to acquire Microtune, Inc.
-- Zoran's Quatro(R) Processor and IPS Print Language Software was deployed
in Muratec's MFX line of printers
Future Outlook
The following forward-looking statements are based on our
current expectations, and actual results may differ materially.
Guidance for the fourth quarter does not reflect the impact of
the acquisition of Microtune, including the purchase price and
related acquisition costs, or any income or expenses incurred after
the close of the transaction which is expected close on or about
November 20, 2010.
The Company is currently expecting fourth quarter 2010 revenues
to range between $60 million and $65 million, with gross margins
ranging between 52 and 53 percent. Excluding acquisition-related
amortization costs and stock-based compensation expense, non-GAAP
operating expenses are expected to be in a range of $52 million to
$53 million. Acquisition-related amortization costs are expected to
be approximately $109 thousand and stock-based compensation expense
is expected to range between $2.7 million and $3.2 million. The
Company expects to record a fourth quarter GAAP loss in the range
of $0.46 to $0.49 per share on approximately 50 million shares. On
a non-GAAP basis, which excludes acquisition-related amortization
costs and stock-based compensation expenses, the Company expects to
record a fourth quarter loss of $0.39 to $0.43 per share. With this
outlook, cash is expected to decline by approximately $15 million
from operations.
Zoran will provide more commentary on its third quarter results
during the quarterly conference call.
Use of Non-GAAP Financial Information
In addition to reporting financial results in accordance with
generally accepted accounting principles, or GAAP, Zoran provides
non-GAAP financial information, non-GAAP net income (loss) and EPS
that excludes charges such as amortization of acquired intangible
assets, acquisition related expenses, stock-based compensation
expense, restructuring expense, non-recurring litigation
settlements and associated income tax adjustments. Non-GAAP results
are reconciled to GAAP results on the attached Schedule.
The Company believes that its non-GAAP financial information
provides useful information to management and investors regarding
financial and business trends relating to its financial condition
and results of operations because it excludes items that management
considers to be outside of the Company's core operating results.
The Company believes that this non-GAAP net income (loss), in
combination with the Company's financial results calculated in
accordance with GAAP, provides investors with additional
perspective and a more meaningful understanding of the Company's
ongoing operating performance. In addition, the Company's
management uses these non-GAAP measures to review and assess the
financial performance of the Company, to determine executive
officer incentive compensation, and to plan and forecast
performance in future periods. The Company's non-GAAP net income
(loss) is not prepared in accordance with GAAP, is not an
alternative to GAAP financial information, and may be calculated
differently than non-GAAP financial information disclosed by other
companies.
Quarterly Conference Call
Zoran Corporation has scheduled a conference call for 2:00 p.m.
PT today to discuss its third quarter results. To listen to the
call, please call 617-614-2702 approximately five minutes prior to
the start time. For those who are not available to listen to the
live conference call, a replay will be available from approximately
4:30 p.m. PT on October 25, 2010, until 4:30 p.m. PT on October 31,
2010. The access number for the replay is 617-801-6888,
confirmation number 12170455. The conference call will be broadcast
live over the Internet and can be accessed by all interested
parties through the investor relations section of Zoran's website
at www.zoran.com. Please access the website at least fifteen
minutes prior to the start of the call to register and to download
and install any necessary audio software. This press release will
be furnished to the SEC on a Form 8-K and posted to the Company's
website prior to the conference call.
Company Profile
Zoran Corporation, based in Sunnyvale, California, is a leading
provider of digital solutions for the digital entertainment and
digital imaging markets. With over two decades of expertise
developing and delivering digital signal processing technologies,
Zoran has pioneered high-performance digital audio and video,
imaging applications and Connect Share Entertain technologies for
the digital home. Zoran's proficiency in integration delivers major
benefits for OEM customers, including greater capabilities within
each product generation, reduced system costs, and shorter time to
market. Zoran-based DTV, set-top box, DVD, digital camera, and
multifunction printer products have received recognition for
excellence and are now in hundreds of millions of homes and offices
worldwide. With headquarters in the U.S. and additional operations
in China, France, India, Israel, Japan, Korea, Sweden, Taiwan, and
the U.K., Zoran may be contacted on the World Wide Web at
www.zoran.com or at 408-523-6500.
Forward-Looking Statements
This press release includes forward-looking statements,
including the chief executive officer quotation and the material
presented under "Future Outlook," that reflect the Company's
current views with respect to future events and future financial
performance, including statements regarding the Company's fourth
quarter financial outlook and statements regarding the Company's
efforts to grow its business and return to profitability. These
forward-looking statements are subject to many risks and
uncertainties that could cause actual results to differ materially
from what is currently expected, including risks associated with:
the Company's loss of market share in the DTV market; market share
loss by the Company's DTV customers; the Company's ability to
acquire new, and increase its business from current, customers,
particularly in the DTV market; weakening demand in the DTV market;
potential declines in the Company's sales as a result of the
continuing global economic slowdown that could continue to reduce
demand for consumer electronic and other products; continued
tightening in global credit markets, which could result in
insolvency of key suppliers, customers, or retailers and customer
inability to finance purchases of our products; the rapidly
evolving markets for the Company's products and uncertainty
regarding the pace and direction of development of those markets;
the impact of further ASP declines, particularly in the DTV market;
the Company's dependence on sales to a limited number of large
customers; cost and length of time required for new product
development; timing and impact of new product introductions by the
Company and its competitors, and of transitions away from older
products; intense competition in the Company's markets and in the
markets in which its customers operate; the Company's reliance on
other parties for wafer supplies, product assembly and testing, and
manufacturing capacity; the effects of changes in revenue and
product mix on the Company's gross margins; fluctuations in tax
rate caused by projections of the geographic sources of Company
income; dependence on key personnel; and reliance on international
operations, particularly operations in Israel. Further information
regarding these and other risks and uncertainties can be found
under the caption "Risk Factors" and elsewhere in the Company's
most recently filed Annual Report on Form 10-K, Quarterly Report on
Form 10-Q, and other filings with the SEC.
Zoran the Zoran logo and Quatro are trademarks or registered
trademarks of Zoran Corporation and/or its subsidiaries in the
United States and/or other countries. All other brands or names may
be claimed as property of others.
ZORAN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- --------------------
2010 2009 2010 2009
-------- --------- --------- ---------
Revenues:
Hardware product revenues $ 88,114 $ 104,980 $ 249,885 $ 253,120
Software and other revenues 11,214 10,558 33,264 33,627
-------- --------- --------- ---------
Total revenues 99,328 115,538 283,149 286,747
Costs and expenses:
Cost of hardware product
revenues 47,266 59,844 136,176 150,154
Research and development 30,016 27,013 85,173 83,494
Selling, general and
administrative 25,634 23,100 73,535 73,247
Amortization of intangibles 109 109 327 327
Acquisition related expenses 2,007 - 2,007 -
Restructuring expense - 1,194 - 2,053
IP licensing related
settlements - - 1,115 11,000
-------- --------- --------- ---------
Total costs and expenses 105,032 111,260 298,333 320,275
Operating income (loss) (5,704) 4,278 (15,184) (33,528)
Interest and other income, net 1,116 1,748 5,565 7,383
-------- --------- --------- ---------
Income (loss) before income taxes (4,588) 6,026 (9,619) (26,145)
Provision (benefit) for income
taxes (500) 1,150 5,100 3,890
-------- --------- --------- ---------
Net income (loss) $ (4,088) $ 4,876 $ (14,719) $ (30,035)
======== ========= ========= =========
Basic net income (loss) per share $ (0.08) $ 0.09 $ (0.29) $ (0.58)
======== ========= ========= =========
Diluted net income (loss) per
share $ (0.08) $ 0.09 $ (0.29) $ (0.58)
======== ========= ========= =========
Shares used to compute basic net
income (loss) per share 49,631 51,684 50,378 51,451
======== ========= ========= =========
Shares used to compute diluted
net income (loss) per share 49,631 52,320 50,378 51,451
======== ========= ========= =========
ZORAN CORPORATION
NON-GAAP ADJUSTMENTS TO NET INCOME (LOSS)
(in thousands, except per share data)
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- ----------------------
2010 2009 2010 2009
------- ------ -------- --------
GAAP net income (loss) $(4,088) $4,876 $(14,719) $(30,035)
Adjusting items to
GAAP net income (loss):
Operating expenses
related to stock
based compensation
expense 2,462 (a) 3,029 (a) 7,098 (a) 9,061 (a)
Amortization of
intangibles 109 (b) 109 (b) 327 (b) 327 (b)
Acquisition related
expenses 2,007 (c) - (c) 2,007 (c) - (c)
Restructuring
expense - (d) 1,194 (d) - (d) 2,053 (d)
IP licensing related
settlements - (e) - (e) 1,115 (e) 11,000 (e)
Provision for income
taxes (1,300) (f) (500) (f) (2,100) (f) (5,660) (f)
------- ------ -------- --------
Non-GAAP net income
(loss) $ (810) (g) $8,708 (g) $ (6,272) (g) $(13,254) (g)
======= ====== ======== ========
Non-GAAP basic net
income (loss) per
share $ (0.02) (g) $ 0.17 (g) $ (0.12) (g) $ (0.26) (g)
======= ====== ======== ========
Non-GAAP diluted net
income (loss) per
share $ (0.02) (g) $ 0.17 (g) $ (0.12) (g) $ (0.26) (g)
======= ====== ======== ========
Shares used to compute
non-GAAP basic net
income (loss) per
share 49,631 51,684 50,378 51,451
======= ====== ======== ========
Shares used to compute
non-GAAP diluted net
income (loss) per
share 49,631 52,752 50,378 51,451
======= ====== ======== ========
(a) This adjustment reflects the stock-based compensation expense recorded
under ASC 718-10. The Company excludes this item when it evaluates the
continuing operational performance of the Company as management believes
this GAAP measure is not indicative of its core operating performance.
(see (g) below)
(b) This adjustment represents the amortization of intangible assets
associated with the acquisition of Let It Wave, Inc. in June 2008. Such
amortization expense does not impact the Company's cash flows and is
excluded by management when evaluating its core operating performance.
(see (g) below)
(c) This adjustment represents acquisition expenses associated with the
acquisition of Microtune, Inc. which is expected to be completed during the
fourth quarter of 2010. The Company excludes this item when it evaluates
the continuing operational performance of the Company as management
believes this GAAP measure is not indicative of its core operating
performance. (see (g) below)
(d) This adjustment reflects the restructuring expense recorded by the
Company as part of closing its facility in Netanya, Israel during the
quarter ended March 31, 2009 and the restructuring of its Mobile division
and closing of its Toronto facility during the quarter ended September 30,
2009. The Company excludes these items when it evaluates the continuing
operational performance of the Company as management believes this GAAP
measure is not indicative of its core operating performance. (see (g)
below)
(e) This adjustment reflects non-recurring expenses associated with IP
licensing related settlements. The Company excludes this item when it
evaluates the continuing operational performance of the Company as
management believes this GAAP measure is not indicative of its core
operating performance. (see (g) below)
(f) This adjustment represents the difference between the non-GAAP income
tax rate and the GAAP income tax rate. This adjustment is made by the
Company when it evaluates its continuing operational performance. (see (g)
below)
(g) The Company believes that its non-GAAP financial information provides
useful information to management and investors regarding financial and
business trends relating to its financial condition and results of
operations because it excludes charges that management considers to be
outside of the Company's core operating performance. The Company believes
that this non-GAAP net income (loss), in combination with the Company's
financial results calculated in accordance with GAAP, provides investors
with additional perspective and a more meaningful understanding of the
Company's ongoing operating performance. In addition, the Company's
management uses these non-GAAP measures to review and assess the financial
performance of the Company, to determine executive officer incentive
compensation and to plan and forecast performance in future periods. The
Company's non-GAAP net income (loss) is not prepared in accordance with
GAAP, is not an alternative to GAAP financial information, and may be
calculated differently than non-GAAP financial information disclosed by
other companies.
ZORAN CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
September December
30, 31,
2010 2009
----------- -----------
ASSETS
Current assets:
Cash and short-term investments $ 371,091 $ 398,686
Accounts receivable, net 30,886 21,997
Inventory 38,039 27,162
Prepaid expenses and other current
assets 22,205 20,519
----------- -----------
Total current assets 462,221 468,364
Property and equipment, net 12,445 12,456
Other assets 65,892 66,804
Intangible assets, net 4,505 4,832
----------- -----------
Total assets $ 545,063 $ 552,456
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 38,277 $ 29,090
Accrued expenses and other liabilities 34,890 30,701
----------- -----------
Total current liabilities 73,167 59,791
Long term liabilities 36,043 32,397
Stockholders' equity:
Common stock 50 51
Additional paid-in capital 857,537 867,139
Accumulated other comprehensive income 2,541 2,634
Accumulated deficit (424,275) (409,556)
----------- -----------
Total stockholders' equity 435,853 460,268
Total liabilities and stockholders'
equity $ 545,063 $ 552,456
=========== ===========
Zoran Corporation: Karl Schneider Chief Financial Officer (408)
523-6500 Email Contact Bonnie McBride (Investors) (415) 454-8898
Email Contact Company Web Site: www.zoran.com
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