Phoenix Technologies Ltd. Reports Q1 FY2008 Results

- Revenue Up 79% Over Prior Year First Quarter

MILPITAS, Calif., Jan. 22 /PRNewswire-FirstCall/ -- Phoenix Technologies
Ltd. (Nasdaq: PTEC) today announced its financial results for the first
quarter of fiscal year 2008, which ended December 31, 2007. (Logo:
http://www.newscom.com/cgi-bin/prnh/20070410/SFTU048LOGO)

-- Total revenues grew approximately 79% to $17.4 million, compared with
$9.7 million for Q1 FY2007, which ended December 31, 2006;
-- Gross margin improved to 88% of revenue, compared with 74% of revenue
in Q1 FY2007;
-- The Company's GAAP net income was $2.2 million, or $0.08 per diluted
share, compared with a loss of ($8.0 million), or ($0.31) per share in
Q1 FY2007;
-- On a non-GAAP basis, net income was $3.3 million, or $0.12 per diluted
share, compared with a net non-GAAP loss of ($4.7 million), or ($0.18)
per share in Q1 FY2007.

Other financial highlights include:

-- $6.0 million in positive cash flow from operations for the quarter
ended December 31, 2007, compared to ($10.2 million) in negative cash
flow from operations for Q1 FY2007;
-- Cash and short-term investment balances, as of December 31, 2007, were
$70.3 million, compared to $50.6 million at December 31, 2006, and
$62.7 million at September 30, 2007.

"Phoenix had a remarkably successful December quarter characterized by
significant new contracts, dramatically increased total backlog and continued
operational efficiency," said Woody Hobbs, President and CEO of Phoenix
Technologies. "We have met our originally stated goal of taking Phoenix from
substantial losses a year ago to overall profitability by the first quarter of
the current financial year," added Hobbs.
"This quarter, we announced two major new products, Phoenix FailSafe(TM)
and HyperSpace(TM). We have again demonstrated our ability to generate
substantial cash flows from our core business, and this has enabled us to fund
these exciting new PC 3.0(TM) initiatives in mobile PC theft deterrence and
user experience enhancement," concluded Hobbs.
Conference Call
The Company will conduct its regularly scheduled financial announcement
conference call on Tuesday, January 22, 2008, at 5:30 a.m. PST (8:30 a.m.
EST). Investors are invited to listen to a live audio web cast of the
quarterly conference call on the investor relations section of the Company's
website at http://www.phoenix.com, which will also contain supplemental
financial information related to the conference call. A replay of the web
cast will be available two hours after the conclusion of the call and will be
available for 30 calendar days. Alternatively investors can listen to the
conference call via telephone at: 888-715-1389 (U.S/Canada) or 913-312-1466
(international). An audio replay of the conference call will also be
available approximately two hours after the conclusion of the call and will be
available until 8:59 p.m. PST on Tuesday, February 22, 2008. The audio replay
can be accessed by dialing 888-203-1112 (U.S./Canada) or 719-457-0820
(international) and entering conference call ID 2449445.
About Phoenix Technologies
Phoenix Technologies Ltd. (Nasdaq: PTEC) is the global market leader in
system firmware that provides the most secure foundation for today's computing
environments. The PC industry's top builders and specifiers trust Phoenix to
pioneer open standards and deliver innovative solutions that will help them
differentiate their systems, reduce time-to-market and increase their
revenues. The Company's flagship products, AwardCore, SecureCore, FailSafe
and HyperSpace, are revolutionizing the PC user experience by delivering
unprecedented security, reliability and ease-of-use. The Company established
industry leadership with its original BIOS product in 1983, has 155 technology
patents and 139 pending applications, and has shipped in over one billion
systems. Phoenix is headquartered in Milpitas, California with offices
worldwide. For more information, visit http://www.phoenix.com.
Phoenix, Phoenix Technologies, Phoenix FailSafe, HyperSpace, HyperCore, PC
3.0 and the Phoenix Technologies logo are trademarks and/or registered
trademarks of Phoenix Technologies Ltd. All other trademarks are the property
of their respective owners.
Use of Non-GAAP Financial Information
To supplement Phoenix's consolidated condensed financial statements
presented on a GAAP basis, Phoenix also presents non-GAAP net income (loss)
information in this press release. Total non-GAAP adjustments in the first
quarter of fiscal year 2008 were $1.1 million compared to $3.3 million of
non-GAAP adjustments in the first quarter of fiscal year 2007. The
adjustments in the current quarter consist principally of non-cash stock
compensation expense as required according to Statement of Financial
Accounting Standards (SFAS 123R). These non-GAAP adjustments, as well as
management's reasons for providing non-GAAP information, are more fully
described in the reconciliation between net income (loss) on a GAAP basis and
non-GAAP net income (loss) provided in the financial statements which
accompany this press release.
Safe Harbor
With the exception of historical information, the statements set forth
above include forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended, regarding the Company's ability to maintain
its current level of operational efficiency, profitability and cash flows and
the prospects of the Company's recently announced products. These statements
involve risk and uncertainties, including: our dependence on key customers;
our ability to successfully enhance existing products and develop and market
new products and technologies; our ability to remain profitable; our ability
to meet our capital requirements in the long-term and maintain positive cash
flow from operations; our ability to attract and retain key personnel; product
and price competition in our industry and the markets in which we operate; our
ability to successfully compete in new markets where we do not have
significant prior experience; end-user demand for products incorporating our
products; the ability of our customers to introduce and market new products
that incorporate our products; risks associated with any acquisition strategy
that we might employ; results of litigation; failure to protect our
intellectual property rights; changes in our relationship with leading
software and semiconductor companies; the rate of adoption of new operating
system and microprocessor design technology; risks associated with our
international sales and operating internationally, including currency
fluctuations, acts of war or terrorism, and changes in laws and regulations
relating to our employees in international locations; whether future
restructurings become necessary; our ability to increase the number of volume
purchase agreements and pay-as-you-go arrangements with customers; any
material weakness in our internal controls over financial reporting; changes
in financial accounting standards and our cost of compliance; the effects of
any software viruses or other breaches of our network security, power
shortages and unexpected natural disasters; trends regarding the use of the
x86 microprocessor architecture for personal computers and other digital
devices; and changes in our effective tax rates. For a further list and
description of risks and uncertainties that could cause actual results to
differ materially from those contained in the forward looking statements in
this release, we refer you to the Company's filings with the Securities and
Exchange Commission, including, but not limited to, its annual report on Form
10-K and quarterly reports on Form 10-Q. All forward-looking statements
included in this document are based upon assumptions, forecasts and
information available to the Company as of the date hereof, and the Company
assumes no obligation to update any such forward-looking statements.

PHOENIX TECHNOLOGIES LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)

December 31, September 30,
2007 2007
Assets
Current assets:
Cash and cash equivalents $70,299 $62,705
Marketable Securities - -
Accounts receivable, net of allowances 5,046 6,383
Other current assets 1,261 3,496
Total current assets 76,606 72,584

Property and equipment, net 2,894 2,791
Purchased technology and Intangible
assets, net 3,500 3,571
Goodwill 14,497 14,497
Other assets 2,905 1,037
Total assets $100,402 $94,480

Liabilities and stockholders' equity
Current liabilities:
Accounts payable $1,361 $1,186
Accrued compensation and related
liabilities 3,001 3,922
Deferred revenue 12,005 11,805
Income taxes payable 2,812 11,733
Accrued restructuring charges - current 904 1,905
Other accrued liabilities - current 2,063 1,744
Total current liabilities 22,146 32,295

Accrued restructuring charges - noncurrent 145 358
Income taxes payable - noncurrent 10,891 -
Other liabilities - noncurrent 2,274 2,055
Total liabilities 35,456 34,708

Stockholders' equity:
Preferred stock - -
Common stock 28 28
Additional paid-in capital 210,017 206,800
Retained earnings / (deficit) (53,319) (55,311)
Accumulated other comprehensive loss (102) (67)
Less: Cost of treasury stock (91,678) (91,678)
Total stockholders' equity 64,946 59,772
Total liabilities and
stockholders' equity $100,402 $94,480

See notes to unaudited condensed consolidated financial statements

PHOENIX TECHNOLOGIES LTD.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)

Three months ended
December September December
31, 30, 31,
2007 2007 2006

Revenues:
License fees $15,409 $13,578 $7,924
Service fees 1,955 2,087 1,800
Total revenues 17,364 15,665 9,724

Cost of revenues:
License fees 159 234 265
Service fees 1,798 1,609 1,997
Amortization of purchased
technology 71 471 292
Total cost of revenues 2,028 2,314 2,554

Gross Margin 15,336 13,351 7,170

Operating expenses:
Research and development 5,103 5,137 4,546
Sales and marketing 2,871 2,593 4,140
General and administrative 3,927 4,357 4,228
Restructuring 69 1,036 2,211
Total operating expenses 11,970 13,123 15,125

Income (loss) from operations 3,366 228 (7,955)

Interest and other income, net 677 470 573
Income (loss) before income taxes 4,043 698 (7,382)

Income tax expense 1,799 1,366 629
Net income (loss) $2,244 $(668) $(8,011)

Earnings (loss) per share:
Basic $0.08 $(0.02) $(0.31)
Diluted $0.08 $(0.02) $(0.31)

Shares used in earnings
(loss) per share calculation:
Basic 27,149 26,736 25,474
Diluted 28,961 26,736 25,474

See notes to unaudited condensed consolidated financial statements

PHOENIX TECHNOLOGIES LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)

Three months ended
December September December
31, 30, 31,
2007 2007 2006
Cash flows from operating activities:
Net income (loss) $2,244 $(668) $(8,011)
Reconciliation to net cash provided
by (used in) operating activities:
Depreciation and amortization 550 944 885
Stock-based compensation 1,022 2,311 1,151
Loss from disposal of fixed assets 33 4 28
Change in operating assets
and liabilities:
Accounts receivable 1,320 (1,165) 2,492
Prepaid royalties and maintenance 29 (13) 43
Other assets 334 (235) 89
Accounts payable 174 305 (1,614)
Accrued compensation and
related liabilities (933) 644 (801)
Deferred revenue 197 109 (2,449)
Income taxes 1,696 1,435 72
Accrued restructuring charges (1,229) 1,015 (1,070)
Other accrued liabilities 530 (730) (1,049)
Net cash provided by (used in)
operating activities 5,967 3,956 (10,234)

Cash flows from investing activities:
Proceeds from sales of marketable
securities - - 48,128
Purchases of marketable securities - - (48,025)
Purchases of property and equipment (615) (427) (87)
Purchases of technology - (3,500) -
Net cash provided by (used in)
investing activities (615) (3,927) 16

Cash flows from financing activities:
Proceeds from stock purchases under
stock option and stock purchase plans 2,195 3,839 565
Net cash provided by
financing activities 2,195 3,839 565

Effect of changes in exchange rates 47 83 36
Net increase in cash and cash equivalents 7,594 3,951 (9,617)
Cash and cash equivalents at
beginning of period 62,705 58,754 34,743
Cash and cash equivalents
at end of period $70,299 $62,705 $25,126

See notes to unaudited condensed consolidated financial statements

PHOENIX TECHNOLOGIES LTD.
RECONCILIATION OF GAAP TO NON-GAAP NET INCOME AND
NET LOSS PER SHARE
(in thousands, except per share data)
(unaudited)

Three months ended
December September December
31, 30, 31,
2007 2007 2006

GAAP net income (loss) $2,244 $(668) $(8,011)

(1) Equity-based compensation expense
under SFAS No. 123( R ) 1,022 2,311 1,135

(2) Restructuring 69 1,036 2,211

Non-GAAP net income (loss) $3,335 $2,679 $(4,665)

Non-GAAP earnings (loss) per share:
Basic $0.12 $0.10 $(0.18)
Diluted $0.12 $0.10 $(0.18)

Shares used in earnings (loss)
per share calculation:
Basic 27,149 26,736 25,474
Diluted 28,961 27,681 25,474

These adjustments reconcile the Company's GAAP results of operations to
the reported non-GAAP results of operations. The Company believes that
presentation of net income and net income per share excluding non-cash
equity-based compensation and restructuring cost provides meaningful
supplemental information to investors, as well as management, that is
indicative of the Company's core operating results and facilitates comparison
of operating results across reporting periods. The Company uses these
non-GAAP measures when evaluating its financial results as well as for
internal planning and budgeting purposes. Equity-based compensation is
excluded from non-GAAP financial results since it is a non-cash based charge.
Restructuring costs are excluded from non-GAAP financial results since these
are infrequent and non-recurring and therefore may not be considered directly
related to our on-going business operations. These non-GAAP measures should
not be viewed as a substitute for the Company's GAAP results, and may be
different than non-GAAP measures used by other companies.
(1) This number represents non-cash equity-based compensation expense
related to the Company's adoption of SFAS No. 123( R ) beginning October 1,
2005. For the three months ended December 31, 2007, non-cash equity-based
compensation was $1.0 million, allocated as follows: $0.1 million to cost of
goods sold, $0.2 million to research and development, $0.2 million to sales
and marketing and $0.5 million to general and administrative. For the three
months ended September 30, 2007, non-cash equity-based compensation was $2.3
million, allocated as follows: $0.5 million to research and development, $0.3
million to sales and marketing and $1.5 million to general and administrative.
For the three months ending December 31, 2006, non-cash equity-based
compensation was $1.1 million, allocated as follows: $0.3 million to research
and development, $0.3 million to sales and marketing and $0.5 million to
general and administrative. Management believes that it is useful to
investors to understand how the expenses associated with the adoption of SFAS
No. 123( R ) are reflected in net income.
(2) The Company has incurred restructuring expenses, included in its GAAP
presentation of operating expense, primarily due to workforce related charges
such as payments for severance and benefits and estimated costs of exiting and
terminating facility lease commitments related to formal restructuring plans
approved by the Board of Directors in June 2006, in September 2006, November
2006 and September 2007. For the three months ended December 31, 2007,
severance and benefits totaled $0.1 million and cost related to exiting and
terminating two facility leases totaled $0.1 million. These costs were partly
offset when the Company decreased its fiscal year 2003 restructuring reserve
for the Irvine facility by $0.1 million due to projected income from the
signing of a new sublease over the remaining term of the lease. For the three
months ended September 30, 2007, severance and benefits totaled $0.4 million
and cost related to exiting and terminating two facility leases totaled
$0.5 million. In addition, for the three months ended September 30, 2007, the
Company increased the fiscal year 2003 restructuring reserve for the Irvine
facility by $0.1 million due to projected increased operating expenses over
the remaining term of the lease. For the three months ending December 31,
2006, severance and benefits totaled $1.9 million and cost related to exiting
and terminating two facility leases totaled $0.4 million. In addition, the
Company decreased the fiscal year 2003 restructuring reserve for the Irvine
facility by $0.1 million due to a revised projection of the liability over the
remaining term of the lease. The Company believes that these items do not
reflect expected future operating expenses nor does the Company believe that
they provide a meaningful evaluation of current versus past operational
performance.
Investor Relations Contacts:

Phoenix Technologies Ltd.
Richard Arnold
Chief Operating Officer and Chief Financial Officer
Tel. +1 408 570 1000
investor_relations@phoenix.com

Sapphire Investor Relations, LLC
Erica Mannion
Tel. +1 212 766 1800 x 203
Investor_relations@phoenix.com

SOURCE Phoenix Technologies Ltd.

Richard Arnold, Chief Operating Officer and Chief Financial Officer of Phoenix
Technologies Ltd., +1-408-570-1000, investor_relations@phoenix.com; or Erica
Mannion of Sapphire Investor Relations, LLC, +1-212-766-1800, ext. 203,
Investor_relations@phoenix.com, for Phoenix Technologies Ltd.