Spansion Reports Fourth Quarter and Fiscal Year 2007 Results

SUNNYVALE, Calif., Jan. 22 /PRNewswire-FirstCall/ -- Spansion Inc., the
world's largest pure-play provider of Flash memory solutions, today announced
results for the fourth quarter and fiscal year ended December 30, 2007. For
the fourth quarter of 2007, the company reported net sales of $653 million, an
increase of 7 percent compared to net sales of $611 million in the third
quarter of 2007.
(Logo: http://www.newscom.com/cgi-bin/prnh/20060118/SFW077LOGO)
For the fourth quarter of 2007 gross margin rose to 20 percent compared to
18 percent in the third quarter of 2007 and sequential operating loss
decreased by $13 million, or 22%, to $46 million. Net loss for the fourth
quarter of 2007 was $50 million, or $0.37 per share, compared to a net loss of
$72 million, or $0.53 per share, in the previous quarter.
"The fourth quarter reflected significant operational improvement as gross
margin improved. The overall pricing environment was encouraging and the
book-to-bill ratio was strong at 1.3," said Bertrand Cambou, president and
CEO,
Spansion Inc. "The strategic investment plan for our 300mm, SP1 facility is
on track and we expect to begin recognizing revenue in the first quarter as we
are already qualified at leading customers."
Divisional Highlights
In the company's Wireless Solutions Division (WSD), net sales for the
fourth quarter of 2007 rose slightly to $322 million, up from $317 million in
net sales in the previous quarter. Worldwide unit shipments were up in the
fourth quarter and blended ASPs were flat sequentially. The book-to-bill
ratio for WSD was particularly strong due to gains at the top 5 handset OEMs.
The company's Consumer, Set Top Box and Industrial Division (CSID)
achieved record net sales of $324 million for the fourth quarter of 2007,
compared to $294 million in net sales in the third quarter of 2007, reflecting
continued segment share gains. Growth was the result of strong sales of the
company's high density MirrorBit(R) solutions across multiple geographies.
Blended ASPs for CSID in the fourth quarter of 2007 rose 9% sequentially and
unit shipments reached a record, up 3% sequentially.
Annual Highlights
For the fiscal year ended December 30, 2007, the company outperformed the
overall NOR industry as net sales declined only 3% to $2.5 billion from $2.6
billion in the same time period last year. For fiscal year 2007, Spansion
preliminarily estimates that its NOR industry segment share increased from 31
percent to approximately 33 percent, driven by strong adoption of the
company's MirrorBit technology as MirrorBit revenue for fiscal year 2007 rose
41 percent to $1.8 billion compared to $1.3 billion in fiscal year 2006.
Net loss for fiscal year 2007 was $263 million, or $1.95 per share,
compared to a net loss of $148 million, or $1.15 per share, for fiscal year
2006. Net loss for fiscal year 2007 includes approximately $152 million in
operating costs related to the strategic investment in SP1, the company's new
300mm, 65nm, wafer fabrication facility.
Additional Highlights

-- Spansion announced an agreement to acquire its long time partner Saifun
Semiconductor Ltd. The acquisition will consolidate all MirrorBit and
NROM IP into one company and immediately enable Spansion to enter the
technology licensing business.
-- The company unveiled its next generation MirrorBit ORNAND architecture
MirrorBit ORNAND2(TM), which will use a SONOS-like memory cell
connected in a NAND memory array at 45-nanometers. Initial shipments
are scheduled to begin in early 2009.
-- Spansion announced an agreement with Virident Inc. to develop and
market a new generation of memory solutions designed to dramatically
reduce power consumption and provide excellent system performance in
Internet data centers. These solutions will be based on Spansion's
revolutionary MirrorBit Eclipse(TM) architecture.
-- The company received the Best Supplier award from Lenovo Mobile
Communication Technology Ltd. for 2007 for the fourth consecutive year.
Spansion was the only NOR Flash memory supplier selected and the award
reflects the commitment and success of Spansion in the China handset
market.

Current Outlook
Spansion's outlook for the first quarter of 2008 and fiscal year 2008 is
based on current expectations and subject to various factors including those
set forth in the Cautionary Statement below.
-- Spansion expects net sales for the first quarter of 2008 to be in the
range of $580 million and $640 million, consistent with seasonal
trends. The company anticipates that its first quarter 2008 CSID net
sales will decline sequentially. However, the company's WSD net sales
are expected to increase sequentially driven by gains at top tier
handset customers.
-- For the first quarter of 2008, the company expects gross margin to
decline due primarily to non-cash depreciation charges related to the
full conversion of its SP1 facility to production.
-- For fiscal year 2008, capital expenditures will be approximately half
the amount of 2007.
-- Spansion expects fiscal year 2008 net sales to increase compared to
fiscal year 2007 and anticipates that its financial performance will
improve compared to fiscal year 2007.

Investor Conference Call
Spansion will host a conference call today, January 22, 2008, at 1:30 p.m.
PT/ 4:30 p.m. ET to discuss the quarterly results. A live audio-only web cast
of the call will be made available in the Investor Relations section of the
company's web site at http://www.spansion.com. In addition, we are providing a
slide presentation regarding our quarterly results and other financial
information, which will be posted to the company's web site immediately prior
to the conference call. The slide presentation will be available for viewing
in the Investor Relations section of the company's web site at
http://www.spansion.com although we reserve the right to discontinue that
availability at any time. A replay of the call will be made available on the
company's investor relations web site at http://www.spansion.com following the
call.
Cautionary Statement
This release contains forward-looking statements that are made pursuant to
the safe harbor provisions of the Private Securities Litigation Reform Act of
1995, including statements regarding: the expectation to recognize revenue
from the company's SP1 facility in the first quarter of 2008; the presumption
that the merger with Saifun Semiconductors Ltd. will close, and the belief
that such closing will consolidate all MirrorBit and NROM IP technologies into
one company and enable Spansion to immediately enter the technology licensing
business; the expectation that the company will begin shipments of its
MirrorBit ORNAND2 products in early 2009; the belief that net sales for the
first quarter of 2008 will be in the range of $580 million and $640 million;
the expectation that first quarter 2008 CSID net sales will decline
sequentially, that WSD net sales will increase sequentially, and that gross
margin will be impacted by approximately $25 million in the first quarter of
2008; the plans that capital expenditures for fiscal year 2008 will be
approximately half the amount of 2007; and the expectation that fiscal year
2008 net sales will increase compared to fiscal year 2007, and that the
company's financial performance will improve in fiscal year 2008 compared to
fiscal year 2007. Investors are cautioned that the forward-looking statements
in this release involve risks and uncertainties that could cause actual
results to differ materially from the company's current expectations. Risks
that the company considers to be the important factors that could cause actual
results to differ materially from those set forth in the forward-looking
statements include the possibility that demand for the company's Flash memory
products will be lower than currently expected; that average selling prices
may decline; loss of key intellectual property arrangements creates a greatly
increased risk of patent or other intellectual property infringement claims;
the high cyclicality of the Flash memory market which has experienced severe
downturns; that Spansion may not be effective in expense reduction efforts;
the merger with Saifun may not result in benefits that we anticipate or that
any delay or failure to complete the merger may result in harm; that OEMs will
increasingly choose NAND-based Flash memory products over NOR, MirrorBit
ORNAND and MirrorBit ORNAND2 architecture-based Flash memory products for
their applications; that Spansion has a significant amount of debt, and such
debt could subject us to restrictive covenants; that the company may not
achieve facilities and capacity implementation schedules as a result of
factors such as insufficient cash flows and inadequate external financing;
that the company may lose a key customer, or experience a reduction of demand
from a key customer; that the company will not successfully develop, introduce
and commercialize new products and technologies or to accelerate our product
development cycle; that competitors may introduce new memory or other
technologies that may make our Flash memory products uncompetitive or
obsolete; that the company will fail to develop, or there will be a lack of
customer acceptance of, MirrorBit ORNAND and MirrorBit ORNAND2
architecture-based Flash memory products; that the company may experience
manufacturing constraints or fail to achieve manufacturing efficiencies;
customers' ability to change booked orders may lead to excess inventory; that
the company's investments in research and development may not lead to timely
improvements in technology; and intellectual property claims or litigation
could cause the company to incur substantial costs or pay substantial damages
or prohibit sales of its products. The company urges investors to review in
detail the risks and uncertainties in the company's Securities and Exchange
Commission filings, including but not limited to the company's Annual Report
on Form 10-K for the fiscal year ended December 31, 2006 and Quarterly Report
on Form 10-Q for the fiscal quarter ended September 30, 2007. The company
assumes no obligation to update any forward-looking statements or information
included in this press release.
About Spansion
Spansion (Nasdaq: SPSN) is a leading Flash memory solutions provider,
dedicated to enabling, storing and protecting digital content in wireless,
automotive, networking and consumer electronics applications. Spansion,
previously a joint venture of AMD and Fujitsu, is the largest company in the
world dedicated exclusively to designing, developing, manufacturing, marketing
and selling Flash memory solutions. For more information, visit
http://www.spansion.com.
Spansion(R), the Spansion logo, MirrorBit(R), MirrorBit(R) Eclipse(TM),
ORNAND(TM), ORNAND2(TM), HD-SIM(TM) and combinations thereof, are trademarks
of Spansion LLC in the U.S. and other countries. Other names used are for
informational purposes only and may be trademarks of their respective owners.

Spansion Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)

Quarter Ended Year Ended
Dec. 30, Sep. 30, Dec. 31, Dec. 30, Dec. 31,
2007 2007 2006 2007 2006*
(Unaudited)(Unaudited)(Unaudited)(Unaudited)

Net sales $652,801 $611,069 $687,274 $2,500,813 $2,579,274
Cost of sales 523,783 500,741 557,793 2,065,143 2,066,642

Gross profit 129,018 110,328 129,481 435,670 512,632
Other expenses:
Research and
development 112,893 111,231 78,739 436,785 341,692
Sales, general and
administrative 62,290 58,226 66,442 239,317 261,696

Operating loss (46,165) (59,129) (15,700) (240,432) (90,756)
Interest and other
income (expense),
net 5,157 6,835 7,940 36,030 28,992
Interest expense (15,487) (23,628) (20,698) (84,238) (88,214)

Loss before income
taxes (56,495) (75,922) (28,458) (288,640) (149,978)
Benefit for income
taxes (6,981) (4,320) (3,445) (25,144) (2,215)

Net loss $(49,514) $(71,602) $(25,013) $(263,496) $(147,763)

Net loss per common
share

Basic and diluted $(0.37) $(0.53) $(0.19) $(1.95) $(1.15)

Shares used in per
share calculation

- Basic and diluted 135,283 135,049 130,489 134,924 128,965

*Derived from the December 31, 2006 audited financial statements of
Spansion Inc.

Spansion Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)

Dec. 30, Sep. 30, Dec. 31,
2007 2007 2006*
Assets (Unaudited) (Unaudited)

Current assets:
Cash, cash equivalents and
marketable securities $415,742 $529,096 $885,769
Accounts receivable, net 379,962 345,890 395,903
Inventories 583,869 531,938 455,840
Deferred income taxes 26,607 32,424 1,395
Prepaid expenses and other current
assets 46,452 62,866 36,163
Total current assets 1,452,632 1,502,214 1,775,070

Property, plant and equipment, net 2,271,964 2,234,153 1,735,694
Deferred income taxes 29,957 26,156 13,556
Other assets 61,092 45,292 25,397

Total Assets $3,815,645 $3,807,815 $3,549,717

Liabilities and Stockholders' Equity

Current liabilities:
Note payable to banks under
revolving loans $- $- $33,608
Accounts payable and accrued
liabilities 643,764 620,113 493,242
Accrued compensation and benefits 60,778 61,692 51,598
Income taxes payable 13,818 23,368 4,333
Deferred income on shipments to
distributors 39,957 33,862 32,496
Current portion of long-term debt
and capital lease obligations 101,797 85,189 74,766
Total current liabilities 860,114 824,224 690,043

Deferred income taxes 186 67 188
Long-term debt and capital lease
obligations 1,299,536 1,286,782 1,009,673
Other long-term liabilities 23,361 32,020 4,053

Stockholders' equity 1,632,448 1,664,722 1,845,760
Total liabilities and stockholders'
equity $3,815,645 $3,807,815 $3,549,717

*Derived from the December 31, 2006 audited financial statements of
Spansion Inc.

SOURCE Spansion Inc.

Investors, Bob Okunski, +1-408-616-1117, bob.okunski@spansion.com, or Media,
Courtney Brigham, +1-408-616-5056, courtney.brigham@spansion.com, both of
Spansion Inc.