Smith Micro Software Reports 2008 Second Quarter Results

Net Revenues Increase to a Company Record $23.5 Million
ALISO VIEJO, Calif.--(Business Wire)--
Smith Micro Software, Inc. (NASDAQ: SMSI), a leading developer and
marketer of software solutions and services for the wireless market,
today reported its financial results for the fiscal 2008 second
quarter ending June 30, 2008.

"We are pleased to report another record quarter for the Company
with revenues increasing 53% year over year to $23.5 million," said
William W. Smith Jr., President and CEO of Smith Micro Software. "Our
Connectivity & Security business segment continued to lead the way
with strong growth of 119% year over year to $12.9 million. We expect
this business segment to continue to be a strong growth driver for the
remainder of the year, as the overall wireless data market continues
its rapid adoption, and our customers launch new connectivity
solutions. We were also pleased to see our Consumer business segment
have its highest revenue contribution in our history. Consumer sales
increased 175% year over year to $6.2 million in a quarter that
seasonally shows slower buying trends. Our Multimedia business segment
performed as expected with revenues up slightly from the first quarter
to $3.1 million."

Mr. Smith continued, "As we look back at the first half of the
year the Company accomplished several significant milestones while
continuing to deliver strong financial results. As we stated earlier
in the year, the first half of 2008 was about laying the foundation
for long-term financial growth. We believe we accomplished this goal
by investing significant resources in the development of new products
that our customers plan to launch in the second half of this year. We
also invested in the continued integration of new technologies, new
customers and employees from the acquisition of the Mobility Solutions
Group from PCTEL earlier this year, which was our largest competitor
in the Connectivity market."

Mr. Smith concluded, "We remain very optimistic about our position
in the wireless software market as we have built a strong platform for
long-term sustainable revenue growth and profitability. We look
forward to another very solid half of 2008 and in closing I would like
to reiterate our annual net revenue guidance of $95 million to $105
million for the year."

Smith Micro reported net revenues of $23.5 million for the second
quarter ended June 30, 2008, a 53% increase when compared to the $15.4
million reported for the second quarter of 2007.

GAAP gross margins of $18.0 million increased $6.6 million, or
58%, from the second quarter ended June 30, 2007. This increase was
primarily due to improved product margins on the favorable product mix
and higher Multimedia margins due to the change in how the product is
delivered. On a non-GAAP basis (which excludes amortization of
intangibles, stock compensation and non-cash tax expense), gross
margin of $19.0 million increased $7.1 million or 60% from the same
period last year.

Of key significance, while the Company's revenues increased a
record 53% year-over-year, gross margin dollars increased 58% from the
same period last year on a GAAP basis, and 60% on a non-GAAP basis,
reflecting the increasing leverage in Smith Micro's financial model.

GAAP gross margin was 77% for the second quarter of 2008 as
compared with 74% for the same period last year, and non-GAAP gross
margin was 81% for the second quarter of 2008 compared to 78% for the
second quarter of 2007.

GAAP net loss was $158,000 or $0.01 per diluted share for the
second quarter of 2008 primarily due to non-cash charges for
amortization related to acquisitions and stock compensation expense.
Non-GAAP net income for the second quarter of 2008 was $3.6 million or
$0.12 per diluted share, as compared to $5.1 million or $0.16 per
diluted share for the quarter ended June 30, 2007.

Fully diluted shares outstanding as of June 30, 2008 were 30.9
million as compared to 31.4 million shares outstanding as of June 30,
2007.

Total cash, cash equivalents, and short-term investments at June
30, 2008 were $26.2 million, equal to the $26.2 million at March 31,
2008.

For the six-months ended June 30, 2008 the Company reported net
revenue of $45.3 million, a 37% increase when compared to the $33.0
million reported for the six months ended June 30, 2007.

GAAP gross margins of $34.8 million increased $11.4 million, or
49%, from the $23.4 million reported in the six months ended June 30,
2007. The increase in gross profit was primarily due to improved
product margins on the favorable product mix and higher Multimedia
margins due to the change in how the product is delivered.

On a non-GAAP basis (which excludes amortization of intangibles,
stock compensation and non-cash tax expense), gross margin of $36.8
million increased $12.6 million, or 52%, from the same period last
year.

GAAP net loss for the six months ended June 30, 2008 was $475,000
or $0.02 per diluted share primarily due to non-cash charges for
amortization related to acquisitions and stock compensation expense.
Non-GAAP net income for the six months ended June 30, 2008 was $6.7
million or $0.22 per diluted share, as compared to $11.4 million or
$0.37 per diluted share for the six months ended June 30, 2007.

The Company uses a non-GAAP reconciliation of net income and
earnings per share in the presentation of financial results in this
press release. Management believes that this presentation may be more
meaningful in analyzing our income generation, since amortization of
intangibles from acquisitions, stock-based compensation, and non-cash
tax expense are excluded from the non-GAAP earnings calculation. This
presentation may be considered more indicative of our ongoing
operational performance. The tables below present the differences
between non-GAAP earnings and net income on an absolute and per-share
basis. Non-GAAP financial measures should not be considered in
isolation from, or as a substitute for, financial information
presented in compliance with GAAP, and the non-financial measures as
reported by Smith Micro Software may not be comparable to similarly
titled amounts reported by other companies.

Investor Conference Call

Smith Micro will hold an investor conference call to discuss the
company's second quarter results at 4:30 p.m. Eastern time today,
August 5, 2008. The call can be accessed by dialing (800) 366-8058 and
providing the pass code "SMSI." Participants are asked to call the
assigned number approximately 10 minutes before the conference call
begins. In addition, the conference call will be available over the
Internet at www.smithmicro.com in the Investor Relations section.

About Smith Micro Software:

Smith Micro Software, Inc., headquartered in Aliso Viejo,
California, with offices in Europe and Asia, develops and markets
wireless multimedia and communication solutions, mobile device
management products, image and data compression solutions and many
award-winning software products. Smith Micro's complete line of
products is available through Smith Micro's Enterprise, Wireless and
OEM Sales Groups, and direct from its websites, retail and value-added
resellers (VARs). Smith Micro's common stock trades on the NASDAQ
Global Market under the symbol SMSI.

Safe Harbor Statement: This release may contain forward-looking
statements that involve risks and uncertainties, including without
limitation forward-looking statements relating to the company's net
revenues guidance for fiscal 2008, our financial prospects and other
projections of our performance, the company's ability to increase its
business and the anticipated timing and financial performance of our
new products and potential acquisitions. Among the important factors
that could cause actual results to differ materially from those
expressed or implied in the forward-looking statements are changes in
demand for our products from our customers and their end-users, new
and changing technologies, customer acceptance of those technologies,
new and continuing adverse economic conditions, and the company's
ability to compete effectively with other software companies. These
and other factors discussed in the company's filings with the
Securities and Exchange Commission, including its filings on Forms
10-K and 10-Q, could cause actual results to differ materially from
those expressed or implied in any forward-looking statements. The
forward-looking statements contained in this release are made on the
basis of the views and assumptions of management regarding future
events and business performance as of the date of this release, and
the company does not undertake any obligation to update these
statements to reflect events or circumstances occurring after the date
of this release.

Smith Micro and the Smith Micro logo are registered trademarks or
trademarks of Smith Micro Software, Inc. All other trademarks and
product names are the property of their respective companies.

-0-
*T
Smith Micro Software, Inc.
Reconciliation of GAAP to Non-GAAP Results

Stock Non-
GAAP Comp. Amort. Taxes GAAP
---------------------------------------

Three Months Ended 06/30/08:
Gross Margin (in thousands) $17,989 $ 132 $ 876 $ - $18,997
Net Loss (in thousands) $ (158) $3,104 $1,742 $(1,067) $ 3,621
EPS (Diluted) $ (0.01) $ 0.10 $ 0.06 $ (0.03) $ 0.12

Three Months Ended 06/30/07:
Gross Margin (in thousands) $11,365 $ 91 $ 452 $ - $11,908
Net Income (in thousands) $ 194 $4,021 $ 623 $ 307 $ 5,145
EPS (Diluted) $ 0.01 $ 0.12 $ 0.02 $ 0.01 $ 0.16

Six Months Ended 06/30/08:
Gross Margin (in thousands) $34,753 $ 232 $1,833 $ - $36,818
Net Loss (in thousands) $ (475) $6,746 $3,619 $(3,144) $ 6,746
EPS (Diluted) $ (0.02) $ 0.22 $ 0.12 $ (0.10) $ 0.22

Six Months Ended 06/30/07:
Gross Margin (in thousands) $23,353 $ 105 $ 750 $ - $24,208
Net Income (in thousands) $ 2,036 $6,667 $1,071 $ 1,576 $11,350
EPS (Diluted) $ 0.07 $ 0.22 $ 0.03 $ 0.05 $ 0.37
*T

-0-
*T
Smith Micro Software, Inc.
Statement of Operations for the Three and Six Months Ended June 30,
2008 and 2007
(in thousands, except per share amounts)

For the Three Months For the Six Months
Ended June 30, Ended June 30,
2008 2007 2008 2007
----------- ----------- ----------- -----------
(unaudited) (unaudited) (unaudited) (unaudited)

Net Revenues $ 23,452 $ 15,346 $ 45,332 $ 33,013

Cost of Revenues 5,463 3,981 10,579 9,660
----------- ----------- ----------- -----------

Gross Profit 17,989 11,365 34,753 23,353
----------- ----------- ----------- -----------
Operating Expenses
Selling & Marketing 5,839 4,437 12,574 7,896
Research &
Development 7,853 3,483 14,922 6,206
General &
Administrative 4,766 3,702 9,614 7,297
----------- ----------- ----------- -----------
Total Operating
Expenses 18,458 11,622 37,110 21,399
----------- ----------- ----------- -----------
Operating (Loss)
Income (469) (257) (2,357) 1,954
Interest Income 141 1,042 416 2,268
----------- ----------- ----------- -----------
(Loss) Income Before
Income Taxes (328) 785 (1,941) 4,222
Income Tax (Benefit)
Expense (170) 591 (1,466) 2,186
----------- ----------- ----------- -----------
Net (Loss) Income $ (158) $ 194 $ (475) $ 2,036
=========== =========== =========== ===========

Earnings (loss) per
share:
Basic $ (0.01) $ 0.01 $ (0.02) $ 0.07
=========== =========== =========== ===========
Diluted $ (0.01) $ 0.01 $ (0.02) $ 0.07
=========== =========== =========== ===========

Weighted average
shares outstanding:
Basic 30,855 29,739 30,637 29,397
=========== =========== =========== ===========
Diluted 30,855 31,434 30,637 31,004
=========== =========== =========== ===========
*T

-0-
*T
Smith Micro Software, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)

June 30, December 31,
2008 2007
----------- ------------
(unaudited)
ASSETS
Current Assets:
Cash & Cash Equivalents $ 24,411 $ 87,549
Short-Term Investments 1,748 --
Accounts Receivable, (Net) 19,750 13,157
Income Taxes Receivable 234 180
Deferred Tax Asset 416 660
Inventory 1,531 1,993
Prepaid & Other Assets 862 1,001
----------- ------------
Total Current Assets 48,952 104,540
Equipment & Improvements, Net 3,597 1,079
Deferred Tax Asset 7,897 6,351
Goodwill 82,886 32,505
Intangible Assets, Net 27,375 17,946
----------- ------------
TOTAL ASSETS $ 170,707 $ 162,421
=========== ============

LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable $ 2,999 $ $3,401
Deferred Revenue 3,102 584
Accrued Liabilities 4,517 3,922
----------- ------------
Total Current Liabilities 10,618 7,907
----------- ------------

Common Stock 31 30
Additional Paid In Capital 160,361 154,312
Accumulated Earnings (Deficit) (303) 172
----------- ------------
Total Stockholders' Equity 160,089 154,514
----------- ------------
TOTAL LIABILITIES & EQUITY $ 170,707 $ 162,421
=========== ============
*T

Smith Micro Software, Inc.
Robert Elliott, Chief Marketing Officer
949-362-5800
relliott@smithmicro.com
or
IR INQUIRIES:
MKR Group
Charles Messman, Todd Kehrli
323-468-2300
smsi@mkr-group.com

Copyright Business Wire 2008