GSI Technology, Inc. Reports Second-Quarter Fiscal 2010 Results

http://www.businesswire.com/news/home/20091029006063/en

SANTA CLARA, Calif.--(Business Wire)--
GSI Technology, Inc. (Nasdaq: GSIT) reported its twenty-fourth consecutive
quarter of profitability with net income of $2.4 million, or $0.09 per diluted
share, on net revenues of $14.7 million in its second fiscal quarter ended
September 30, 2009. In the second quarter of fiscal 2009, the Company earned
$3.6 million, or $0.12 per diluted share, on net revenues of $17.1 million.

For the six months ended September 30, 2009, the Company reported net income of
$4.6 million, or $0.17 per diluted share, on net revenues of $28.9 million
compared to net income of $6.6 million, or $0.23 per diluted share, on net
revenues of $34.4 million in the first six months of fiscal 2009.

Sequentially, second-quarter fiscal 2010 net revenues increased by $468,000, or
3.3%, from $14.2 million in the first quarter; net income increased by $325,000,
or 15.3%, from $2.1 million in the prior quarter. According to Lee-Lean Shu,
Chairman and Chief Executive Officer, second-quarter revenues were slightly
better than expected, due primarily to the Company's August 2009 acquisition of
substantially all the assets related to Sony Electronics' SRAM product line.
"The acquisition added $349,000 to second-quarter net revenues and may add
revenues in excess of our previous quarterly guidance for the acquired products
to third-quarter net revenues due to a one-time build in inventory at a tier one
customer," said Shu. "It is anticipated that within a year the acquired product
line will be generating as much as $2 million in incremental quarterly revenues
with gross profit margins on a par with the Company's existing SRAM products."

Gross margin and operating margin were 44.4% and 10.3%, respectively, in the
second quarter of fiscal 2010 compared to 42.5% and 16.8%, respectively, in the
prior quarter. In the second quarter of fiscal 2009, gross margin and operating
margin were 45.7% and 24.0%, respectively.

"Gross margin was slightly better than we had anticipated due to a shift in
product mix during the quarter to a higher percentage of higher-density,
higher-margin products," said Shu.

Lower operating margin reflects a sequential increase of $1.1 million, or 70.9%
in research and development expense related in large part to the tape-out of a
new 65-nanometer product that accounted for $650,000 in R&D expense in the
second quarter. Selling, general and administrative expenses increased
sequentially $213,000, or 10.3%, primarily reflecting professional fees related
to the acquisition of the Sony Electronics SRAM product line. Selling, general
and administrative expenses were $2.3 million, or 15.5% of net revenues, in the
second quarter, compared to $2.1 million, or 14.5% of net revenues, in the prior
quarter, and $2.4 million, or 13.9% of net revenues, in the second quarter of
fiscal 2009.

Second-quarter direct and indirect sales to Cisco Systems were $4.8 million, or
32.6% of net revenues, compared to $3.3 million, or 23.1% of net revenues, in
the prior quarter and $4.2 million, or 24.8% of net revenues in the second
quarter of fiscal 2009. Sales to Huawei Technologies were $1.7 million, or 11.7%
of net revenues, compared to $1.3 million, or 9.3% of net revenues, in the prior
quarter and $1.2 million, or 6.8% of net revenues in the second quarter of
fiscal 2009. Military/defense sales were $2.3 million, or 14.8% of net revenues,
compared to $2.4 Million, or 15.8% of net revenues, in the prior quarter.

The Company received the first silicon on two new 65-nanometer products in the
second quarter, which it believes will help it maintain its leadership position
in the SRAM market. When introduced, the first product will be the highest
density SigmaQuad family available in the industry. The second new product, our
third generation SigmaQuad, will be the highest performing SRAM in the market,
and has already been designed into the next generation service router of one of
the Company`s largest customers.

The SigmaQuad line of products continues to grow, accounting for 17.1% of total
shipments in the second quarter compared to 15.9% in the prior quarter, 19.8% in
the fourth quarter of fiscal 2009, 14.9% in the third quarter of fiscal 2009,
10.2% in the second quarter of fiscal 2009, and 8.2% in the first quarter of
fiscal 2009.

At September 30, 2009, inventory was $15.8 million compared to $12.5 million at
June 30, 2009 and $11.0 million at March 31, 2009. The growth in inventory was
primarily related to inventory acquired in our acquisition of the Sony
Electronics SRAM product line.

Total second-quarter pre-tax stock-based compensation expense was $383,000
compared to $291,000 in the prior quarter and $309,000 in the comparable quarter
a year ago.

At September 30, 2009, the Company had $37.2 million in cash, cash equivalents
and short-term investments, $29.0 million in long-term investments, $52.3
million in working capital, no debt, and stockholders` equity of $90.5 million.
The sequential decrease in working capital, from $58.6 million at the end of
June, is largely attributable to the aforementioned Sony acquisition.

Stock Repurchase Program

On November 6, 2008, the Board of Directors authorized the repurchase, at
management`s discretion, of up to $10 million of the Company`s common stock.
Under the repurchase program, the Company may repurchase shares from time to
time on the open market or in private transactions. The specific timing and
amount of the repurchases will be dependent on market conditions, securities law
limitations and other factors. The repurchase program may be suspended or
terminated at any time without prior notice. No repurchases were made during the
second quarter of fiscal 2010. To date, the Company has repurchased a total of
1,481,962 shares at an average cost of $2.80 per share.

Outlook for Third-Quarter Fiscal 2010

We currently expect net revenues in the third quarter of fiscal 2010 to be in
the range of $16.1 to $16.9 million with gross margins of approximately 41%. We
expect operating expenses to be down approximately $300,000 from the second
quarter of fiscal 2010.

About GSI Technology

Founded in 1995, GSI Technology, Inc. is a leading provider of high-performance
static random access memory, or SRAM, products primarily incorporated in
networking and telecommunications equipment. Headquartered in Santa Clara,
California, GSI Technology is ISO 9001 certified and has worldwide factory and
sales locations. For more information, please visit www.gsitechnology.com.

Conference Call

GSI Technology will review its financial results for the quarter ended September
30, 2009 and discuss its current business outlook during a conference call for
investors at 1:30 p.m. PDT (4:30 p.m. EDT) today, October 29, 2009. To listen to
the teleconference, please call toll-free 877-717-3046 (or 706-634-6364 for
international callers) approximately 10 minutes prior to the start time and
provide conference ID 36168593. You may also listen to the teleconference live
via the Internet at www.gsitechnology.com or www.earnings.com. For those unable
to attend, these Web sites will archive the call.

Forward-Looking Statements

The statements contained in this press release that are not purely historical
are forward-looking statements within the meaning of Section 21E of the
Securities Exchange Act of 1934, as amended, including statements regarding GSI
Technology`s expectations, beliefs, intentions, or strategies regarding the
future. All forward-looking statements included in this press release are based
upon information available to GSI Technology as of the date hereof, and GSI
Technology assumes no obligation to update any such forward-looking statements.
Forward-looking statements involve a variety of risks and uncertainties, which
could cause actual results to differ materially from those projected. These
risks include those associated with fluctuations in GSI Technology`s operating
results; GSI Technology`s historical dependence on sales to a limited number of
customers and fluctuations in the mix of customers and products in any period;
the rapidly evolving markets for GSI Technology`s products and uncertainty
regarding the development of these markets; the need to develop and introduce
new products to offset the historical decline in the average unit selling price
of GSI Technology`s products; the challenges of rapid growth followed by periods
of contraction; and intensive competition. Further information regarding these
and other risks relating to GSI Technology`s business is contained in the
Company`s filings with the Securities and Exchange Commission, including those
factors discussed under the caption "Risk Factors" in such filings.

(financial tables follow)

GSI TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(Unaudited)

Three Months Ended Six Months Ended
Sept. 30, June 30, Sept. 30, Sept. 30, Sept. 30,
2009 2009 2008 2009 2008

Net revenues $14,676 $14,208 $17,094 $28,884 $34,438
Cost of goods sold 8,167 8,165 9,276 16,332 18,929

Gross profit 6,509 6,043 7,818 12,552 15,509

Operating expenses:

Research & development 2,727 1,596 1,348 4,323 2,601
Selling, general and administrative 2,273 2,060 2,369 4,333 4,825
Total operating expenses 5,000 3,656 3,717 8,656 7,426

Operating income 1,509 2,387 4,101 3,896 8,083

Interest and other income, net 1,340 294 359 1,634 674

Income before income taxes 2,849 2,681 4,460 5,530 8,757
Provision for income taxes 403 560 890 963 2,159
Net income $2,446 $2,121 $3,570 $4,567 $6,598

Earnings per share, basic $0.09 $0.08 $0.13 $0.17 $0.24
Earnings per share, diluted $0.09 $0.08 $0.12 $0.17 $0.23

Weighted-average shares used in computing per share amounts:

Basic 26,977 26,872 28,088 26,925 28,046
Diluted 27,592 27,324 28,844 27,458 28,822

Stock-based compensation included in the Condensed Consolidated Statement of Operations:

Three Months Ended Six Months Ended
Sept. 30, June 30, Sept. 30, Sept. 30, Sept. 30,
2009 2009 2008 2009 2008

Cost of goods sold $76 $67 $72 $143 $145
Research & development 179 113 96 292 201
Selling, general and administrative 128 111 141 239 292
$383 $291 $309 $674 $638

GSI TECHNOLOGY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(Unaudited)

September 30, 2009 March 31, 2009
Cash and cash equivalents $18,274 $12,597
Short-term investments 18,923 34,740
Accounts receivable 7,744 5,622
Inventory 15,817 10,995
Other current assets 4,066 3,417
Net property and equipment 7,880 5,126
Long-term investments 28,954 19,428
Other assets 1,770 748
Total assets $103,428 $92,673

Current liabilities $12,553 $7,617
Long-term liabilities 418 351
Stockholders' equity 90,457 84,705
Total liabilities and stockholders' equity $103,428 $92,673

GSI Technology, Inc.
Douglas M. Schirle
Chief Financial Officer
408-980-8388
or
Silverman Heller Associates
Philip Bourdillon/Gene Heller
310-208-2550

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