Lattice Semiconductor Reports Second Quarter 2011 Results

HILLSBORO, OR, Jul 21 (MARKET WIRE) --
Lattice Semiconductor Corporation (NASDAQ: LSCC)

Financial Highlights:

-- Revenue of $83.9 million, an increase of 2% from $82.6 million in 1Q11
and an increase of 9% from $77.1 million in 2Q10.
-- Gross margin of 60.4%, compared to 60.0% in 1Q11 and 61.2% in 2Q10.
-- Net income of $0.11 per diluted share, compared to net income of $0.09
per diluted share in 1Q11 and net income of $0.14 per diluted share in
2Q10. 2Q11 financial results include approximately $1.4 million ($0.01
per diluted share) of restructuring related charges.

Lattice Semiconductor Corporation (NASDAQ: LSCC) today announced
financial results for the second quarter ended July 2, 2011.

For the second quarter, revenue was $83.9 million, an increase of 2% from
the $82.6 million reported in the prior quarter, and an increase of 9%
from the $77.1 million reported in the same quarter a year ago. FPGA
revenue for the second quarter was $27.9 million, a decrease of 11% from
the $31.2 million reported in the prior quarter, and an increase of 13%
from the $24.6 million reported in the same quarter a year ago. PLD
revenue for the second quarter was $56.0 million, an increase of 9% from
the $51.4 million reported in the prior quarter, and an increase of 7%
from the $52.5 million reported in the same quarter a year ago.

Net income for the second quarter was $13.0 million ($0.11 per diluted
share), compared to a prior quarter net income of $10.9 million ($0.09
per diluted share) and net income of $16.7 million ($0.14 per diluted
share) reported in the same quarter a year ago. Second quarter 2011
financial results include approximately $1.4 million ($0.01 per diluted
share) of restructuring related charges due to the Company's previously
announced strategic decision to refocus certain of its world-wide
research and development activities as compared to approximately $1.8
million ($0.02 per diluted share) of restructuring related charges
included in the first quarter 2011 financial results.

Darin G. Billerbeck, President and Chief Executive Officer, said, "The
second quarter developed as expected, with revenue increasing
sequentially. In total, the second quarter 2011 was our highest revenue
quarter in ten years. Of note, revenue in our new product segment
increased 28% year over year and 11% sequentially. We continue to receive
positive customer feedback and design wins for our MachXO2 family, which
is now in volume production. We remained focused on our product quality,
reduction in development and operational costs, and streamlining our
supply chain for improved predictability and flexibility."

Joe Bedewi, Corporate Vice President and Chief Financial Officer, added,
"Gross margin for the second quarter improved sequentially to 60.4%,
consistent with prior guidance. Total operating expenses of $37.8 million
were also in-line with prior guidance. We incurred approximately $1.4
million in restructuring charges in the quarter. We generated $16.5
million of cash from operations, ending the quarter with a cash, cash
equivalents and short-term marketable securities balance of $247.5
million. During the quarter, we repurchased approximately 592,500 of the
Company's outstanding shares. We have now repurchased approximately 1.7
million shares valued at approximately $9.9 million, under the $20
million stock repurchase program we announced on October 21, 2010."

Second Quarter 2011 Business Highlights:

-- Finished Qualifying and Production Released MachXO2(TM) Family's
First Member: The LCMXO2-1200 is one of six members of the MachXO2 PLD
family, offering designers of low-density PLDs an unprecedented mix of
low cost, low power and high system integration in a single device.
Built on a low power 65-nm process, these devices have a rich feature
set that includes embedded memory, PLLs, user Flash memory (UFM) and
popular functions such as I2C, SPI and timer/counter that have been
hardened into the device.
-- Released the MachXO2 Pico Development Kit: The battery powered Pico
Development Kit accelerates time-to-market for low power space
constrained consumer designs.
-- Released several important IP Cores for the Award Winning LatticeECP3
Family:
-- Lattice announced a 4 x 3.125Gbps version of the Serial RapidIO
2.1, Level 1 endpoint core. The announcement demonstrated
Lattice's continued leadership in mid-range FPGAs by supporting
all lane configurations/rates of high speed serial protocols such
as Level 1 SRIO and also providing the lowest cost, lowest power
programmable Gen2 SRIO solution available.
-- With its partner Oregano Systems, Lattice announced comprehensive
versions of the IEEE-1588 Timing Node System IP Core, providing
scalable, resource-efficient, self-contained SoC solutions for the
telecom and industrial markets.
-- Lattice and partner Flexibilis Oy announced the first FPGA
Ethernet Switch IP cores with HSR (IEC 62439-3) protocol support.
The FES - HSR IP cores enable designers of smart grid substation
automation and industrial networking applications to immediately
and confidently apply the emerging High-availability Seamless
Redundancy (HSR) protocol using LatticeECP3 FPGAs.
-- Signed Distribution Agreement with Arrow Electronics EMEA for Europe,
Middle East and Africa (EMEA): Arrow's comprehensive supply chain and
logistic capabilities, combined with its history of demand generation
and superior customer service, will be invaluable assets as Lattice
further expands its presence in the European market.
-- Signed a Global Distribution Agreement with Digi-Key Corporation:
Digi-Key is one of the world's leading totally integrated, cloud-based
distributors of electronic components. As a full-service provider of
both prototype/design and production quantities of electronic
components, Digi-Key offers more than 2 million products from over 470
quality name-brand manufacturers.
-- Distribution Relationship with Avnet Ending: The global franchise
agreement with Avnet and Lattice Semiconductor is ending effective
August 28, 2011. After the transition Lattice will serve its customers
with a sales network that includes a global distributor, regional
distributors, manufacturer's representatives, and our direct sales
team.

Business Outlook - Third Quarter 2011:

-- Revenue is expected to be flat to up 5% on a sequential basis.
-- Gross margin percentage is expected to be approximately 60% plus or
minus 2%.
-- Total operating expenses are expected to be approximately $36.5
million, including approximately $1.1 million in restructuring
charges.

Investor Conference Call / Webcast Details:

Lattice Semiconductor will review the Company's financial results for the
second quarter 2011 and business outlook for the third quarter 2011 on
Thursday, July 21, 2011 at 5:00 p.m. EDT. The conference call-in number
is 1-888-286-6281 or 1-706-643-3761. A live webcast of the conference
call will also be available on Lattice's website at www.latticesemi.com.
Our financial guidance will be limited to the comments on our public
quarterly earnings call and the public business outlook statements
contained in this press release.

A replay of the call will be available approximately two hours after the
conclusion of the live call through 11:59 p.m. EDT on July 28, 2011, by
telephone at 1-706-645-9291. To access the replay, use conference
identification number 81087384. A webcast replay will also be available
on Lattice's investor relations website at www.latticesemi.com.

Forward-Looking Statements Notice:
The foregoing paragraphs contain
forward-looking statements that involve estimates, assumptions, risks and
uncertainties. Such forward-looking statements include statements
relating to: our business outlook, including those statements under the
heading "Business Outlook - Third Quarter 2011" relating to expected
revenue, gross margin, total operating expenses and projected
restructuring charges; positive feedback and continued design wins for
our MachXO2 family; our ability to enhance product quality, reduce
development and operational costs and streamline our supply chain for
improved predictability and flexibility; our continued leadership in the
mid-range FPGA market; the value of Arrow's capabilities in allowing us
to further expand our presence in the European market; and our effective
service of our customers through a sales network that includes a global
distributor, regional distributors, manufacturer's representatives and
our direct sales team after the ending of our global franchise agreement
with Avnet. Other forward-looking statements may be indicated by words
such as "will," "could," "should," "would," "expect," "plan,"
"anticipate," "intend," "forecast," "believe," "estimate," "predict,"
"propose," "potential," "continue" or the negative of these terms or
other comparable terminology. Lattice believes the factors identified
below could cause actual results to differ materially from the
forward-looking statements.

Estimates of future revenue are inherently uncertain due to, among other
things, the high percentage of quarterly "turns" business. In addition,
revenue is affected by such factors as global economic conditions, which
may affect customer demand, pricing pressures, competitive actions, the
demand for our Mature, Mainstream and New products, and in particular our
MachXO and LatticeECP3 solutions, the ability to supply products to
customers in a timely manner and any further unanticipated consequences
associated with the Japan earthquakes and tsunami or changes in our
distribution relationships. Actual gross margin percentage and operating
expenses could vary from the estimates on the basis of, among other
things, changes in revenue levels, changes in product pricing and mix,
changes in wafer, assembly, test and other costs, variations in
manufacturing yields, the failure to sustain operational improvements,
the actual amount of restructuring charges and compensation charges due
to stock price changes. Restructuring charges may vary from the estimate
on the basis of the timing and scope of the restructuring. Any
unanticipated declines in revenue or gross margin, any unanticipated
increases in our operating expenses or unanticipated charges, including
without limitation, restructuring charges could adversely affect our
profitability during the quarter.

In addition to the foregoing, other factors that may cause actual results
to differ materially from the forward-looking statements in this press
release include global economic uncertainty, overall semiconductor market
conditions, market acceptance and demand for our new products, the
Company's dependencies on its silicon wafer suppliers, the impact of
competitive products and pricing, technological and product development
risks, and the other risks that are described in this press release and
that are otherwise described from time to time in our filings with the
Securities and Exchange Commission. The Company does not intend to update
or revise any forward-looking statements, whether as a result of events
or circumstances after the date hereof or to reflect the occurrence of
unanticipated events.

About Lattice Semiconductor:
Lattice is the source for innovative FPGA,
PLD, programmable Power Management and Clock Management solutions. For
more information, visit www.latticesemi.com. Follow Lattice via Facebook,
RSS and Twitter.

Lattice Semiconductor Corporation, Lattice (& design), L (& design) and
specific product designations are either registered trademarks or
trademarks of Lattice Semiconductor Corporation or its subsidiaries in
the United States and/or other countries.

Lattice Semiconductor Corporation
Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)

Three Months Ended Six Months Ended
------------------------------ -------------------
July 2, April 2, July 3, July 2, July 3,
2011 2011 2010 2011 2010
---------- --------- --------- --------- ---------
Revenue $ 83,861 $ 82,615 $ 77,119 $ 166,476 $ 147,551

Costs and expenses:
Cost of products sold 33,190 33,006 29,889 66,196 59,153
Research and
development 18,631 20,140 15,158 38,771 29,840
Selling, general and
administrative 17,738 17,170 16,385 34,908 31,803
Restructuring (1) 1,387 1,835 (120) 3,222 (38)
---------- --------- --------- --------- ---------
70,946 72,151 61,312 143,097 120,758
---------- --------- --------- --------- ---------
Income from operations 12,915 10,464 15,807 23,379 26,793

Other income, net (2) 268 663 945 931 1,247
---------- --------- --------- --------- ---------
Income before provision
for income taxes 13,183 11,127 16,752 24,310 28,040
Provision for income
taxes 152 208 16 360 215
---------- --------- --------- --------- ---------
Net income $ 13,031 $ 10,919 $ 16,736 $ 23,950 $ 27,825
========== ========= ========= ========= =========

Net income per share
(3):
Basic $ 0.11 $ 0.09 $ 0.14 $ 0.20 $ 0.24
========== ========= ========= ========= =========
Diluted $ 0.11 $ 0.09 $ 0.14 $ 0.20 $ 0.23
========== ========= ========= ========= =========

Shares used in per
share calculations
(3):
Basic 118,047 117,996 116,101 118,021 115,873
========== ========= ========= ========= =========
Diluted 121,468 121,864 120,270 121,695 118,727
========== ========= ========= ========= =========

Notes:

(1) Represents costs and adjustments incurred primarily related to the
corporate restructuring plan announced on April 21, 2011.

(2) During the first quarter of fiscal 2011, and the second quarter of
fiscal 2010, the Company recognized a gain on the sale of certain
auction rate securities of $0.6 million and a gain on the sale of
real estate of $0.7 million, respectively.

(3) For all periods presented the computation of diluted earnings per
share includes the effects of stock options, ESPP shares and
restricted stock units as they are dilutive.

Lattice Semiconductor Corporation
Consolidated Balance Sheets
(in thousands)
(unaudited)
July 2, January 1,
2011 2011
----------- -----------
Assets
Current assets:
Cash, cash equivalents and short-term marketable
securities $ 247,537 $ 238,220
Accounts receivable, net 56,373 41,188
Inventories 35,069 37,333
Other current assets 8,424 8,648
----------- -----------
Total current assets 347,403 325,389

Property and equipment, net 40,459 39,322
Long-term marketable securities 7,389 10,232
Other long-term assets 6,255 2,744
----------- -----------
$ 401,506 $ 377,687
=========== ===========

Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and other accrued liabilities $ 36,070 $ 38,648
Deferred income and allowances on sales to sell-
through distributors 16,581 15,692
----------- -----------
Total current liabilities 52,651 54,340

Other long-term liabilities 7,496 4,625
----------- -----------
Total liabilities 60,147 58,965

Stockholders' equity 341,359 318,722
----------- -----------
$ 401,506 $ 377,687
=========== ===========

Lattice Semiconductor Corporation
- Supplemental Historical Financial Information -

Q211 Q111 Q210
-------- -------- --------
Operations Information
Percent of Revenue
Gross Margin 60.4% 60.0% 61.2%
R&D Expense 22.2% 24.4% 19.7%
SG&A Expense 21.2% 20.8% 21.2%

Depreciation and amortization (in thousands) 4,426 4,083 3,460
Capital Expenditures (in thousands) 3,242 4,065 2,627
Stock Compensation Expense (in thousands) 1,737 1,344 1,277

Balance Sheet Information
Current Ratio 6.6 6.6 5.2
A/R Days Revenue Outstanding 61 54 55
Inventory Months 3.2 3.5 2.7

Revenue% (by Product Family)
PLD 67% 62% 68%
FPGA 33% 38% 32%

Revenue% (by Product Classification)
New 49% 44% 41%
Mainstream 27% 32% 35%
Mature 24% 24% 24%

Revenue% (by Geography)
Asia 65% 61% 68%
Europe (incl. Africa) 22% 21% 18%
Americas 13% 18% 14%

Revenue% (by End Market)
Communications 47% 44% 49%
Industrial & Other 30% 31% 25%
Computing 13% 13% 15%
Consumer 10% 12% 11%

Revenue% (by Channel)
Distribution 57% 62% 57%
Direct 43% 38% 43%

New: LatticeECP3, LatticeXP2, LatticeECP2/M, MachXO, Power Manager
II, ispClock A/D/S, ispMACH 4000ZE

Mainstream: ispXPLD, ispGDX2, ispMACH 4000/Z, ispXPGA, LatticeSC,
LatticeECP, LatticeXP, ispClock, Power Manager I, Software and IP

Mature: FPSC, ORCA 2, ORCA 3, ORCA 4, ispPAC, isplsi 8000V, ispMACH
5000B, ispMACH 2LV, ispMACH 5LV, ispLSI 2000V, ispLSI 5000V, ispMACH
5000VG, all 5-volt CPLDs, GDX/V, ispMACH 4/LV, all SPLDs

For more information contact:
Joe Bedewi
Chief Financial Officer
Lattice Semiconductor Corporation
503-268-8000

David Pasquale
Global IR Partners
914-337-8801
lscc@globalirpartners.com

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