Lattice Semiconductor Reports Third Quarter 2011 Results

HILLSBORO, OR, Oct 20 (MARKET WIRE) --
Lattice Semiconductor Corporation (NASDAQ: LSCC)

Financial Highlights:

-- Revenue of $81.7 million, a decrease of 2.6% from $83.9 million in
2Q11 and an increase of 6.0% from $77.1 million in 3Q10.
-- Gross margin of 58.6%, compared to 60.4% in 2Q11 and 59.1% in 3Q10.
-- Net income of $0.11 per diluted share, compared to net income of $0.11
per diluted share in 2Q11 and net income of $0.13 per diluted share in
3Q10. 3Q11 financial results include approximately $1.8 million ($0.01
per diluted share) of restructuring related charges.

Lattice Semiconductor Corporation (NASDAQ: LSCC) today announced
financial results for the third quarter ended October 1, 2011.

For the third quarter, revenue was $81.7 million, a decrease of 2.6% from
the $83.9 million reported in the prior quarter, and an increase of 6.0%
from the $77.1 million reported in the same quarter a year ago. FPGA
revenue for the third quarter was $26.2 million, a decrease from the
$27.9 million reported in the prior quarter, and an increase from the
$24.7 million reported in the same quarter a year ago. PLD revenue for
the third quarter was $55.5 million, a decrease from the $56.0 million
reported in the prior quarter, and an increase from the $52.4 million
reported in the same quarter a year ago.

Net income for the third quarter was $13.3 million ($0.11 per diluted
share), compared to a prior quarter net income of $13.0 million ($0.11
per diluted share) and net income of $15.4 million ($0.13 per diluted
share) reported in the same quarter a year ago. Third quarter 2011
financial results include approximately $1.8 million ($0.01 per diluted
share) of restructuring related charges, as compared to approximately
$1.4 million ($0.01 per diluted share) of restructuring related charges
included in the second quarter 2011 financial results.

Darin G. Billerbeck, President and Chief Executive Officer, said, "Our
third quarter results reflect the impact of weakness worldwide, with the
European economic crisis and uncertainty slowing telecommunications
infrastructure spending. In response to these uncertain conditions, we
continue to manage our inventory and work with customers to meet demand
fluctuations. We had record quarterly shipments of our mid-range
LatticeECP3 FPGA and the consumer end-market was strong for us during the
quarter. We continue to focus on the areas that will drive our success,
with an emphasis on product, supply chain and operations excellence, and
cost controls, as evidenced by our ability to maintain our earnings per
share from the previous quarter even as our gross margin was slightly
lower. We are confident in our ability to navigate further volatility
given our differentiated market position, strong balance sheet, and an
R&D roadmap focused on delivering affordable innovation."

Joe Bedewi, Corporate Vice President and Chief Financial Officer, added,
"Total operating expenses of $35.6 million were lower than our original
guidance of $36.5 million. We incurred approximately $1.8 million in
restructuring charges in the quarter. Gross margin for the third quarter
decreased sequentially to 58.6%. This was at the low end of our guidance,
and was driven by product mix, gold and yield related costs. We generated
$26.4 million of cash from operations, ending the quarter with a cash,
cash equivalents and short-term marketable securities balance of $267.2
million. During the third quarter, we repurchased 850,770 of the
Company's outstanding shares. We have now repurchased approximately 2.5
million shares valued at $14.8 million, under the $20 million stock
repurchase program we announced on October 21, 2010."

Third Quarter 2011 Business Highlights:

-- Started Shipping Industry-Leading Lattice MachXO2 PLD Family in Small
WLCSP Package: Lattice started shipping samples of its MachXO2(TM)
PLD family using a 2.5mmx2.5mm 25-ball Wafer Level Chip Scale Package
(WLCSP). The MachXO2 devices now combine an extremely small footprint
-- until now unprecedented in the PLD market -- with the industry's
lowest power and most feature rich low density PLDs. With the
industry's most robust PLD functionality, ultra low power and new
WLCSP packaging, the MachXO2 devices can now address applications
previously not accessible to PLDs.
-- Announced LatticeECP3(TM) FPGA family as the First PCI Express 2.0
Compliant Low Cost FPGA at 2.5Gbps: Achieving this significant
industry milestone enables cost and power reduction with higher
reliability for 2.5Gbps PCIe v2.0 systems for communications,
multimedia, server and mobile platforms, and adds to the broad range
of design solutions from Lattice and its IP partners that support the
widely adopted serial interconnect standard.
-- Launched Power & Platform Management Seminars: Following the
publication and widespread adoption of its Power 2 You guide to power
management, Lattice has launched the worldwide Power 2 You Seminar
Series in October 2011. Board Designers can learn to reduce power and
platform management costs up to 50%, increase reliability and reduce
the risk of board re-spins.
-- Expanded Board of Directors with Additions of Veteran Technology
Executives: Ms. Robin Abrams has over 30 years of top-level sales,
marketing and executive management experience in high-tech companies,
both in the U.S. and abroad, including Firefly Mobile, Inc., Palm
Computing, Inc. and Apple. Mr. John Bourgoin has more than 35 years of
executive management experience in the semiconductor industry at MIPS
Technologies, Advanced Micro Devices, Inc., and Silicon Graphics.

Business Outlook - Fourth Quarter 2011:

-- Revenue is expected to decline 4% to 9% on a sequential basis.
-- Gross margin percentage is expected to be approximately 59% plus or
minus 2%.
-- Total operating expenses are expected to be approximately $35.6
million, including approximately $1.0 million in restructuring
charges.

Investor Conference Call / Webcast Details:

Lattice Semiconductor will review the Company's financial results for the
third quarter 2011 and business outlook for the fourth quarter 2011 on
Thursday, October 20, 2011 at 6:00 p.m. EDT. The conference call-in
number is 1-888-286-6281 with conference identification number 14035088.
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 October 27, 2011,
by telephone at 1-404-537-3406. To access the replay, use conference
identification number 14035088. 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 - Fourth
Quarter 2011" relating to expected revenue, gross margin, total operating
expenses and projected restructuring charges; our managing inventory and
demand fluctuations; our continued focus on product, supply chain and
operations; our ability to control costs; our ability to maintain
earnings per share; and our ability to navigate further volatility. 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 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, including commodity 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, and programmable Power
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 Nine Months Ended
---------------------------------- ----------------------
October 1, July 2, October 2, October 1, October 2,
2011 2011 2010 2011 2010
---------- ---------- ---------- ---------- ----------
Revenue $ 81,720 $ 83,861 $ 77,137 $ 248,196 $ 224,688

Costs and
expenses:
Cost of products
sold 33,866 33,190 31,551 100,062 90,704
Research and
development 16,999 18,631 14,814 55,770 44,654
Selling, general
and
administrative 16,809 17,738 15,818 51,717 47,621
Restructuring
(1) 1,760 1,387 79 4,982 41
---------- ---------- ---------- ---------- ----------
69,434 70,946 62,262 212,531 183,020
---------- ---------- ---------- ---------- ----------
Income from
operations 12,286 12,915 14,875 35,665 41,668

Other income, net
(2) 248 268 669 1,179 1,916
---------- ---------- ---------- ---------- ----------
Income before
(benefit)
provision for
income taxes 12,534 13,183 15,544 36,844 43,584
(Benefit)
provision for
income taxes (3) (803) 152 176 (443) 391
---------- ---------- ---------- ---------- ----------
Net income $ 13,337 $ 13,031 $ 15,368 $ 37,287 $ 43,193
========== ========== ========== ========== ==========

Net income per
share (4):
Basic $ 0.11 $ 0.11 $ 0.13 $ 0.32 $ 0.37
========== ========== ========== ========== ==========
Diluted $ 0.11 $ 0.11 $ 0.13 $ 0.31 $ 0.36
========== ========== ========== ========== ==========

Shares used in per
share
calculations (4):
Basic 117,926 118,047 117,257 117,990 116,332
========== ========== ========== ========== ==========
Diluted 120,627 121,468 121,052 121,343 119,624
========== ========== ========== ========== ==========

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) Relates to the adjustment for uncertain tax benefits in connection with
the settlement of IRS proposed adjustments for the Company's income tax
returns for 2001 and 2002.

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

Lattice Semiconductor Corporation
Consolidated Balance Sheets
(in thousands)
(unaudited)

October 1, January 1,
2011 2011
----------- -----------
Assets
Current assets:
Cash, cash equivalents and short-term marketable
securities $ 267,236 $ 238,220
Accounts receivable, net 53,482 41,188
Inventories 35,121 37,333
Other current assets 10,659 8,648
----------- -----------
Total current assets 366,498 325,389

Property and equipment, net 38,735 39,322
Long-term marketable securities 7,389 10,232
Other long-term assets 11,790 2,744
Goodwill 897 --
----------- -----------
$ 425,309 $ 377,687
=========== ===========

Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and other accrued liabilities $ 45,763 $ 38,648
Deferred income and allowances on sales to sell-
through distributors 19,081 15,692
----------- -----------
Total current liabilities 64,844 54,340

Other long-term liabilities 8,492 4,625
----------- -----------
Total liabilities 73,336 58,965

Stockholders' equity 351,973 318,722
----------- -----------
$ 425,309 $ 377,687
=========== ===========

Lattice Semiconductor Corporation
- Supplemental Historical Financial Information -

Q311 Q211 Q310
-------- -------- --------
Operations Information
Percent of Revenue
Gross Margin 58.6% 60.4% 59.1%
R&D Expense 20.8% 22.2% 19.2%
SG&A Expense 20.6% 21.2% 20.5%

Depreciation and amortization (in thousands) 4,089 4,426 3,673
Capital Expenditures (in thousands) 1,383 3,242 3,799
Stock Compensation Expense (in thousands) 1,687 1,737 1,033

Balance Sheet Information
Current Ratio 5.7 6.6 5.4
A/R Days Revenue Outstanding 59 61 57
Inventory Months 3.1 3.2 3.0

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

Revenue% (by Product Classification)
New 48% 49% 46%
Mainstream 27% 27% 32%
Mature 25% 24% 22%

Revenue% (by Geography)
Asia 64% 65% 69%
Europe (incl. Africa) 20% 22% 17%
Americas 16% 13% 14%

Revenue% (by End Market)
Communications 44% 47% 50%
Industrial & Other 31% 30% 26%
Computing 13% 13% 14%
Consumer 12% 10% 10%

Revenue% (by Channel)
Distribution 61% 57% 55%
Direct 39% 43% 45%

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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