Zoran Corporation (NASDAQ: ZRAN), a leading provider of digital
solutions for applications in the digital entertainment and digital
imaging markets, today reported results for its first quarter ended
March 31, 2011.
Revenues for the first quarter of 2011 were $84.9 million,
compared to $74.2 million for the previous quarter and $90.5
million for the first quarter of 2010. The Company reported a first
quarter GAAP net loss of $30.4 million, or $0.62 per share, which
compares with a GAAP net loss of $32.9 million, or $0.67 per share,
for the previous quarter and a GAAP net loss of $4.0 million, or
$0.08 per share, for the first quarter of the prior year.
Non-GAAP net loss for the first quarter was $21.3 million, or
$0.43 per share, which excludes $1.5 million of amortization of
acquired intangible assets, $1.8 million of restructuring expenses,
$2.3 million of acquisition related expenses, $1.9 million related
to shareholder consent revocation activities, $3.9 million of
stock-based compensation expenses, and includes an adjustment of
$2.4 million for the tax provision to a non-GAAP rate. This
compares with a non-GAAP net loss of $15.2 million, or $0.31 per
share, for the previous quarter, and a non-GAAP net loss of $1.4
million, or $0.03 per diluted share for the same period last
year.
"During the first quarter we achieved a number of new design
wins with new customers in DTV, including several tier-one
manufacturers which was consistent with our goals and resulted in
an expanded and more diversified customer base," said Dr. Levy
Gerzberg, president and chief executive officer of Zoran. "In
printer imaging, momentum continued to build around our laser
solutions which address both color and monochrome printers, and we
achieved multiple deployments of our proprietary IPS software with
new and existing customers. In our set-top-box product line, which
includes Broadband-receivers, we saw new design wins and deployment
of our solution with operators in India. While we are seeing slower
than anticipated adoption of Docsis 3.0, continued demand for the
traditional Docsis 2.0 slightly offset the shortfall. DVD continued
to increase profits as we harvest end-of-life revenues.
"In digital camera, our results were in-line with previous
expectations for the first quarter. We are pleased to announce
that, during the quarter, we secured a new design win from one of
the few remaining large tier-one manufacturers who were not already
buying our COACH processor. We expect this new customer to begin
contributing to revenue starting in the third quarter of this
year.
"While our camera team continues to execute well, Cisco's
recently announced decision to exit the video camcorder segment
will negatively impact digital camera revenues in the second
quarter and balance of the year. However, as a result of Zoran's
leading market position and broad customer base, we believe that
our other COACH customers will eventually fill a good portion of
the market void, generating increased demand for our COACH
processors. Combined with the aforementioned new customer, we
expect digital camera revenues to grow significantly in the third
quarter.
"During the quarter and driven by the tragedy in Japan, we saw
cautious order patterns from customers across all of our core
markets. However, we are already seeing signs of recovery as
optimism builds and while outlook for the second quarter is
relatively flat, the third quarter is expected to show significant
revenue growth."
Dr. Gerzberg continued, "Zoran is fully committed to move
towards the completion of our pending merger with CSR plc, which is
expected to close by the end of the second quarter. We remain
excited about the possibilities presented by our highly
complementary and synergistic technology and product portfolios and
the resulting opportunities for integration."
Recent Highlights
-- Zoran's revenues by product line for the first quarter of 2011 were 39
percent Digital Camera, 25 percent STB (includes broadband receivers),
18 percent Printer Imaging, 11 percent DTV, and 7 percent DVD
-- Zoran signs definitive agreement to merge with CSR Plc
-- Zoran and Software Imaging Limited launch new Universal driverless
printing solution for Smartphones & Tablets
-- Zoran secures new design win for COACH with one of the few remaining
tier one customers who is not already a customer
-- Zoran delivered customer samples of COACH 14 which will power a new
generation of high end cameras and secured several top tier designs
with the product
-- Zoran demonstrates DTV and Set-Top-Box platforms for worldwide
manufacturers at CCBN in Beijing
-- Zoran demonstrates Set-Top platforms for Pay Satellite manufacturers at
Convergence India in New Delhi
-- Zoran demonstrated to customers its Android TV platform based on its
new SupraHD DTV processor
Future Outlook
The following forward-looking statements are based on our
current expectations and reflect expectations regarding the impact
of Cisco's exit of the video camcorder market as well as the
tragedy in Japan among other factors, and actual results may differ
materially.
Zoran currently expects revenues for the second quarter of 2011
to range between $80 million and $85 million, with gross margins
ranging between 52 and 53 percent. The Company expects to record a
second quarter GAAP net loss in the range of $0.50 to $0.53 per
share on approximately 50 million shares. On a non-GAAP basis,
which excludes acquisition-related amortization costs and
stock-based compensation expenses, the Company expects to record a
second quarter net loss of $0.40 to $0.43 per share.
Zoran expects a significant increase in revenues for the third
quarter of 2011 and expects to be profitable on a non-GAAP basis in
the second half of 2011.
Use of Non-GAAP Financial Information
In addition to reporting financial results in accordance with
generally accepted accounting principles, or GAAP, Zoran provides
non-GAAP financial information, including non-GAAP net income
(loss) and non-GAAP EPS that excludes charges such as amortization
of acquired intangible assets, acquisition related expenses,
stock-based compensation expense, restructuring expense,
shareholder consent revocation expenses, and associated income tax
adjustments. Non-GAAP results are reconciled to GAAP results on the
attached Schedule.
The Company believes that its non-GAAP financial information
provides useful information to management and investors regarding
financial and business trends relating to its financial condition
and results of operations because it excludes items that management
considers to be outside of the Company's core operating results.
The Company believes that this non-GAAP financial information, in
combination with the Company's financial results calculated in
accordance with GAAP, provides investors with additional
perspective and a more meaningful understanding of the Company's
ongoing operating performance. In addition, the Company's
management uses these non-GAAP measures to review and assess the
financial performance of the Company, to determine executive
officer incentive compensation, and to plan and forecast
performance in future periods. The Company's non-GAAP financial
information, is not prepared in accordance with GAAP, is not an
alternative to GAAP financial information, and may be calculated
differently than non-GAAP financial information disclosed by other
companies.
Company Profile
Zoran Corporation, based in Sunnyvale, California, is a leading
provider of digital solutions for the digital entertainment and
digital imaging markets. With over two decades of expertise
developing and delivering digital signal processing technologies,
Zoran has pioneered high-performance digital audio and video,
imaging applications and Connect Share Entertain™ technologies for
the digital home. Zoran's proficiency in integration delivers major
benefits for OEM customers, including greater capabilities within
each product generation, reduced system costs, and shorter time to
market. Zoran-based DTV, set-top box, broadband receivers (silicon
tuners), DVD, digital camera, and multifunction printer products
have received recognition for excellence and are now in hundreds of
millions of homes and offices worldwide. With headquarters in the
U.S. and additional operations in China, France, Germany, India,
Israel, Japan, Korea, Taiwan, and the U.K., Zoran may be contacted
on the World Wide Web at www.zoran.com or at 408-523-6500.
Forward-Looking Statements
This press release includes forward-looking statements that
reflect the Company's current views of future events and future
financial performance, including each of the chief executive
officer quotations, and the material presented under "Future
Outlook," including statements regarding the Company's future
results of operations including in the second and third quarters of
2011, business prospects, and statements regarding potential design
wins, new customer sales contribution, prospects and expectations
for our COACH line of digital camera products in light of Cisco's
decision to terminate its Flip product, the prospects of various
business lines, and expectations regarding the timing of closing
the CSR transaction. These forward-looking statements are subject
to many risks and uncertainties that could cause actual results to
differ materially from what is currently expected, including risks
associated with the earthquake and related nuclear accident in
Japan; risks associated with the Company's ability to acquire new,
and increase its business from current, customers; potential
declines in the Company's sales as a result of the continuing
global economic slowdown that could continue to reduce demand for
consumer electronic and other products; the impact of Cisco's
decision to discontinue its Flip product line on the Company's
results of operations, including that new customers may not buy
COACH products as anticipated, inability to close or delays in
closing the CSR transaction due to failure of or any delay in the
satisfaction of any condition precedent or otherwise; continued
tightening in global credit markets, which could result in
insolvency of key suppliers, customers, or retailers and customer
inability to finance purchases of our products; the rapidly
evolving markets for the Company's products and uncertainty
regarding the pace and direction of development of those markets;
the impact of further ASP declines; the Company's dependence on
sales to a limited number of large customers; cost and length of
time required for new product development; timing and impact of new
product introductions by the Company and its competitors, and of
transitions away from older products; intense competition in the
Company's markets and in the markets in which its customers
operate; the Company's reliance on other parties for wafer
supplies, product assembly and testing, and manufacturing capacity;
the effects of changes in revenue and product mix on the Company's
gross margins; fluctuations in tax rate caused by projections of
the geographic sources of Company income; dependence on key
personnel; reliance on international operations, particularly
operations in Israel; the possibility of disruption from the
consent solicitation making it more difficult to maintain business
and operational relationships; disruption or uncertainty caused by
future shareholder actions, including by Ramius Group;. Please
refer to the discussion of the risks and uncertainties under the
caption "Risk Factors" and elsewhere in Forms 10-K, 10-Q and 8-K
filed by the Company with the SEC for further information regarding
risks and uncertainties that could cause actual results or events
to differ materially from those contained in the forward-looking
statements included in this press release. The Company assumes no
obligation to update any forward-looking statements as a result of
new information or future events or developments, except as
required by law.
Zoran, the Zoran logo and SupraHD are trademarks or registered
trademarks of Zoran Corporation and/or its subsidiaries in the
United States and/or other countries. All other brands or names may
be claimed as property of others.
ZORAN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
Three Months Ended
March 31,
------------------------
2011 2010
----------- -----------
Revenues:
Hardware product revenues $ 72,877 $ 79,050
Software and other revenues 12,043 11,401
----------- -----------
Total revenues 84,920 90,451
Costs and expenses:
Cost of hardware product revenues 40,926 43,720
Research and development 35,285 26,114
Selling, general and administrative 31,995 23,011
Amortization of intangibles 1,511 109
Acquisition related expenses 2,307 -
Restructuring expense 1,841 -
Shareholder consent revocation expense 1,860 -
IP licensing related settlements - 1,115
----------- -----------
Total costs and expenses 115,725 94,069
Operating loss (30,805) (3,618)
Interest and other income, net 867 2,349
----------- -----------
Loss before income taxes (29,938) (1,269)
Provision for income taxes 428 2,700
----------- -----------
Net loss $ (30,366) $ (3,969)
=========== ===========
Basic and diluted net loss per share $ (0.62) $ (0.08)
=========== ===========
Shares used to compute basic and diluted net loss
per share 49,079 51,174
=========== ===========
ZORAN CORPORATION
NON-GAAP ADJUSTMENTS TO NET LOSS
(in thousands, except per share data)
(unaudited)
Three Months Ended
March 31,
------------------------
2011 2010
--------- ---------
GAAP net loss $ (30,366) $ (3,969)
Adjusting items to GAAP net loss:
Operating expenses related to stock based
compensation expense 3,945 (a) 2,196 (a)
Amortization of intangibles 1,511 (b) 109 (b)
Acquisition related expenses 2,307 (c) -
Restructuring expense 1,841 (d) - (d)
Shareholder consent revocation expense 1,860 (e) -
IP licensing related settlements - 1,115 (f)
Provision for income taxes (2,362) (g) (900) (g)
--------- ---------
Non-GAAP net loss $ (21,264) (h) $ (1,449) (h)
========= =========
Non-GAAP basic and diluted net loss per share $ (0.43) (h) $ (0.03) (h)
========= =========
Shares used to compute non-GAAP basic and
diluted net loss per share 49,079 51,174
========= =========
(a) This adjustment reflects the stock-based compensation expense recorded
under ASC 718-10. The Company excludes this item when it evaluates the
continuing operational performance of the Company as management believes
this GAAP measure is not indicative of its core operating performance.
(see (h) below)
(b) This adjustment represents the amortization of intangible assets
associated with the acquisition of Let It Wave, Inc. in June 2008 and
Microtune, Inc. in November 2010. Such amortization expense does not
impact the Company's cash flows and is excluded by management when
evaluating its core operating performance. (see (h) below)
(c) This adjustment represents acquisition expenses associated with the
pending merger with CSR plc and the acquisition of Microtune, Inc. which
was completed during the fourth quuarter of 2010. The Company excludes
this item when it evaluates the continuing operational performance of the
Company as management believes this GAAP measure is not indicative of its
core operating performance. (see (h) below)
(d) This adjustment reflects various resturcturing expenses recorded by the
Company during the quarter ended March 31, 2011 in order to reduce ongoing
operating costs. The Company excludes these items when it evaluates the
continuing operational performance of the Company as management believes
this GAAP measure is not indicative of its core operating performance.
(see (h) below)
(e) This amount represents the shareholder consent revoation expenses
associated with our Ramius shareholder. The Company excludes these items
when it evaluates the continuing operational performance of the Company as
management believes this GAAP measure is not indicative of its core
operating performance. (see (h) below)
(f) This adjustment reflects non-recurring expenses associated with IP
licensing related settlements. The Company excludes this item when it
evaluates the continuing operational performance of the Company as
management believes this GAAP measure is not indicative of its core
operating performance. (see (h) below)
(g) This adjustment represents the difference between the non-GAAP income
tax rate and the GAAP income tax rate. This adjustment is made by the
Company when it evaluates its continuing operational performance. (see (h)
below)
(h) The Company believes that its non-GAAP financial information provides
useful information to management and investors regarding financial and
business trends relating to its financial condition and results of
operations because it excludes charges that management considers to be
outside of the Company's core operating performance. The Company believes
that this non-GAAP net income (loss), in combination with the Company's
financial results calculated in accordance with GAAP, provides investors
with additional perspective and a more meaningful understanding of the
Company's ongoing operating performance. In addition, the Company's
management uses these non-GAAP measures to review and assess the financial
performance of the Company, to determine executive officer incentive
compensation and to plan and forecast performance in future periods. The
Company's non-GAAP net income (loss) is not prepared in accordance with
GAAP, is not an alternative to GAAP financial information, and may be
calculated differently than non-GAAP financial information disclosed by
other companies.
ZORAN CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
March 31, December 31,
2011 2010
----------- -----------
ASSETS
Current assets:
Cash and short-term investments $ 251,479 $ 261,266
Accounts receivable, net 25,065 22,815
Inventory 42,923 48,139
Prepaid expenses and other current
assets 21,554 22,379
----------- -----------
Total current assets 341,021 354,599
Property and equipment, net 16,347 16,959
Other assets 78,769 82,006
Intangible assets, net 54,456 53,825
----------- -----------
Total assets $ 490,593 $ 507,389
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 33,497 $ 25,158
Accrued expenses and other liabilities 43,358 42,236
----------- -----------
Total current liabilities 76,855 67,394
Long term liabilities 38,367 38,517
Stockholders' equity:
Common stock 49 49
Additional paid-in capital 861,827 857,154
Accumulated other comprehensive income 1,053 1,467
Accumulated deficit (487,558) (457,192)
----------- -----------
Total stockholders' equity 375,371 401,478
Total liabilities and stockholders'
equity $ 490,593 $ 507,389
=========== ===========
Zoran Corporation: Karl Schneider Chief Financial Officer (408)
523-6500 Email Contact Bonnie McBride (Investors) (415) 454-8898
Email Contact Company Web Site: www.zoran.com
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