Cypress Reports Third-Quarter 2013 Results

Our third quarter revenue declined 2% sequentially and was slightly higher than our recently revised guidance. We were disappointed to lower our guidance for the third quarter, but we experienced unforecasted weakness in the mobile handset market. Our gross margins remained strong at 53.8% and our operating expenses achieved a 3.5-year low. Together, they allowed us to deliver 12.5% pretax profitability, despite the revenue decline.

We will continue to endure volatility and granularity in our mobile handset business in the fourth quarter, leading to a sequential decline of 10% to 14% in revenue, consistent with the guidance given in our pre-announcement. Despite some delays, our design win pipeline remains robust, especially for our new TrueTouch^® Gen5 touchscreen products, and we expect to resume revenue growth in early 2014.

BUSINESS REVIEW

+ Our non-GAAP consolidated gross margin for the third quarter was 53.8%, up 0.7 percentage points from the previous quarter, due to customer mix and continued cost-reduction efforts. Excluding our Emerging Technologies Division, our core semiconductor gross margins were 54.8%, a record for the year.

+ Net inventory at the end of the third quarter was $101.0 million, up just $2.5 million from the second quarter despite the revenue weakness.


NET SALES SUMMARY
(In thousands, except percentages)
(Unaudited)

	THREE MONTHS ENDED
	Sept. 29,	June 30,	Sept. 30,	Sequential	Year-over-
Business Unit	2013	2013	2012	Change	Year Change

PSD ¹	$78,136	$81,320	$91,207	-4%	-14%
MPD ¹	$88,743	$88,127	$88,254	1%	1%
DCD ¹	$18,884	$21,296	$21,236	-11%	-11%
ETD ^{1, 2}	$2,960	$2,723	$2,318	9%	28%
Total	$188,723	$193,466	$203,015	-2%	-7%

Geographic
China and ROW	64%	69%	67%	-7%	-4%
Americas	14%	13%	14%	8%	0%
Europe	12%	10%	10%	20%	20%
Japan	10%	8%	9%	25%	11%
Total	100%	100%	100%	0%	0%

Channel
Distribution	74%	75%	74%	-1%	0%
Direct	26%	25%	26%	4%	0%
Total	100%	100%	100%	0%	0%

1.	PSD, Programmable Systems Division; DCD, Data Communications Division; MPD, Memory Products Division: ETD, Emerging Technology Division.
2.	“Emerging Technology” includes businesses outside our core semiconductor businesses outlined in Footnote 1. Includes subsidiaries AgigA Tech Inc., Deca Technologies Inc., and our foundry business unit.

THIRD-QUARTER 2013 HIGHLIGHTS

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