Use of Non-GAAP Financial Information

Silicon Image presents and discusses gross margin, operating expenses, net income (loss) and basic and diluted net income (loss) per share in accordance with Generally Accepted Accounting Principles (GAAP), and on a non-GAAP basis for informational purposes only. Silicon Image believes that non-GAAP reporting, giving effect to the adjustments shown in the attached reconciliation, provides meaningful information and therefore uses non-GAAP reporting to supplement its GAAP reporting and internally in evaluating operations, managing and monitoring performance, and determining bonus compensation. Further, Silicon Image uses non-GAAP information as certain non-cash charges such as stock-based compensation expense, amortization of intangible assets, business acquisition related expenses, other than temporary impairment of a privately-held company investment, proceeds from legal settlement, restructuring charges, impairment of intangible assets and write-down (recovery) of certain unsalable inventory do not reflect the cash operating results of the business. Silicon Image has chosen to provide this supplemental information to investors, analysts and other interested parties to enable them to perform additional analyses of its operating results and to illustrate the results of operations giving effect to such non-GAAP adjustments. The non-GAAP financial information presented herein should be considered supplemental to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP.

Conference Call

Silicon Image will host an investor conference call today to discuss its fiscal 2013 and fourth quarter of 2013 results at 2:00 p.m. Pacific Time and will webcast the event. To access the conference call, dial 877-941-1427 or 480-629-9664 and enter pass code 4662072. The webcast and replay will be accessible on Silicon Image's investor relations website at http://www.SiliconImage.com. A replay of the conference call will be available within two hours of the conclusion of the conference call through February 13, 2014. To access the replay, please dial 800-406-7325 or 303-590-3030 and enter pass code 4662072.

About Silicon Image, Inc.

Silicon Image is a leading provider of connectivity solutions that enable the reliable distribution and presentation of high-definition content for mobile, consumer electronics, and PC markets. The company delivers its technology via semiconductor and intellectual property products that are compliant with global industry standards and feature market leading Silicon Image innovations such as InstaPort™ and InstaPrevue™. Silicon Image's products are deployed by the world's leading electronics manufacturers in devices such as mobile phones, tablets, DTVs, Blu-ray Disc™ players, audio-video receivers, digital cameras, as well as desktop and notebook PCs. Silicon Image has driven the creation of the highly successful HDMI® and DVI™ industry standards, the latest standard for mobile devices — MHL®, and the leading 60GHz wireless HD video standard — WirelessHD®. Via its wholly-owned subsidiary, Simplay Labs, Silicon Image offers manufacturers comprehensive standards interoperability and compliance testing services. For more information, visit us at http://www.siliconimage.com/.

Silicon Image and the Silicon Image logo are trademarks, registered trademarks or service marks of Silicon Image, Inc. in the United States and/or other countries. All other trademarks and registered trademarks are the property of their respective owners in the United States and/or other countries.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of federal securities laws and regulations. These forward-looking statements include, but are not limited to, statements related to Silicon Image's future operating results, including revenue, gross margin, operating expenses, tax rates, company growth, progress and stock repurchases. These forward-looking statements involve risks and uncertainties, including the risks of uncertain economic conditions, competition in our markets, Silicon Image's ability to deliver financial performance in-line with its stated goals and other risks and uncertainties described from time to time in Silicon Image's filings with the U.S. Securities and Exchange Commission (SEC). These risks and uncertainties could cause the actual results to differ materially from those anticipated by these forward-looking statements. In addition, see the Risk Factors section of the most recent Form 10-K and 10-Q filed by Silicon Image with the SEC. These forward-looking statements are made on the date of this press release, and Silicon Image assumes no obligation to update any such forward-looking information.

SILICON IMAGE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
Unaudited
			Three Months Ended												Twelve Months Ended
			December 31,				September 30,			December 31,					December 31,				December 31,
			2013				2013			2012					2013				2012
Revenue:
Product			$	46,949			$	66,337		$	46,808				$	227,308			$	203,487
Licensing				14,428				12,974			12,796					49,098				48,877
Total revenue				61,377				79,311			59,604					276,406				252,364
Cost of revenue and operating expenses:
Cost of product revenue (1)(2)(3)				22,897				33,222			30,105					112,940				109,815
Cost of licensing revenue				267				185			220					881				626
Research and development (4)				19,787				18,424			17,305					76,994				77,372
Selling, general and administrative (5)				16,046				16,191			12,279					64,736				57,446
Restructuring expense				1,307				483			(54	)				1,783				110
Amortization and impairment of acquisition-related intangible assets				230				405			(889	)				1,116				599
Total cost of revenue and operating expenses				60,534				68,910			58,966					258,450				245,968
Income from operations				843				10,401			638					17,956				6,396
Proceeds from legal settlement				-				-			-					1,275				-
Other than temporary impairment of a privately-held company investment				-				-			-					(1,500	)			(7,467	)
Interest income and other, net				144				168			555					1,203				1,661
Income before provision for income taxes and equity in net loss of an unconsolidated affiliate				987				10,569			1,193					18,934				590
Income tax expense				1,837				1,488			1,458					6,955				9,979
Equity in net loss of an unconsolidated affiliate				114				116			-					489				1,803
Net income (loss)			$	(964	)		$	8,965		$	(265	)			$	11,490			$	(11,192	)
Net income (loss) per share – basic			$	(0.01	)		$	0.12		$	(0.00	)			$	0.15			$	(0.14	)
Net income (loss) per share – diluted			$	(0.01	)		$	0.11		$	(0.00	)			$	0.15			$	(0.14	)
Weighted average shares – basic				77,417				77,530			79,564					77,399				81,872
Weighted average shares – diluted				77,417				78,995			79,564					79,065				81,872
(1) Includes restructuring expense			$	284			$	-		$	-				$	284			$	-
(2) Includes amortization of acquisition-related intangible assets			$	225			$	250		$	250				$	975			$	425
(3) Includes stock-based compensation expense			$	152			$	163		$	104				$	603			$	523
(4) Includes stock-based compensation expense			$	852			$	879		$	871				$	3,576			$	3,585
(5) Includes stock-based compensation expense			$	1,687			$	1,440		$	1,200				$	6,336			$	5,096

SILICON IMAGE, INC.
GAAP NET INCOME (LOSS) TO NON-GAAP NET INCOME RECONCILIATION
(In thousands, except per share amounts)
Unaudited
			Three Months Ended							Twelve Months Ended
			December 31,		September 30,		December 31,			December 31,		December 31,
			2013		2013		2012			2013		2012
GAAP net income (loss)			$ (964)		$ 8,965		$ (265)			$ 11,490		$ (11,192)
Non-GAAP adjustments:
Stock-based compensation expense (1)			2,691		2,482		2,175			10,515		9,204
Amortization of intangible assets (2)			455		480		(639)			1,916		1,024
Amortization of intangible assets of an unconsolidated affiliate (2)			40		52		-			168		402
Strategic initiative and acquisition related expenses (2)			1,000		-		-			1,000		3,257
Restructuring expense (3)			1,591		483		(54)			2,067		110
Other than temporary impairment of a privately-held company investment (3)			-		-		-			1,500		7,467
Impairment of intangible asset (3)			-		175		-			175		-
Write-down (recovery) of certain unsalable inventory (3)			(825)		(960)		6,245			(1,785)		6,245
Proceeds from legal settlement (3)			-		-		-			(1,275)
Non-GAAP net income before tax adjustments			3,988		11,677		7,462			25,771		16,517
Tax adjustments (4)			89		(2,462)		(1,218)			(2,864)		2,030
Non-GAAP net income			$ 4,077		$ 9,215		$ 6,244			$ 22,907		$ 18,547
Non-GAAP net income per share — basic			$ 0.05		$ 0.12		$ 0.08			$ 0.30		$ 0.23
Non-GAAP net income per share — diluted			$ 0.05		$ 0.12		$ 0.08			$ 0.29		$ 0.22
Weighted average shares — basic			77,417		77,530		79,564			77,399		81,872
Weighted average shares — diluted			78,990		78,995		80,389			79,065		82,871
Stock-based compensation expense is composed of the following:
Cost of revenue			$ 152		$ 163		$ 104			$ 603		$ 523
Research and development			852		879		871			3,576		3,585
Selling, general and administrative			1,687		1,440		1,200			6,336		5,096
Total			$ 2,691		$ 2,482		$ 2,175			$ 10,515		$ 9,204

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