“In our Smart Sensor Solutions business, the investments we have made over the last year are beginning to pay off. The market acceptance of our new PC smart sensors, the small form factor AES1660 and the wider and newly introduced AES2660, has been very positive. Moreover, we will soon be announcing our first PC product using our TouchStone™ packaging technology, which has received wide acceptance in the wireless market and we expect as much in the PC market. In fact, we have already secured our first design win for this new PC product, which we plan to formally introduce in the third quarter.

“In the Smart Sensor wireless market, our revenue increased 80 percent on a sequential basis as a key customer in Japan ramped to production on new mobile phones that integrate our recently introduced AES1750 smart sensor. We have additional designs in the wireless market for this new product, which clearly sets a new bar for aesthetics, durability and cost. We believe that these new opportunities, some direct and some through partners, will result in new phones that could begin shipping as early as the fourth quarter of this year.

“Lastly, I am very pleased to report on two notable new design wins for the 2011 PC cycle. Subsequent to the quarter end, AuthenTec was notified by a significant PC customer that it plans to use AuthenTec’s fingerprint sensors in its next design cycle for the 2011 model year. This significant design win is especially gratifying since it represents the regaining of business from a previous customer. Separately, while we have often noted that AuthenTec sensors were used by eight of the top nine PC OEMs that used fingerprint sensors, we were recently notified by this ninth PC OEM that they had selected both TruePrint® smart sensors and TrueSuite® software for their 2011 model year. Our team is very enthusiastic about being chosen for these opportunities, which could potentially start shipping as early as the fourth quarter of this year with full volume production expected in the first half of 2011.

“As we have communicated previously, we anticipated that 2010 would be a challenging year for us, but our investments in new products and our focus on expanding our overall capabilities are beginning to pay off with design wins and new market opportunities that will contribute to increased revenues starting late this year as these designs move into production. We are presently targeting a return to profitability for early 2011.”

Business Outlook:

Mr. Moody concluded, “Looking ahead to the second quarter of 2010, we expect revenue to increase to a range between $10.4 million and $11.4 million including the first full quarter of revenue from our Embedded Security business. Operating expenses are expected to increase sequentially due to the full quarter of the Embedded Security expenses, as well as some additional expenses related to our expectations of ramping to higher volumes late this year and early in 2011. We expect a second quarter non-GAAP net loss per diluted share of between $0.06 and $0.10.”

First Quarter 2010 Financial Results Webcast and Conference Call:

AuthenTec will host a conference call to discuss its first quarter 2010 financial results and other information that may be material to investors at 5:00 p.m. Eastern Time (ET) today, May 12, 2010. Investors and analysts may join the conference call by dialing 866-383-8008 and providing the participant pass code 45003452. International callers may join the teleconference by dialing +1-617-597-5341 and using the same pass code. A replay of the conference call will be available beginning at 8:00 p.m. ET and will remain available until midnight ET on Wednesday, May 19, 2010. The U.S. replay number is 888-286-8010, with a confirmation code of 65137379. International callers should dial +1-617-801-6888, with the same confirmation code. A live web cast of the conference call will be accessible from the Investor section of the Company's web site at  http://investors.authentec.com. Following the live web cast, an archived version will be made available on AuthenTec’s web site.

Use of GAAP and Non-GAAP Financial Metrics:

To supplement AuthenTec’s consolidated financial statements presented in accordance with GAAP, the Company uses non-GAAP financial measures that exclude from the statement of operations the effects of stock-based compensation, certain acquisition-related charges, amortization of certain intangible assets, impairments on investments, and costs related to a reduction in workforce. AuthenTec uses the above non-GAAP financial measures internally to understand, manage and evaluate the business. Management believes it is useful for itself and investors to review, as applicable, both GAAP information and the non-GAAP measures in order to assess the performance of continuing operations and for planning and forecasting in future periods. The presentation of these non-GAAP measures is intended to provide investors with an understanding of the Company’s operational results and trends that enables them to analyze the base financial and operating performance and facilitate period-to-period comparisons and analysis of operational trends. AuthenTec believes the presentation of these non-GAAP financial measures is useful to investors in allowing for greater transparency with respect to supplemental information used by management in its financial and operational decision-making. Non-GAAP financial measures should be considered in addition to results prepared in accordance with GAAP, but should not be considered substitutes for or superior to GAAP results. In addition, our non-GAAP financial measures may not be comparable to similarly titled measures utilized by other companies since such other companies may not calculate such measures in the same manner as we do.