Silicon Image Reports Third Quarter 2008 Financial Results (Revenue up 11%)

SUNNYVALE, Calif.—(BUSINESS WIRE)—October 23, 2008— Silicon Image, Inc. (NASDAQ:SIMG), a leader in semiconductors and intellectual property for the secure distribution, presentation and storage of high-definition content, today reported financial results for its third quarter ended September 30, 2008.

Revenue for the third quarter of 2008 was $77.8 million, compared to $70.1 million for the second quarter of 2008 and $86.3 million for the third quarter of 2007.

GAAP net income for the third quarter of 2008 was $6.1 million, or $0.08 per diluted share, compared to a GAAP net loss of $0.5 million, or $0.01 per diluted share, for the second quarter of 2008 and GAAP net income of $4.1 million, or $0.05 per diluted share, for the third quarter of 2007.

Non-GAAP net income for the third quarter of 2008 was $17.7 million, or $0.23 per diluted share, compared to $5.0 million, or $0.07 per diluted share, for the second quarter of 2008 and $8.3 million, or $0.10 per diluted share, for the third quarter of 2007. Non-GAAP net income for the third quarter of 2008 consisted of $9.7 million, or $0.13 per diluted share, from operations and $8.0 million, or $0.10 per diluted share, attributable to income tax benefits. Non-GAAP net income excludes stock-based compensation expense, amortization of intangible assets and restructuring charges.

A reconciliation of GAAP and non-GAAP items is provided in a table immediately following the Condensed Consolidated Statements of Operations.

During Q3 we sequentially increased revenue and operating profit in line with our plan and generated $15 million in cash, said Steve Tirado, Silicon Image's president and chief executive officer. As of September 30, 2008 we had $200 million in cash and investments and no debt. Weve experienced a number of design wins during the quarter and expect to win additional slots as we progress through the 2008/2009 customer design win season in accordance with our new product initiatives roadmap.

Third Quarter Highlights

-- Samsung Electronics implements InstaPort (TM) technology in next generation DTVs in order to improve the HDTV entertainment experience for their consumers.
-- Instaport reduces HDMI device switching time to sub-second speeds vs competitive solutions at 4-7 seconds.
-- New PEN (Personal Entertainment Network) digital connectivity technology voted "Best New Product Idea" at CableLabs (R) Summer Conference 2008.
-- PEN "Echocast technology" solves remote user interface distribution with a "pixel accurate protocol" that provides a highly responsive consumer experience to any display on a wired or wireless home network.
-- Introduction of SiI9206 - a new ultra-low-power dual-mode HDMI/MHL interface solution targeting the mobile phone handset.
-- VastLane HDMI and DVI Transmitters now available for next-generation AMD processor-based mobile, thin-client, point-of-sale and gaming systems.

The following is Silicon Image's current financial outlook for the fourth quarter of 2008:

Revenue: $68 million - $69 million

Gross margin: 57% - 58%

GAAP operating expenses: $40 million - $41 million

Non-GAAP operating expenses: $34 million - $35 million
Interest Income: $0.9 million - $1.0 million
Effective tax rate: 0%
Diluted shares outstanding: approximately 76 million

Use of Non-GAAP Financial Information

Silicon Image presents and discusses gross margin, operating expenses, net income 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 amortization of intangibles and stock based compensation 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.

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