Dialog Semiconductor Announces Results for the First Quarter of 2011

Dialog Semiconductor plc, a provider of highly integrated innovative power management, audio and low energy short range wireless technologies, today reports results for the first quarter ended 1 April 2011.

Q1 2011 Financial Highlights - Revenue for Q1 2011 was $98.5 million, a year-on-year increase of 61.2% over the corresponding first quarter of 2010

- Q1 2011, IFRS operating profit was $8.2 million or 8.5% of revenue with underlying(**) operating profit of $13.8 million or 14.0% of revenue

The integration of SiTel Semiconductor

Q1 2011 Operational Highlights - Good early progress made in the integration of SiTel Semiconductor, a leader taking everything into account range low energy wireless and VoIP (Voice over Internet Protocol) ICs acquired in February this year. Remains on track to be revenues accretive from Q3 2011

- Lenovo announced as Dialog's first PM-OLED customer, with S800 advanced feature phone for the Chinese market utilising a transparent display

'I am very pleased to report again another record revenue quarter, this time for our combined and larger business. This progress has been driven chiefly by increased demand for smartphones and tablet PCs and we as well remain encouraged by the opportunities we see for our newly acquired short range wireless capabilities.

The acquisition of SiTel

The acquisition of SiTel was an important event for us while the first quarter. We are making very good initial progress in integrating SiTel's operations and corporate functions with our own and we are working toward a target to have largely completed this integration work within 6 months of the acquisition. We are already hard at work on re-positioning the excellent innovation we have acquired to take advantage of emerging low energy wireless opportunities and we expect to launch new products to market within the at once twelve months.

As a business, our design win activity is accelerating and yielding positive results for both custom and standard products, particularly through our successful processor partner program initiative, which bodes very so then for Dialog's future.'

The combined business

Revenue in Q1 2011 for the combined business was $98.5 million, an increase of 61.2% over the $61.1 million in the first quarter of 2010 and a sequential increase of 12.5% on the $87.6 million of revenue delivered in the prior quarter. Included, was a contribution of $17.9 million of revenue from the SiTel acquisition which was consolidated in the financial results from 10 February. Excluding this SiTel contribution, revenue in Q1 2011 increased by 32.0% over Q1 2010 and decreased by 8.0% over the prior quarter. This first quarter is typically the lowest quarter of our financial year due to the seasonally lower consumer demand for our wireless segment products.

Gross margin in Q1 2011 was 40.7% of revenue. This represents a decrease of 5.3 percentage points over the 46.0 % achieved in the comparative period last year and a decrease of 4.2 percentage points over the 44.9% achieved in Q4 2010. Prior year Q1 margin was positively influenced by 1.1 percentage points due to a last time buy product programme.

R&D and SG&A in Q1 2011 for the combined company stood at 19.3% and 12.9% of revenue respectively, compared to 17.9% and 12.3% in the prior quarter excluding SiTel.

IFRS basis in Q1 2011

Operating profit on an IFRS basis in Q1 2011 was $8.2 million or 8.5% of revenue. This compares to the $6.6 million or 10.8% of revenue delivered in Q1 2010. Excluding the share-based compensation impact and the one-time costs associated with the acquisition, the underlying(**) operating profit achieved in Q1 2011 was $13.8 million or 14.0% of revenue, compared with the underlying(**) operating profit of $9.1 million or 14.9% of revenue in Q1 2010.

In Q1 2011, on an IFRS basis net income was $7.9 million or 13 cents per basic share and 12 cents per diluted share. This compares to 8 cents per basic share and diluted share delivered in Q1 2010. The underlying revenues per share in Q1 2011 was 20 cents. This compares to 11 cents in Q1 2010. At the end of Q1 2011, our total inventory level was $58.9 million: an increase of $18.2 million over the prior quarter and a level which, we feel is appropriate in order to service the demand of the combined business for the straightway quarters given the constrained supply chain situation and resulting extended lead-time.

For financial year 2010, SiTel recorded $116.9 million revenue and will be consolidated in Dialog financials from 10 February 2011. From this date, SiTel recorded $17.9 million in revenue in Q1 2011 at a gross margin of 38.9% and contributed $2.3 million of operating profit. Excluding the amortisation of capitalised R&D mentioned above, gross margin and operating profit would have been 43.3% and $3.1 million respectively. SiTel's revenue seasonality pattern has historically resulted in the first quarter of the year being the lowest quarter, previously typically peaking in the third quarter.

The existing operational

Good initial progress has been made in integrating SiTel into the existing operational and technical structures of our organisation. Our focus now rests on largely completing the integration plan by Q3 2011. Dialog's strategy includes the pursuit of opportunities in the higher growth and higher profit market segments SiTel operates in. New R&D product development will be primarily focused on the development of low energy short range wireless and VoIP solutions.

In Q1 2011, and as announced by Dialog on 20 April, Lenovo launched a transparent advanced feature phone, the S800, which was based on our SmartXtend(TM) PM OLED driver IC. This represents the first early production and commercial adoption for this innovation and the first cellphone to offer a true transparent display to the user. We continue to work with other manufactures for other similar early adopter type designs using the innovative features which SmartXtend(TM) enables.

We have sampled multiple clients with our DA8223 2D-3D video conversion IC while the quarter with very strong interest being generated particularly with Asian clients. We already have the first success at an early adopter OEM while to boot we work closely with a major provider of displays to the smartphone and tablet PC market.

Our unparalleled ability to combine ultra low power audio and high integrated power management innovation is continuing to gain market traction, with a custom device being successfully sampled in Q1 2011 to a major Asian OEM. From the newly acquired SiTel business, we are now working closely with leading VoIP equipment providers and have already secured multiple design wins across the enterprise segment. We are starting to see strong interest in our low energy research for early adopter home automation and security applications, due to the unequalled features it delivers over competing technologies.

For Q2 2011, we expect revenue including SiTel to be in the range of $107.0 million to $112.0 million in spite of some market uncertainty in the worldwide electronics supply chain due to the earthquake and tsunami in Japan. Annualised growth trends in 2011 are expected to be in line with current market expectations.

Looking forward, for the combined company gross margins are expected to remain at their current levels whilst supply chain conditions remain restricted. Nevertheless, we expect furthermore margin improvements in the acquired SiTel business to be realised towards the end of the year.

[2] The 'IFRS' column has been disclosed for instance the performance of the Dialog Semiconductor Plc business in 2011 excluding the acquisition of SiTel Semiconductor B.V. which occurred on 10 February 2011. The performance of SiTel Semiconductor B.V. since acquisition on 10 February 2011 is shown in the 'Adjustment' column. The 'IFRS' column represents the total consolidated result of the enlarged Dialog Semiconductor Plc group for three months ended 1 April 2011. Dialog Semiconductor's underlying financial performance for Q1-2011 and Q1-2010 is summarised below:

Note to editors: Dialog Semiconductor creates highly integrated, mixed-signal integrated circuits optimised for personal portable, low energy short-range wireless, lighting, display and automotive applications. The company provides flexible and dynamic support, world-class research and the assurance of dealing with an established business partner.

With its in a class by itself focus and expertise in energy efficient system power management, and now with the recent addition of low energy short range wireless and VoIP research to the portfolio, Dialog brings decades of experience to the rapid development of ICs for personal portable applications including smartphones, tablet PCs, digital cordless phones and gaming applications.

The performance in terms of extended battery lifetime

Dialog's power management processor companion chips are essential for enhancing both the performance in terms of extended battery lifetime and the consumers' multimedia experience. With world-class manufacturing partners, Dialog operates a fabless business model.

Dialog Semiconductor plc is headquartered nearly Stuttgart with a global sales, R&D and marketing organisation. In 2010, it had $296.6 million in revenue and was again one of the fastest growing European public semiconductor companies. It currently has roughly 550 employees. The company is listed on the Frankfurt stock exchange and is a member of the German TecDax index.

Forward Looking Statements: This press release contains 'forward-looking statements' that reflect management's current views with respect to future events. The words 'anticipate,' 'believe,' 'estimate, 'expect,' 'intend,' 'may,' 'plan,' 'project' and 'should' and similar expressions identify forward-looking statements. Such statements are subject to risks and uncertainties, including, nevertheless not limited to: an economic downturn in the semiconductor and telecommunications markets; changes in currency exchange rates and interest rates, the timing of customer orders and manufacturing lead times, insufficient, excess or obsolete inventory, the impact of competing products and their pricing, political risks in the countries in which we operate or sale and supply constraints. If any of these or other risks and uncertainties occur or if the assumptions underlying any of these statements prove incorrect, at that time actual results may be materially different from those expressed or implied by such statements. We do not intend or assume any obligation to update any forward-looking statement which speaks only as of the date on which it is made, still, any subsequent statement will supersede any previous statement.