NetLogic Microsystems Announces Second Quarter 2007 Financial Results

Q2 2007 Net Revenues: $25.8 million

Q2 2007 GAAP Net Income: $2.3 million; $0.11 per share (diluted)

Q2 2007 Non-GAAP Net Income: $6.2 million; $0.28 per share (diluted)

Q2 2007 cash and short-term investments grew by $8.8 million to $104.7 million

Mountain View, Calif. – July 24, 2007 – NetLogic Microsystems, Inc. (NASDAQ: NETL), the leader in the design and development of knowledge-based processors, today announced financial results for the second quarter ended June 30, 2007.

Revenue for the second quarter of 2007 was $25.8 million, a 10.4 percent sequential increase from $23.4 million for the first quarter of 2007.

Second quarter 2007 net income, determined in accordance with generally accepted accounting principles (GAAP), was $2.3 million or $0.11 per share. By comparison, GAAP net income was $1.6 million or $0.08 per share in the first quarter of 2007.  GAAP net income includes stock-based compensation expense and amortization of intangible assets. Excluding these costs, non-GAAP net income for the second quarter of 2007 was $6.2 million or $0.28 per share, an increase of 16.7 percent from $0.24 per share for the first quarter of 2007.

The company continued to generate cash from its profitable operations.  Cash and short-term investments increased $8.8 million during the second quarter to $104.7 million at June 30, 2007.

Management Qualitative Comments

“This was another good quarter as we continued to see broad-based momentum across our customer base,” said Ron Jankov, president and CEO.  “During the second quarter, revenue growth outside our largest customer grew by more than 30 percent, indicating a continuing strong demand for increasingly complex packet processing in a wide array of applications.  Further, we received our first volume production orders for the NL8000 product family for shipment in the fourth quarter to our largest customer.  This marks a company record for the speed in which we brought a product from tape out to fully-qualified volume production, and is the result of our success in achieving functionality and performance targets with first pass silicon.  Our design-in activity continues to be very strong for both the NL7000 and NL8000 product families, where our advanced performance and unique functionality puts us in a position of custom, sole-sourced supplier for many complex applications.  Our design engagements and design wins for our NETLite™ processors are increasing as we continue to work with our silicon partners to significantly upgrade the functionality of entry-level systems, such as broadband access and Ethernet switching.  Also, our NETL7™ processor product family continues to expand with the release of the NLS1005 content processor featuring a high-speed PCI Express interface.  We also announced the availability of production-ready software drivers, compilers and inspection engines for our NETL7 processors, which will allow us to effectively and efficiently support and engage with a much larger set of customers.  We expect to announce design wins for our NETL7 processors with additional customers in the second half of 2007.”

Recent Highlights

• NetLogic Microsystems announced that it appointed Michael T. Tate as vice president and chief financial officer, effective July 18, 2007.  Tate was previously interim chief financial officer, vice president, corporate controller, and treasurer at Marvell Technology Group Ltd.  Tate joined Marvell in January 2001 as part of Marvell’s acquisition of Galileo Technology Ltd. Prior to joining Marvell, from 1997 to 2001, he served in various senior financial management roles at Galileo Technology Ltd. including vice president of finance and chief financial officer.

• NetLogic Microsystems also announced that its knowledge-based processors will be used by Datang Mobile Communications Equipment Co., Ltd. for its third-generation (3G) TD-SCDMA network solutions that will be deployed by China Mobile as part of China Mobile’s network expansion program.

• The company announced the availability of the NLS1005 content processor, the newest addition to its NETL7 Layer 7 knowledge-based processor family.  The NLS1005 content processor features a high-speed PCI Express® interface, and enables deep packet inspection and application signature recognition with 10-Gigabit line rate performance.

• The company announced the availability of production-ready software drivers, compilers and inspection engines for its NETL7 processors. This significantly reduces the amount of time and engineering resources required by the company and its customers to productize solutions incorporating the NETL7 processors.

• NetLogic Microsystems also announced initial revenue shipments of the NL8000, its fourth generation knowledge-based processor, to its leading customer in support of multiple programs covering a range of advanced products.  The NL8000 knowledge-based processor features a number of major advances and industry firsts in knowledge-based processing. It achieves new levels of parallel processing performance through a patented dual-core technology and a first-of-its-kind ability to parse decisions into 64 unique processing elements, which is double the number of processing elements of any competitive part.  This capability to execute multiple parallel decisions during a single core clock cycle combined with our highly pipelined synchronous cross-connect bussing scheme enables customers to deploy 100 Gbps ASIC, Switches, and Network Processors.

Conference Call

NetLogic Microsystems will hold its second quarter 2007 financial results conference call today at 2:00 p.m. Pacific time.  To listen to the conference call, dial 800-299-7098 ten minutes prior to the start of the call, using the passcode 74101484. International callers, dial 617-801-9715. A taped replay will be made available approximately two hours after the conclusion of the call and will remain available for one week. To access the replay, dial 888-286-8010 and enter passcode 22288708. International callers dial 617-801-6888.

The conference call will be available via a live webcast on the investor relations section of NetLogic Microsystems’ web site at http://www.netlogicmicro.com.  Access the web site 15 minutes prior to the start of the call to download and install any necessary audio software.  An archived webcast replay will be available on the web site for three months.

View Tables (PDF)

About NetLogic Microsystems

NetLogic Microsystems, Inc. (NASDAQ:NETL), a fabless semiconductor company headquartered in Mountain View, California, designs, develops and markets high performance knowledge-based processors for a variety of advanced wireline and mobile wireless networking systems, such as routers, switches, wireless infrastructure equipment, network security appliances, network access equipment and networked storage devices. NetLogic Microsystems' knowledge-based processors employ an advanced processor architecture and a large knowledge or signature database containing information on the network, as well as applications and content that run on the network, to make complex decisions about individual packets of information traveling through the network. Knowledge-based processors from NetLogic Microsystems significantly enhance the ability of networking original equipment manufacturers (OEMs), to supply network service providers with systems offering more advanced functionality for the Internet, such as high-definition video delivery over the Internet (IPTV), voice transmission over the Internet (VoIP), unified threat management (UTM), virtual private networks (VPN), rich content delivery over mobile wireless networks, and streaming video and audio. For more information about products offered by NetLogic Microsystems, call 650.961.6676 or visit the NetLogic Microsystems Web site at http://www.netlogicmicro.com.

NetLogic Microsystems, the NetLogic Microsystems logo, NETLite and NETL7 are trademarks of NetLogic Microsystems, Inc. All other trademarks are the sole property of their respective holders.

"Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995:  Statements in this press release regarding NetLogic Microsystems’ business which are not historical facts may be "forward-looking statements” that involve risks and uncertainties. Forward-looking statements are based on certain assumptions and expectations of future events that are subject to risks and uncertainties. Actual results and trends may differ materially from historical results or those projected in any such forward-looking statements depending on a variety of factors. These factors include, but are not limited to, customer acceptance and demand for our products, the volume of sales to our principal product customers, manufacturing yields for our products, the timing of manufacture and delivery of product by our foundry suppliers, potential warranty claims and product defects, the length of our sales cycles, our average selling prices, our ability to successfully develop and sell new products, the strength of the OEM networking equipment market and the cyclical nature of that market and the semiconductor industry. For a discussion of such risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see "Risk Factors” in the Company's reports on Forms 10-K and 10-Q, as well as other reports that NetLogic Microsystems files from time to time with the Securities and Exchange Commission.  All forward-looking statements are qualified in their entirety by this cautionary statement, and NetLogic Microsystems undertakes no obligation to update publicly any forward-looking statement for any reason, except as required by law, even as new information becomes available or other events occur in the future.

###

Non-GAAP Financial Information

In addition to disclosing financial results calculated in accordance with U.S. generally accepted accounting principles (GAAP), this announcement of operating results contains non-GAAP financial measures that exclude the income statement effects of stock-based compensation, amortization of intangible assets, an in-process research and development charge and a fair value adjustment of the acquired inventory resulting from the acquisition of NSE assets of Cypress Semiconductor Corporation and the effects of our adoption of SFAS 123R upon the number of diluted shares used in calculating non-GAAP earnings per share.

We excluded stock-based compensation expense as well as amortization of intangibles as they are non-cash in nature.  We excluded an in-process research and development charge and a fair value adjustment related to acquired inventory, as they are considered one-time expenses. 

We use the non-GAAP financial measures that exclude these items to make strategic decisions, forecast future results and evaluate the Company’s current performance. We believe that the presentation of non-GAAP financial measures that exclude these items is useful to investors because we do not consider these charges part of the day-to-day business or reflective of the core operational activities of the Company that are within the control of management or that would be used to evaluate management’s operating performance.

The non-GAAP financial measures disclosed by the Company should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and the financial results calculated in accordance with GAAP and reconciliations to those financial statements should be carefully evaluated. The non-GAAP financial measures used by the Company may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies.  The Company has provided reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures.  For additional information regarding these non-GAAP financial measures, and management’s explanation of why it considers such measures to be useful,  refer to the Form 8-K dated July 24, 2007 that the Company has submitted to  the Securities and Exchange Commission.