Tessera Technologies, Inc. (Nasdaq: TSRA) announced its results for the fourth quarter and full year ended Dec. 31, 2010.
“2010 was a record revenue year for Tessera, with total revenue of $301.4 million,” said Henry R. Nothhaft, Tessera’s chairman and chief executive officer. “We continued our innovation efforts during the year, spending $74.1 million in research and development and $20.1 million on patent acquisitions, resulting in an increase of 430 patents and patent applications worldwide or 24% over 2009. Cash, cash equivalents, and investments at Dec. 31, 2010 were $475.0 million, an increase of $71.4 million for the year.”
Revenue highlights: Fourth quarter 2010
•Total revenues were $80.4 million.
•Micro-electronics revenues were $71.2 million.
•Imaging & Optics revenues were $9.2 million.
Fourth quarter 2010 total revenues of $80.4 million were up 42% compared to the fourth quarter of 2009. The company’s two business segments, Micro-electronics and Imaging & Optics, were up 47% and 16% respectively in the fourth quarter of 2010 as compared to the fourth quarter of 2009.
Fourth quarter 2010 Micro-electronics revenues of $71.2 million were comprised of $71.1 million in royalties and license fees and $70,000 in products and services. Fourth quarter 2010 Imaging & Optics revenues of $9.2 million were comprised of $5.2 million in royalties and license fees, and $4.0 million in products and services.
Generally accepted accounting principles (GAAP) net income for the fourth quarter of 2010 was $13.5 million, or $0.27 per diluted share, which included non-cash charges of $6.8 million for stock-based compensation, $4.0 million for amortization of acquired intangibles, and $3.5 million for the impairment of certain long-lived assets.
Non-GAAP net income for the fourth quarter of 2010 was $23.1 million or $0.44 per diluted share. Non-GAAP net income is defined as income and operating expenses adjusted for acquired intangibles amortization, charges for acquired in-process research and development, stock-based compensation expense, impairment charges on long-lived assets, and related tax effects.
Revenue highlights: Full year ended Dec. 31, 2010
•Total revenues were $301.4 million.
•Micro-electronics revenues were $264.1 million.
•Imaging & Optics revenues were $37.3 million.
GAAP net income for 2010 was $57.3 million, or $1.14 per diluted share. Non-GAAP net income for the year was $91.2 million, or $1.77 per diluted share.
“We see significant opportunities for our Extended Depth of Field (EDOF), Zoom and Micro Electro Mechanical Systems (MEMS) Auto Focus Imaging & Optics solutions. In 2011, we are reorganizing our Imaging & Optics segment to focus on these leading edge technologies, while aligning our expenses accordingly,” concluded Nothhaft.
Imaging & optics reorganization
As part of Tessera’s reorganization of its Imaging & Optics segment, the company announced today a reduction of its Imaging & Optics employees that is anticipated to be up to 15% of the company’s worldwide employee base.
Tessera expects to incur severance and other related costs in conjunction with the planned workforce reduction in the range of $2.5 million to $3.0 million, which the company will recognize in the first quarter of 2011.
First quarter 2011 financial guidance
First quarter 2011 total revenues are expected to range between $65 million and $68 million, compared to first quarter 2010 total revenues of $64.3 million.
First quarter 2011 Micro-electronics revenues are expected to range between $54 million and $56 million, all of which will be royalties. As a comparison, the first quarter of 2010 Micro-electronics royalties and license fees revenues were $55.8 million and included a $3.0 million payment for past royalties from United Test and Assembly Center Ltd under a litigation settlement.
The company’s first quarter 2011 guidance reflects the fact that five licensees or former licensees are either in breach or have not yet renewed their license agreements. Tessera is pursuing UTAC (Taiwan) Corporation and Amkor for breaches of their contracts. In its most recent royalty report, Amkor indicated there will not be any royalty bearing packages for the six months ending March 31, 2011, which impacts the company’s first quarter 2011 guidance and potentially guidance thereafter. Amkor’s actions will be the subject of further arbitration.
Tessera is also pursuing Sony (collective Sony Corporation and Sony Electronics, Inc.) and Renesas Electronics (the merged entity of NEC Electronics and Renesas Technology Corp.) for patent infringement. Tessera is pursuing these actions based on its long standing practice of to protecting its intellectual property and licensees in good standing. The timing of resolution of these litigation and arbitration matters is difficult to predict. In addition, Tessera is in active licensing negotiations with a fifth company.
Two major DRAM manufacturers have volume pricing adjustments in their licenses that may cause, only for these two DRAM manufacturers when unit shipment volumes are high, our aggregate annual DRAM royalty revenue to grow less rapidly than annual growth in overall unit shipments in the DRAM market.
First quarter 2011 Imaging & Optics revenues, in total, are expected to be approximately $11 million to $12 million. First quarter 2011 Imaging & Optics royalty and license fees revenues are expected to be approximately $6.5 million to $7.0 million. Imaging & Optics products and services revenues are expected to be approximately $4.5 million to $5.0 million. This compares to Imaging & Optics royalties and license fees revenues of $3.1 million and products and services revenues of $5.4 million in the first quarter of 2010, which totaled $8.5 million for this segment.
Non-GAAP operating expenses for the first quarter 2011 are projected to range between $35 million and $36 million, excluding litigation expenses and the aforementioned one-time charge related to the planned workforce reduction.
Prepared remarks and conference call information
Concurrent with the publication of its earnings press release, Tessera will post to its website, www.tessera.com, management’s prepared remarks regarding Tessera’s quarterly performance. These prepared remarks are being made available in order to provide the investment community with additional time to analyze Tessera’s results prior to the conference call. The fourth quarter and full year 2010 earnings conference call will include brief remarks from management, followed by a Q&A session.
Tessera Technologies, Inc. invests in, licenses and delivers innovative miniaturization technologies for next-generation electronic devices. The company’s micro-electronics solutions enable smaller, higher-functionality devices through chip-scale, 3D and wafer-level packaging technology, as well as high-density substrate and silent air cooling technology. Tessera’s imaging and optics solutions provide low-cost, high-quality camera functionality in electronic products and include image sensor packaging, wafer-level optics and image enhancement technologies. The company also offers customized micro-optic lenses, from diffractive and refractive optical elements to integrated micro-optical subassemblies. Tessera licenses its technologies, as well as delivers products based on these technologies, to promote the development of the supply chain infrastructure. The company is headquartered in San Jose, California. For information call 1.408.321.6000 or go to www.tessera.com.