All Regions Achieve Double-Digit Growth; Sales in Small and Medium Business Sector Highlight Quarter TOKYO, Aug. 10 /Xinhua-PRNewswire-FirstCall/ -- Trend Micro, Inc. (TSE: 4704; Nasadq: TMIC), a leader in network antivirus and Internet content security software and services, today announced earnings results for the second quarter 2006. Trend Micro posted consolidated net sales of 20.08 billion Yen (or US $174.98 million, 114.75 JPY = 1USD), operating income of 5.37 billion Yen (or US $46.81 million) and net income of 3.04 billion Yen (or US $26.52 million) for the second quarter 2006. These figures reflect an increase of 17% in net sales compared with the same period in the previous year. Operating income was down 2% from the same quarter in the previous year. Following the revision of its deferred revenues, the company still continued to see steady growth around the world, with each of its regions achieving double-digit revenue growth during the second quarter of 2006. North American operations experienced 18 percent revenue growth year-on-year; Europe, Middle East and Africa (EMEA) experienced 15 percent growth; Japan 14 percent, and the Asia-Pacific region a 13 percent year-over-year increase in revenue. Continued, solid growth in the company's small and medium business solutions and consumer business helped boost worldwide revenue with 22 and 21 percent year-on-year increases respectively. "In the second quarter of 2006, we continue to benefit from solid growth in strategic markets such as North America. We are also very pleased with the growth we have sustained in areas such as the small and medium-sized business sector," said Eva Chen, CEO of Trend Micro. "We believe the commitment we have to protecting our customers' digital assets from malicious attacks through security solutions designed to fit the specific needs of the different types of customers we serve, will help enable long-term enduring growth." Based on information currently available to the company, consolidated net sales for the third quarter ending September 30, 2006 is expected to be 20.50 billion Yen (or US $178.26 million, based on an exchange rate of 115 JPY = 1USD). Operating income and net income are expected to be 6.00 billion Yen (or US $52.17 million) and 3.30 billion Yen (or US $28.70 million), respectively. Second Quarter Business Highlights Products and Innovation Trend Micro introduced the following products in the second quarter 2006: Email Security Services -- Trend Micro launched a managed email service for Small and Medium-sized businesses in May 2006, available initially in North America and Australia. This service protects a small and medium business network and infrastructure by stopping threats before they reach the customer's gateway. Trend Micro PC-cillin Internet Security for Microsoft Vista Beta Customers -- offers Windows Vista customers advanced features, beyond standard antivirus and firewall protection, helping to safeguard PCs from new emerging threats like phishing attacks, network viruses, spam, Wi-Fi intrusions and spyware programs. Corporate and Business Highlights By the end of the second quarter, Trend Micro HouseCall, the malware scanning service recorded the 100-millionth malware infection of 2006. The web-based solution is designed to scan a PC for a wide range of Internet security threats including viruses, worms, Trojans, and spyware. In April, Trend Micro announced an extension to its agreement with Microsoft Corporation, to provide antivirus scanning to MSN Hotmail customers. Dave Rand, CTO for Trend Micro Internet Content Security, addressed the Messaging Anti-Abuse Working Group General Meeting in June, where he presented validation that botnets are now the primary source of spam. The creation of 100 new jobs was announced at the Trend Micro Operations Centre in Cork, Ireland. The central office provides a shared service and serves as the support centre for customers throughout Europe, Middle East and Africa. New customers and new business in the second quarter included: Sogique in Canada, Okuma in North America, Koscom and Hanjin Shipping in Korea, Beijing Mobile, Guangdong Telecom, The People's Bank of China and Sinopec (China Petroleum & Chemical Corporation) in China. Notice Regarding Forward-looking Statements Certain statements that we make in this release are forward-looking statements. These forward-looking statements are based upon management's current assumptions and beliefs in light of the information currently available to it, but involve known and unknown risks and uncertainties. Many important factors could cause our actual results to differ materially from those expressed in our forward-looking statements. These factors include: -- Difficulties in addressing new virus and other computer security problems -- Timing of new product introductions and lack of market acceptance for our new products -- The level of continuing demand for, and timing of sales of, our existing products -- Rapid technological change within the antivirus software industry -- Changes in customer needs for antivirus software -- Existing products and new product introductions by our competitors and the pricing of those products -- Declining prices for products and services -- The effect of future acquisitions on our financial condition and results of operations -- The effect of adverse economic trends on our principal markets -- The effect of foreign exchange fluctuations on our results of operations -- An increase in the incidence of product returns -- The potential lack of attractive investment targets and -- Difficulties in successfully executing our investment strategy We assume no obligation to update any forward-looking statements. For more details regarding risk factors relating to our future performance, please refer to our filings with the U.S. Securities and Exchange Commission. About Trend Micro, Inc. Trend Micro Incorporated is a pioneer in secure content and threat management. Founded in 1988, Trend Micro provides individuals and organizations of all sizes with award-winning security software, hardware and services. With headquarters in Tokyo and operations in more than 30 countries, Trend Micro solutions are sold through corporate and value-added resellers and service providers worldwide. For additional information and evaluation copies of Trend Micro products and services, visit our Web site at http://www.trendmicro.com/ . Trend Micro, the t-ball logo, OfficeScan, PC-cillin, and VirusWall are trademarks or registered trademarks of Trend Micro Incorporated. TrendLabs is a service mark of Trend Micro Incorporated. All other company or product names may be trademarks or registered trademarks of their owners. Supplementary Information (1) CONSOLIDATED BALANCE SHEETS (Thousands of yen) Account June 30, June 30, December 31, 2005 2005 2006 Amount % Amount % Amount % Current assets: Cash and cash equivalents 55,797,854 71,118,356 59,612,577 Time deposits 906,397 1,038,871 1,435,293 Marketable securities 14,915,254 22,566,765 22,395,365 Notes and accounts receivable, trade -less allowance for doubtful accounts of -June 30, 2005 (Yen) 381,428 -June 30, 2006 (Yen) 383,294 and December 31, 2005 (Yen) 282,257 -less sales returns allowance of -June 30, 2005 (Yen) 695,848 -June 30, 2006 (Yen) 517,796 and December 31, 2005 (Yen) 422,453 in FY2005 13,742,453 15,827,083 19,198,870 Inventories 280,722 496,261 359,897 Deferred income taxes 6,272,727 7,985,215 6,727,229 Prepaid expenses and other current assets 1,457,490 2,603,035 1,925,791 Total current assets 93,372,897 83.7 121,635,586 83.5 111,655,022 84.0 Investments and other assets: Investment Securities 9,321,151 12,469,433 11,159,428 Investments in and advances to affiliate companies 206,944 297,511 321,569 Software development costs, net 640,578 1,012,239 1,174,691 Other intangibles, net 1,260,470 1,781,019 1,390,434 Goodwill 2,442,109 2,079,121 2,130,179 Deferred income taxes 1,543,222 2,883,907 2,033,488 Other 662,846 751,433 671,800 Total investments and other assets 16,077,320 14.4 21,274,663 14.6 18,881,589 14.2 Property and equipment: Office furniture and equipment 3,841,551 4,981,586 4,468,891 Other properties 1,349,320 1,830,459 1,539,195 5,190,871 6,812,045 6,008,086 Less: Accumulated depreciation (3,094,701) (4,065,622) (3,609,473) Property and equipment, net 2,096,170 1.9 2,746,423 1.9 2,398,613 1.8 Total assets 111,546,387 100.0 145,656,672 100.0 132,935,224 100.0 (Thousands of yen) Account June 30, June 30, December 31, 2005 2005 2006 Amount % Amount % Amount %