VRGY Verigy Ltd. (MM)

Verigy Ltd. (NASDAQ: VRGY), a premier semiconductor test company, today reported financial results for its first quarter, ended Jan. 31, 2008. First quarter revenue was $200 million, a 21 percent increase over revenue of $165 million in the prior year period, and a decrease of 4 percent from the prior quarter of $209 million. Orders for the first quarter were $179 million, a 35 percent increase over orders of $133 million in the prior year period, and a decrease of 2 percent from $183 million from the prior quarter. Net income for the first quarter was $32 million or $0.52 per fully diluted share, compared with net income of $13 million or $0.22 per fully diluted share in the prior year period, and was unchanged from the prior quarter. �Verigy delivered another strong quarter as a result of solid execution throughout the company,� said Keith Barnes, Verigy chairman, chief executive officer and president. �We won new customers in Memory and SOC, strengthened our momentum in the RF market and started or completed several evaluations on both the 93000 and V5000 platforms. We continue to feel comfortable with our operating model and long-term strategy. No company in our sector is immune from the current market deterioration and we are closely monitoring the volatility in the semiconductor industry as well as the concerns over the broader macroeconomic environment.� �Despite deteriorating business conditions for the industry, we met our revenue and earnings per share targets for the first quarter,� added Bob Nikl, Verigy chief financial officer. �We invested in new opportunities, including the acquisition of Inovys, to provide our customers with a compelling test and yield improvement solution. We are committed to further differentiating Verigy with the products we plan to introduce in fiscal 2008. As we continue to execute against our strategic plans, improving profitability from cycle to cycle will remain a top priority for Verigy.� Outlook for Q2 2008 For the quarter ending Apr. 30, 2008, the company is providing the following guidance: Revenue is expected to be in the range of $155 to $170 million. Net income is expected to be in the range of $10 to $14 million, or $0.16 to $0.23 per fully diluted share, and will include between $4.2 to $4.5 million of share-based compensation expense. Conference Call and Webcast Verigy�s management will present more details on its first quarter fiscal year 2008 financial results on a conference call with investors today beginning at 1:30 p.m. (Pacific). This event will be webcast live in listen-only mode. Listeners may log on at http://investor.verigy.com and select �Q1 Verigy Earnings Conference Call� in the �Webcasts & Presentations� section. The webcast will remain available on the company�s Web site for fourteen days. A telephone replay of the conference call will be available from 4:30 p.m. (Pacific) today through March 5, 2008. The replay number is +1 888-286-8010 toll-free, or international callers may dial +1 617-801-6888; enter pass code 86747058. About Verigy Verigy designs, develops, manufactures, sells and services advanced test systems and solutions for the flash memory and system-on-chip segments of the semiconductor industry. Verigy�s scalable platform systems are used by leading semiconductor companies worldwide in design validation, characterization, and high volume manufacturing test. Information about Verigy can be found at www.verigy.com. Forward-Looking Statements In our earnings release, some of the comments are forward-looking, including statements regarding Verigy�s future revenue and earnings, guidance for the second quarter, plans to introduce new products in 2008 and other statements that express the company�s expectations, beliefs, plans and forecasts. Words such as expect, anticipate, intend, plan, believe, estimate and variations of such words and similar expressions may identify additional forward-looking statements. These forward-looking statements are based on current information and estimates, and are not guarantees of future performance or events. These statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. The risks and uncertainties include, but are not limited to, unforeseen changes in demand for semiconductors and thus for semiconductor test solutions, the strength of our customers� businesses and unforeseen changes in the demand for current and new products and technologies. Additional factors that may cause results to differ materially from those in the forward-looking statements are discussed in our Annual Report on Form 10-K for the year ended October 31, 2007. The forward-looking statements, including guidance, are only valid as of this date, and Verigy undertakes no duty to update any forward-looking statements. VERIGY LTD. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In millions, except share and per share amounts) (Unaudited) � � Three Months Ended January 31 � 2008 � 2007 � Orders: $ 179 $ 133 � Net revenue: Products $ 163 $ 128 Services � 37 � 37 Total net revenue 200 165 � Cost of sales: Cost of products (1) 79 69 Cost of services (1) � 28 � 25 Total cost of sales 107 94 � Operating expenses: Research and development (1) 25 23 Selling, general and administrative (1) 39 34 Separation costs � - � 2 Total operating expenses 64 59 Income from operations 29 12 Other income (expense), net � 6 � 3 � Income before taxes 35 15 Provision for income taxes � 3 � 2 � Net income $ 32 $ 13 � � � Net income per share- basic: $ 0.53 $ 0.22 � Net income per share- diluted: $ 0.52 $ 0.22 � � Weighted average shares (presented in thousands) used in computing net income per share: Basic 59,875 58,768 Diluted 60,702 59,099 � (1) Share-based compensation expense by function: Cost of products $ 0.5 $ 0.4 Cost of services $ 0.2 $ 0.2 Research and development $ 0.5 $ 0.5 Selling, general and administrative $ 2.7 $ 2.6 VERIGY LTD. CONDENSED CONSOLIDATED BALANCE SHEETS (In millions, except share data) (Unaudited) � � � January 31, October 31, � 2008 � � 2007 � � ASSETS Current assets: Cash and cash equivalents $ 192 $ 146 Short-term marketable securities 137 229 Trade accounts receivable, net 102 107 Inventory 68 68 Other current assets � 51 � � 54 � Total current assets 550 604 Property, plant and equipment, net 43 42 Long-term marketable securities 94 48 Goodwill and other intangibles, net 19 18 Other long-term assets � 81 � � 59 � Total assets $ 787 � $ 771 � � LIABILITIES AND SHAREHOLDERS� EQUITY � Current liabilities: Accounts payable $ 70 $ 76 Payables to Agilent - 1 Employee compensation and benefits 47 53 Deferred revenue, current 54 65 Income and other taxes payable 5 12 Other current liabilities � 19 � � 19 � Total current liabilities 195 226 � Long-term liabilities: Income taxes payable 10 - Other long-term liabilities � 49 � � 47 � Total liabilities 254 273 � � � Shareholders' equity Ordinary shares, no par value, 59,956,641 and 59,704,629 issued and outstanding at January 31, 2008 and October 31, 2007, respectively Additional paid in capital 389 381 Retained earnings 161 131 Accumulated other comprehensive loss � (17 ) � (14 ) Total shareholders' equity � 533 � � 498 � Total liabilities and shareholders� equity $ 787 � $ 771 �