VRGY Verigy Ltd. (MM)

Verigy Ltd. (NASDAQ: VRGY), a premier semiconductor test company, today reported financial results for its second quarter, ended Apr. 30, 2008. Second quarter revenue was $162 million, an 11 percent decrease from revenue of $183 million in the prior year period, and a decrease of 19 percent from the prior quarter revenue of $200 million. Orders for the second quarter were $177 million, a 12 percent decrease from orders of $202 million in the prior year period, and essentially flat with the prior quarter. Net income for the second quarter was $14 million or $0.23 per fully diluted share, compared with net income of $22 million or $0.36 per fully diluted share in the prior year period, and $32 million or $0.52 per fully diluted share in the prior quarter. �Despite the challenging environment in certain segments of the semiconductor industry, we had a solid second quarter and a good first half,� said Keith Barnes, Verigy chairman, chief executive officer and president. �For the first half of fiscal 2008, we delivered financial results that were better than those achieved in the first half of fiscal 2007. Our diversified product portfolio and leveraged operating model have helped us manage our business better than many of our peers.� �We benefited from strong demand for our SOC products and achieved earnings per share at the high end of our guidance range,� added Bob Nikl, Verigy chief financial officer. �Our financial results demonstrate our ability to deliver superior returns to our shareholders while satisfying our customers� increasingly challenging test needs.� Outlook for Q3 2008 For the quarter ending July 31, 2008, the company is providing the following guidance: Revenue is expected to be in the range of $170 to $180 million. Net income is expected to be in the range of $15 to $18 million, or $0.24 to $0.29 per fully diluted share, and will include between $4.3 to $4.6 million of share-based compensation expense. Conference Call and Webcast Verigy�s management will present more details on its second 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 �Q2 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 June 5, 2008. The replay number is +1 888-286-8010 toll-free, or international callers may dial +1 617-801-6888; enter pass code 55432272. About Verigy Verigy designs, develops, manufactures, sells and services advanced semiconductor test systems and solutions for the flash memory, high-speed memory and system-on-chip (SoC) markets. Verigy�s scalable platforms are used by leading companies worldwide in design validation, characterization, and high-volume manufacturing test. Advanced analysis tools accelerate design debug and yield ramp processes for Verigy�s customers. Information about Verigy can be found at www.verigy.com. Forward-Looking Statements This earnings release contains forward-looking statements, including statements regarding Verigy�s guidance for the third quarter. 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 most recent Form 10-Q filing for the period ended January 31, 2008, and our 10-K for the period ended October 31, 2007. In those filings you will find descriptions of risk factors that could impact our future results. 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 Six Months Ended April 30, April 30, 2008 2007 2008 2007 � Orders: $ 177 $ 202 $ 356 $ 335 � Net revenue: Products $ 122 $ 147 $ 285 $ 275 Services � 40 � 36 � 77 � 73 Total net revenue 162 183 362 348 � Cost of sales: Cost of products (1) 56 79 135 148 Cost of services (1) � 29 � 25 � 57 � 50 Total cost of sales 85 104 192 198 � Operating expenses: Research and development (1) 26 22 51 45 Selling, general and administrative (1) 37 35 76 69 Separation costs � - � 1 � - � 3 Total operating expenses 63 58 127 117 � Income from operations 14 21 43 33 Other income (expense), net � 3 � 4 � 9 � 7 � Income before taxes 17 25 52 40 Provision for income taxes � 3 � 3 � 6 � 5 � Net income $ 14 $ 22 $ 46 $ 35 � � � Net income per share- basic: $ 0.24 $ 0.37 $ 0.76 $ 0.59 � Net income per share- diluted: $ 0.23 $ 0.36 $ 0.75 $ 0.59 � � Weighted average shares (presented in thousands) used in computing net income per share: Basic 60,009 59,004 59,941 58,884 Diluted 60,663 59,945 60,714 59,567 � (1) Share-based compensation expense by function: Cost of products $ 0.5 $ 0.4 $ 1.0 $ 0.8 Cost of services $ 0.3 $ 0.2 $ 0.5 $ 0.4 Research and development $ 0.5 $ 0.4 $ 1.0 $ 0.9 Selling, general and administrative $ 2.9 $ 2.2 $ 5.6 $ 4.8 � � � � � � VERIGY LTD. CONDENSED CONSOLIDATED BALANCE SHEETS (In millions, except share data) (Unaudited) � � � April 30, October 31, 2008 2007 � ASSETS Current assets: Cash and cash equivalents $ 242 $ 146 Short-term marketable securities 129 229 Trade accounts receivable, net 90 107 Inventory 81 68 Other current assets � 51 � � 54 � Total current assets 593 604 � Property, plant and equipment, net 41 42 Long-term marketable securities 83 48 Goodwill and other intangibles, net 18 18 Other long-term assets � 84 � � 59 � Total assets $ 819 � $ 771 � � LIABILITIES AND SHAREHOLDERS� EQUITY � Current liabilities: Accounts payable $ 77 $ 76 Payables to Agilent - 1 Employee compensation and benefits 52 53 Deferred revenue, current 61 65 Income and other taxes payable 4 12 Other current liabilities � 17 � � 19 � Total current liabilities 211 226 � Long-term liabilities: Income taxes payable 10 - Other long-term liabilities � 47 � � 47 � Total liabilities 268 273 � � � Shareholders' equity Ordinary shares, no par value, 60,021,531 and 59,704,629 issued and outstanding at April 30, 2008 and October 31, 2007, respectively Additional paid in capital 393 381 Retained earnings 175 131 Accumulated other comprehensive loss � (17 ) � (14 ) Total shareholders' equity � 551 � � 498 � Total liabilities and shareholders� equity $ 819 � $ 771 �