Zoran Corporation Reports Third Quarter 2010 Results

SUNNYVALE, Calif. — Zoran Corporation (NASDAQ:ZRAN), a leading provider of digital solutions for applications in the digital entertainment and digital imaging markets, today reported results for its third quarter ended September 30, 2010.

Revenues for the third quarter were $99.3 million, compared to $93.4 million last quarter and $115.5 million for the third quarter of 2009. The Company reported a third quarter GAAP net loss of $4.1 million, or $0.08 per share, which compares with a GAAP net loss of $6.7 million, or $0.13 per share, for the previous quarter and GAAP net income of $4.9 million, or $0.09 per diluted share, for the third quarter of the prior year.

Non-GAAP net loss for the third quarter was $810 thousand, or $0.02 per share, which excludes $109 thousand of amortization of acquired intangible assets, $2.0 million of acquisition related expenses, $2.5 million of stock-based compensation expenses, and an adjustment of $1.3 million for the tax provision to a non-GAAP rate. This compares with non-GAAP net loss of $4.0 million, or $0.08 per share, for the previous quarter, and a non-GAAP net income of $8.7 million, or $0.17 per diluted share for the same period last year.

“During the third quarter, strong and widespread demand for our COACH processors drove growth in digital cameras, and we continued to see solid signs of recovery in Printer Imaging,” said Dr. Levy Gerzberg, president and chief executive officer of Zoran. “DTV was impacted by share loss by our customers to tier-1 brands combined with severe price erosion in the segments they serve. We were also impacted by one of our customers’ decision to add a second source supplier, causing additional share loss for Zoran. In addition, we are seeing rising channel inventory and softening consumer demand. DVD is also showing signs of weakening demand, causing a modest inventory build of red-laser products.

“As a result of these developments, we are reducing our outlook for the remainder of 2010 and are carefully evaluating our current strategies against existing and potential growth opportunities. We are also in the process of working on restructuring alternatives with an emphasis on operating expenses to right size the business. Management remains committed to returning Zoran to a growing and profitable business with a sound financial model, and we are working to take whatever steps are necessary to achieve this objective.

“Also during the quarter, Zoran signed a definitive agreement to acquire Microtune, Inc. (NASDAQ:TUNE), a pioneer in the development and deployment of silicon tuners, a technology that is complementary and synergistic to Zoran’s strategic objectives in both the set-top-box and DTV markets. We believe this acquisition will enable Zoran to become a complete provider of solutions for consumer home entertainment, immediately accelerating our position in the STB market and ultimately strengthen our DTV position as global markets transition from analog to digital and to more efficient single-chip TV tuners over the next several years.”

Recent Highlights

• Revenues by product line for the third quarter of 2010 were 50 percent Digital Camera, 23 percent DTV (includes set-top-box), 16 percent Printer Imaging and 11 percent DVD
• Zoran demonstrated new 3D, IPTV and Blu-Ray technologies at CEATEC and IFA 2010
• Zoran announced Irdeto certification for Pay-TV satellite set-top-box products
• Zoran demonstrated new set-top box platforms for worldwide manufacturers at IBC 2010
• Zoran announced agreement to acquire Microtune, Inc.

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