Combination with TranSwitch Corporation will Create a New Leader in Communications IC

FREMONT, Calif., Aug. 5 /PRNewswire-FirstCall/ -- Centillium Communications, Inc. (Nasdaq: CTLM), a leading provider of highly innovative communications processing technology, today announced financial results for the second quarter ended June 30, 2008.

Net revenues for the second quarter of 2008 were $6.3 million, compared with $6.1 million during the first quarter of 2008 and $10.0 million during the second quarter of 2007.

The GAAP gross margin was 57.6 percent for the second quarter of 2008, compared with 56.7 percent for the first quarter of 2008 and 55.1 percent for the second quarter of 2007.

GAAP results were a net loss of $1.8 million, or $0.04 per share, for the second quarter of 2008, compared with net income of $1.4 million, or $0.03 per share, for the first quarter of 2008 and a net loss of $8.9 million, or $0.22 per share, for the second quarter of 2007. The GAAP net loss for the second quarter of 2008 includes a $2.0 million benefit from the gain on legal settlement, restructuring expense of $643,000, and a benefit of $990,000 due to the reversal of accrued royalties. The GAAP net income for the first quarter of 2008 included an $8.1 million benefit from the gain on sale of our DSL related assets, restructuring expense of $2.3 million, and a benefit of $850,000 due to the reversal of accrued royalties. The GAAP net loss for the second quarter of 2007 included a charge for $2.5 million from the loss on legal settlement and restructuring expense of $308,000. The GAAP results for all periods include charges for stock-based compensation due to the adoption of SFAS 123R, effective January 1, 2006.

Non-GAAP results were a net loss of $3.9 million, or $0.09 per share, for the second quarter of 2008, compared with a net loss of $5.0 million, or $0.12 per share, for the first quarter of 2008 and a net loss of $5.6 million, or $0.14 per share, for the second quarter of 2007. The non-GAAP results for the second quarter exclude a $2.0 million benefit from the gain on legal settlement, restructuring expense of $643,000, a benefit of $990,000 due to the reversal of accrued royalties and stock-based compensation of $273,000. The non-GAAP results for the first quarter excluded the effect of the $8.1 million benefit from the gain on sale of our DSL related assets, restructuring expense of $2.3 million, a benefit of $850,000 due to the reversal of accrued royalties and stock-based compensation of $277,000. The non-GAAP results for the second quarter of 2007 excluded the effect of loss on settlement of $2.5 million, restructuring expense of $308,000 and stock-based compensation of $495,000. Further information about non-GAAP measures is provided below.

Total cash, short-term investments and restricted cash were $36.8 million at June 30, 2008, compared with $41.7 million at March 31, 2008. The restricted cash included in the $36.8 million was $1.8 million at June 30, 2008.

'We recently announced that we have entered into a definitive agreement to be acquired by TranSwitch Corporation and the transaction is expected to close during the fourth quarter of 2008,' said Faraj Aalaei, co-founder and CEO. 'We are excited about this partnership, and we believe that the combined company will be a strong leader in the communications IC sector. We also believe that this partnership will lead to exciting new opportunities for our Optical and VoIP businesses, and enable the combined company to better serve its customers and increase shareholder value.'

Conference Call Information

A conference call to review the second quarter 2008 financial results will follow this press release today at 2:00 p.m. Pacific time/5:00 p.m. Eastern time. To listen to the call, please dial (210) 839-8948, passcode: Centillium. A replay will be made available approximately one hour after the conclusion of the call and will remain available for approximately one week. To access the replay, dial (203) 369-1883. The conference call will also be web cast over the Internet; visit the Investor Relations section of the Centillium Communications website at http://www.centillium.com to access the call from the website. This web cast will be recorded and available for replay on the Centillium website from approximately two hours after the conclusion of the conference call until Sept. 30, 2008.

Non-GAAP Financial Measures

In this earnings press release and during the earnings conference call and webcast as described above, Centillium has supplemented and will supplement its reported GAAP financials with non-GAAP measures. Non-GAAP gross margin, operating expenses, net loss and net loss per share, where applicable, exclude the effect of stock-based compensation and, with respect to the six months ended June 30, 2008, restructuring expense, the gain on sale of our DSL related assets, the gain on legal settlement, the benefit due to the reversal of accrued royalties; and with respect to the six months ended June 30, 2007, the loss on legal settlement and restructuring expense. The company uses the non-GAAP information internally to evaluate its continuing operational performance and its cash requirements and to determine incentive compensation, and believes these non-GAAP measures are useful to investors as they provide additional insight into the underlying operating results and the company's cash requirements and its ongoing performance in the ordinary course of its operations. However, non-GAAP measures are not stated in accordance with, should not be considered in isolation from and are not a substitute for GAAP measures, and our non-GAAP measures may be different from similarly titled non-GAAP measures reported by other companies. A reconciliation of GAAP to non-GAAP results is provided in the table immediately below the GAAP Consolidated Statements of Operations included in this earnings press release.

About Centillium Communications, Inc.

Centillium Communications, Inc. (NASDAQ: CTLM) delivers highly innovative communications processing technology for global systems vendors targeting service provider, enterprise and consumer markets.