Financial Highlights   -- Poker and casino software revenues of $31.7 million, in line with      expectations.   -- Active depositing poker players held steady quarter-over-quarter; new      depositing players grew slightly during the period.   -- Asian online games revenues of $12.7 million, up 33 percent      quarter-over-quarter on strong organic growth; FunTown and T2CN      revenues surged 27 percent and 43 percent, respectively, during the      period.    Operational Highlights and Developments   -- Everest Poker sponsors Spanish Poker Tour.   -- Asian online games platform: FunTown begins open beta testing of new      MMORPG Warhammer Online in Taiwan and Hong Kong.   -- Asian online games platform: T2CN begins beta testing of Luna Online      - one of Asia's most successful MMO games; plans China launch in summer      2009.   

HONG KONG, June 9 /PRNewswire-Asia-FirstCall/ -- GigaMedia Limited today reported first-quarter revenues of $44.4 million, net income of $4.8 million, and earnings per share of $0.09 basic and $0.08 fully-diluted. First-quarter results were negatively affected by global economic conditions and continued weakness of the euro against the U.S. dollar.

First-quarter 2009 non-GAAP basic and diluted earnings per share were $0.11 and $0.10, respectively, which exclude result from discontinued operations and non-cash share-based compensation expenses.

The company also announced that it is final round discussions with two parties concerning a potential strategic partnership or sale involving its poker and casino software business. No additional details are available at this time.

"In the first quarter, our Everest software business faced greater than expected challenges from the macroeconomic downturn and the weakness of the euro - slowing our business in Europe," stated CEO Arthur Wang. "We have responded with a set of cost reductions and efficiencies which will protect the financial strength of the business, as well as prepare for a return to growth as a leaner, tighter organization."

"The good news: we believe we have hit bottom in this cyclical downturn and that the second half will see renewed strength in Europe. And in Asia, we are looking at our best year ever, with strong top and bottom-line growth," stated CEO Arthur Wang.

"We remain confident in the strategic position of our poker and casino software business, and are excited about the new games we are launching in Asia this year," stated President and COO Thomas Hui. "Our core businesses remain healthy and well positioned to deliver strong long-term growth."

   Consolidated Financial Results    For the First Quarter                   GIGAMEDIA 1Q09 CONSOLIDATED FINANCIAL RESULTS   (unaudited,     1Q09      1Q08      Change    1Q09     4Q08      Change    all                                 (%)                          (%)    figures in US$    thousands,    except per    share    amounts)   Revenues (A)    44,417    51,190        -13   44,417   44,583        0   Gross    Profit(A)      35,118    42,153        -17   35,118   36,001       -2   Income from    Operations (A)  5,419    12,698        -57    5,419    7,912      -32   Income from    Continuing    Operations (A)  5,180    12,736        -59    5,180    8,522      -39   Net Income    Attributable    to GigaMedia    4,843    12,077        -60    4,843    9,075      -47   Net Income    Per Share,    Diluted           .08       .20        -59      .08     0.15      -47   Non-GAAP    Income from    Operations(A)    (B)             6,385    13,445        -53    6,385    7,993      -20   Non-GAAP Net    Income (A) (B)  5,735    12,638        -55    5,735    8,214      -30   Non-GAAP Net    Income Per    Share, Diluted    (A) (B)          0.10      0.21        -54     0.10     0.14      -30   EBITDA (C)       7,185    13,929        -48    7,185   11,677      -38   Cash, Cash    Equivalents    and Marketable    Securities-    Current        97,461    79,923         22   97,461   99,372       -2    (A) Excludes results from discontinued operations.   (B) Non-GAAP income from operations, non-GAAP net income and non-GAAP net       income per share exclude results from discontinued operations, and       non-cash share-based compensation expenses. (See, "Use of Non-GAAP       Measures," for more details.)   (C) EBITDA (earnings before interest, taxes, depreciation, and       amortization) is provided as a supplement to results provided in       accordance with U.S. generally accepted accounting principles        ("GAAP"). (See, "Use of Non-GAAP Measures," for more details.)     

Consolidated revenues for the first quarter decreased 13 percent to $44.4 million from $51.2 million in the same period of 2008, and held steady compared with the fourth quarter of 2008. The year-period decrease was primarily due to lower contributions from the company's gaming software business reflecting the impact of the global economic downturn on player spending in the industry, with depreciation of the euro against the U.S. dollar increasing playing costs, resulting in decreased player spending. Quarter-over-quarter results reflected a strong increase in revenues in the Asian online games business, which offset an expected revenue decline in the gaming software business during the first quarter, with depreciation of the euro continuing during the period.

Consolidated gross profit for the first quarter decreased to $35.1 million from $42.2 million in the same period of 2008 and from $36.0 million in the fourth quarter of 2008. First-quarter consolidated gross profit margin decreased to 79.1 percent from 82.3 percent in the same period of 2008, and 80.7 percent in the fourth quarter of 2008 reflecting decreases in the proportions of contributions from the higher margin gaming software business during the periods, and the effect of revenue declines outpacing decreases in certain fixed costs.

Consolidated income from operations for the first quarter was $5.4 million compared to $12.7 million in the first quarter of 2008 and $7.9 million in the fourth quarter of 2008.

The year-over-year decrease in consolidated income from operations reflected the aforementioned revenue decrease and lower gross profit margin on changed revenue mix during the period, which despite flat operating expenses, yielded a decrease in the company's consolidated operating margin to 12.2 percent.

The quarter-over-quarter decrease in consolidated income from operations was primarily the result of lower gross profit, as well as an increase in operating expenses of approximately $1.6 million. The variation in operating expenses reflected comparison with exceptionally low expenses during the fourth quarter of 2008, which benefited from year-end adjustments of compensation related expenses.

Consolidated non-operating income during the first quarter of 2009 was $268 thousand, down from non-operating income of approximately $600 thousand in the first quarter of 2008 and $669 thousand recorded in the previous quarter. GigaMedia's first-quarter non-operating income included interest income and foreign exchange gains.

Net income for the quarter was $4.8 million compared to $12.1 million in the first quarter of 2008 and $9.1 million in the fourth quarter of 2008, reflecting the aforementioned factors affecting income from operations and non-operating income during the periods.

GigaMedia also reports non-GAAP financial measures, including non-GAAP consolidated operating income, non-GAAP consolidated net income, non-GAAP basic and fully-diluted earnings per share, and consolidated EBITDA. The company's first-quarter non-GAAP financial measures exclude results from discontinued operations and non-cash share-based compensation expenses. Results from discontinued operations represented income of approximately $39 thousand in the first quarter of 2009. First-quarter non-cash share-based compensation charges were $931 thousand, up from $715 thousand in the same period in 2008. Reconciliations of non-GAAP measures to the corresponding GAAP measures are included at the end of this release. (See, "Use of Non-GAAP Measures," and "About the Numbers in This Release - Non-GAAP figures," for more details.)

Non-GAAP consolidated income from operations was $6.4 million in the first quarter of 2009, down from $13.4 million in the first quarter of 2008 and $8.0 million in the fourth quarter of 2008. Non-GAAP consolidated net income in the first quarter was $5.7 million compared to $12.6 million in the same period last year and $8.2 million in the fourth quarter of 2008. Non-GAAP basic and fully-diluted earnings per share were $0.11 and $0.10, respectively.

Consolidated EBITDA for the first quarter of 2009 was $7.2 million, down from $13.9 million in the same period last year and $11.7 million in the fourth quarter of 2008. Operating cash flow for the first quarter of 2009 was $5.6 million. Capital expenditures totaled $3.3 million for the period.

GigaMedia continued to maintain a healthy balance sheet during the first quarter. Cash, cash equivalents and marketable securities-current were $97.5 million, down from $99.4 million in the fourth quarter of 2008. Total short-term borrowings decreased to $14.7 million at the end of the first quarter of 2009.

Business Unit Results

GigaMedia Limited conducts its online entertainment business in two business segments. The gaming software segment develops and licenses online poker, casino, and sports betting gaming software solutions and application services, primarily targeting continental European markets. The Asian online games segment operates a suite of play-for-fun online games, mainly targeting online gamers in Greater China.

   Gaming Software Business    (unaudited, in US$  1Q09     1Q08     Change    1Q09     4Q08    Change    thousands)                             (%)                        (%)   Revenues           31,745    38,301      -17    31,745  35,060     -9   Gross Profit       26,134    32,754      -20    26,134  29,197    -10   Income from    Operations         4,871    11,515      -58     4,871   5,160     -6   EBITDA              6,198    11,913      -48     6,198   6,312     -2     

Results of the gaming software business were in line with expectations in the first quarter of 2009. Revenues in the gaming software business are traditionally driven by an upturn in online gaming during the winter, which peaks in the fourth quarter. During the first quarter of 2009, trends in player activity reflected traditional seasonality but continued to be negatively impacted by the economic downturn in Europe and the depreciation of the euro against the U.S. dollar. Given the challenging operating environment, management is implementing appropriate measures to cut costs and improve efficiencies.

First-quarter revenues in the gaming software business decreased 17 percent year-over-year to $31.7 million from $38.3 million and decreased 9 percent quarter-over-quarter from $35.1 million.

GigaMedia's revenues from the gaming software business derived from providing poker and casino software and services to its master licensee were $14.6 million during the first quarter of 2009. This represented a decrease of 13 percent from $16.9 million in 2008 and a 9 percent decrease from the fourth quarter of 2008, which totaled $16.0 million. Such revenues are eliminated in consolidation.

Revenues in the poker software vertical were $21.6 million in the first quarter of 2009, down 27 percent from the same period of 2008 and 10 percent from the fourth quarter of 2008, reflecting the impact of the adverse economic climate in Europe and depreciation of the euro against the U.S. dollar, which has continued to increase playing costs, resulting in decreased player spending. First-quarter poker software revenues represented 68 percent of the business unit's total first-quarter 2009 revenues. Approximately 183,000 active depositing real-money customers played on the poker platform during the first quarter, comparable with the previous quarter. During the quarter, approximately 45,000 new depositing real-money poker players were added, up 3 percent quarter-over-quarter. Average monthly revenue per active paying account decreased approximately 10 percent quarter-over-quarter.

Revenues in the casino software vertical were $10.2 million during the first quarter of 2009, an 18 percent increase from the same period in 2008 and down 8 from the previous quarter. Enhancements to GigaMedia's platform software enabling strong cross-marketing to Everest Poker players contributed to the strong year-over-year revenue growth. Quarterly sequential results reflected the impact of the global economic downturn.

First-quarter gross profit was $26.1 million compared to $32.8 million in the same period last year and $29.2 in the fourth quarter of 2008, in line with revenues recorded during the periods. Gross profit margin decreased slightly year-over-year to 82.3 percent from 85.5 percent in 2008 and from 83.3 percent in the fourth quarter of 2008 as revenue decreases outpaced decreases in certain fixed costs.

Total first-quarter selling and marketing expenses were $15.1 million, down from $15.9 million in the same period of 2008 and $18.9 million in the fourth quarter of 2008. The year-over-year decrease was attributable to decreases in marketing initiatives.