TSRA

Tessera Technologies, Inc. (TSRA)

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Tessera Technologies, Inc. (TSRA)

Q2 2009 Earnings Call Transcript

August 4, 2009 4:30 pm ET

Executives

Moriah Shilton – Senior Director, IR

Hank Nothhaft – President and CEO

Mike Anthofer – EVP and CFO

Barney Cassidy – SVP and General Counsel

Analysts

CJ Muse – Barclays Capital

Raj Seth – Cowen and Company

Kevin Vassily – Pacific Crest Securities

Paul Thomas – Bank of America

Daniel Gelbtuch – Roaring Brook Capital

Michael Cohen – MDC Financial Research

Greg Eisen – ICM Asset Management

Hans Mosesmann – Raymond James

Presentation

Operator

Good afternoon. My name is Ellie and I will be your conference operator today. At this time, I would like to welcome everyone to the Tessera second quarter 2009 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator instructions)

Thank you. Ms. Shilton, you may begin your conference.

Moriah Shilton

Thank you, Ellie, and good afternoon, everyone. Thank you for joining us for the Tessera Technologies second quarter 2009 earnings conference call. This call is being broadcast live over the Internet. A webcast replay will be available at tessera.com for 90 days after the call.

In addition, a telephone replay of this call will be made available for two business days beginning approximately two hours after the completion of this call. To listen to the replay in the U.S., please dial 800-642-1687 and internationally dial 706-645-9291. The access code is 19462142.

I will now read a short Safe Harbor statement. During the course of this conference call management will make a number of forward-looking statements, which are statements regarding future events including the future financial performance of the company. These forward-looking statements are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.

Forward-looking statements involve risks and uncertainties that could cause actual results to differ significantly from those projected. You are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date of this call. More information about factors and that may cause results to differ from the projections made in these forward-looking statements can be found in Tessera’s filings with the Securities and Exchange Commission including it’s annual report on Form 10-K for the year ended December 31st, 2008 and its quarterly report on Form 10-Q for the period ended March 31st, 2009, especially in the sections of these filings entitled Risk Factors. The company disclaims any obligations to publicly update or revise any forward-looking statements to reflect events or circumstances that occur after this call.

On the call today from management are Hank Nothhaft, Tessera’s President and Chief Executive Officer; Mike Anthofer, Chief Financial Officer; and Barney Cassidy, General Counsel. During this call today, management will discuss certain non-GAAP financial measures for comparison purposes only and they will be using non-GAAP numbers in their prepared remarks.

The non-GAAP amounts of cost of revenues; research and development; selling, general and administrative expenses; net income and earnings per share do not include the following. Stock-based compensation, acquired intangibles, amortization charges, charges for acquired in-process research and development, and related tax effects.

Management believes that non-GAAP amounts provide a more meaningful comparison measure of quarter-over-quarter and year-over-year financial performance. Please refer to the company’s second quarter 2009 earnings press release and to the company’s website for a reconciliation of non-GAAP measures to GAAP.

After management's opening remarks, we will open the call to your questions. So that management is able to respond to as many of you as possible, please restrict yourself to an opening and a follow-on question. Please re-enter the queue if you have additional questions.

And with that, I will turn the call over to Hank.

Hank Nothhaft

Thank you, Moriah. Greetings to all of you. Thank you for your interest in Tessera. Coincidentally, this is my one-year anniversary as CEO of Tessera. We will discuss our second quarter 2009 results, recent developments, and then open the call for your questions.

Total revenue for the second quarter of 2009 was $62.3 million, slightly above the raised guidance we gave on June 2nd. Combined and controlled spending during the quarter, we had favorable GAAP EPS and non-GAAP EPS results.

In our micro-electronics business, we generated $55.6 million of total revenue during the second quarter of 2009, 100% of which was royalties and license fees including a license fee and options fees from Motorola who became a licensee in the second quarter. Although the macroeconomic outlook remains uncertain, we did see some encouraging trends during the quarter in our served markets of computing and wireless mobile devices.

In the DRAM market, the decline in chip demand appeared to bottom out as both OEMs and the channel became comfortable with inventory levels. As a result, we believe DRAM vendors experienced an increase in orders towards the end of the second quarter. Demand in the overall mobile device market appears to have reached it nadir and will begin to improve in the second half. Because we recognize revenue one quarter in arrears, any positive impact we receive from increased orders in either DRAM or wireless would be felt starting in our third quarter.

Turning to the research and development side of our micro-electronics business, we continued to make progress on multiple fronts in the second quarter. Within the context of our controlled spending, we have reallocated resources and continue to invest in strategic micro-electronics programs including silent air cooling and micro-PILR.

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