Gennum Reports 2008 First Quarter Results

Burlington, Ontario (March 26, 2008) – Gennum Corporation (TSX: GND) today reported unaudited financial results for the first quarter of fiscal 2008.

(in millions of U.S. dollars except per share amounts)

* EPS of 15 cents before one-time tax adjustment to revalue future income tax assets for new federal tax rates.

"We continue to outpace the industry as we experienced another quarter of strong revenue growth," said Dr. Franz Fink, President and CEO of Gennum. "By executing to our plan with speed and clarity, the new products we have introduced to the market are enabling us to secure more design-wins with our existing customers and gain new business in adjacent markets. We continue to focus on optimizing our global resources and investing in key programs that allow us to further accelerate our growth."

Revenue
Total revenue for the first quarter of 2008 increased by 31.8% compared to the same period in 2007 as a result of higher revenues in analog and mixed-signal (AMS), optical and new revenue from intellectual property (IP) products.

Specifically, revenue generated from AMS products rose 8.0% to $22.5 million in the first quarter of 2008 compared to the same quarter in the prior year. The revenue increase is partly attributable to our CDR sales and the continued ramp of our 3Gb/s products.

Revenue generated from optical products was $5.3 million compared to $1.9 million in the same quarter in 2007, an increase of more than $3 million. This increase was driven mainly by our 10Gb/s transimpedance amplifiers (TIAs) (increase of $1.5 million), which are sold to all 10Gb/s optical transceiver types (including XFP). The sale of limiting amplifier products also contributed $1.2 million to the revenue increase.

Gross Margin
Gross margin as a percentage of revenue in the first quarter of 2008 was 75.9%, up 1.2% over the fourth quarter of 2007. Comparing to the 2007 first quarter, gross margins were down 3%. We continue to remain in the industry’s top tier for gross margin percentage. The cost reduction programs we have in place and an increased mix of IP licensing revenue will help to maintain our gross margins and offset market price pressures.

Operating Expenses
Sales, marketing and administration (SM&A) expenditures for the first quarter of 2008 increased by 57.5% compared to the first quarter of 2007. The strengthening Canadian dollar increased expenses reported in U.S. dollars by $1.2 million. The acquisition of Snowbush added $0.3 million, and the remaining increase represents investments in fundamental activities such as broadening our sales presence, accelerating new product introductions, globally launching our new corporate brand identity and increasing corporate business development activities. Compared to the fourth quarter of 2007, expenses for SM&A in the first quarter of 2008 decreased by $1.0 million.

R&D spending in the first quarter of 2008 was higher compared to the same period in 2007 as we accelerated new product development activities for our core portfolio of IP, optical, analog and mixed-signal solutions. The acquisition of Snowbush Microelectronics, which occurred in October 2007, added $1.6 million to our net R&D expenditures versus the first quarter of 2007. The strengthening Canadian dollar increased R&D expenses reported in U.S. dollars by $1.2 million.

Earnings
In the first quarter of 2008, net earnings from continuing operations were $4.6 million, or $0.13 per share, compared with net earnings from continuing operations of $6.2 million, or $0.17 per share, in the first quarter of 2007. The lower earnings were mainly attributable to lower gross margin percentages, higher spending in R&D and sales, marketing and administrative expenses and higher income tax expense. The increase in income tax expense of $0.7 million resulted primarily from the revaluation of net future income tax assets related to the enactment in December of lower 2008 federal tax rates.

Discontinued operations contributed a gain of $8.7 million or $0.24 per share in the first quarter of 2008 mainly due to the gain on the sale of the VXP® Image Processing business which was completed in February 2008. More information related to discontinued operations is found in note 4 of the first quarter 2008 unaudited consolidated statements.

Other income in the first quarter of 2008 was primarily related to a $0.9 million foreign exchange gain compared to a $0.3 million foreign exchange gain in the first quarter of 2007.

Financial Condition
The cash and cash equivalents balance at February 29, 2008 was $46.5 million, an increase of $12.3 million from the end of the 2007 fiscal year. This was primarily due to the cash proceeds received from the sale of the VXP® Image Processing business to Sigma Designs for $16.9 million, net of deal costs, and cash proceeds received from the sale of the manufacturing, land and building for an additional $4.3 million. This was partially offset by the payment of $4.1 million of the deferred equity related to the Snowbush Microelectronics acquisition, the purchase of a second LTX high speed tester for our prototyping operations, investment in an ERP system and a one-time vacation pay-out to employees in December of $1.0 million.

Product and Customer Developments
In the first quarter of 2008, Gennum introduced a series of new products and demonstrated new capabilities that highlight the opportunities for our products in new markets.

We launched ActiveConnect™, the longest reach, highest performance high-definition multimedia interface (HDMI) connectivity solution. Supporting distances up to 100 meters, the ActiveConnect™ solution is being integrated into new consumer connectivity products by Belden, Gefen, Orbital Development, Liberty Cable and Kramer Electronics.

In a joint technology demonstration at DesignCon 2008, Gennum combined its advanced clock and data recovery (CDR) solutions with Meritec cable technology to drive a 10Gb/s signal serially over low-cost 30-gauge America wire gauge (AWG) copper cable enabling new opportunities for Gennum’s CDRs products in low-cost enterprise connectivity applications.

We introduced a new line of receive optical sub-assembly (ROSA) products significantly broadening our component offerings and providing dramatic performance and manufacturing benefits for data communications optical module applications.

Other Developments
In February 2008, we closed the sale of our VXP® Image Processing group to Sigma Designs. Cash proceeds from the sale of the VXP® business were approximately U.S. $18 million.

Gennum recently welcomed Chad Hutchison as the Company’s new Vice-President, General Counsel and Corporate Secretary. Mr. Hutchison has a broad background in mergers and acquisitions, corporate finance practices and general securities law. In his new role, Mr. Hutchison manages all of Gennum’s legal and regulatory matters.

Gennum signed key agreements with new sales and distribution partners. Infinity Sales Inc. will provide technical sales coverage in the greater Southern California area. To strengthen its support and presence in Korea and China, Gennum signed Seung Jun Sang Sa, a distributor of many leading semiconductor companies in these high growth regions. Finally, Leading Light Technologies will be manufacturer’s representatives for Gennum’s analog and mixed-signal products in the UK and Norway.

Reflecting the Company’s aggressive strategy to expand the market for its optical, analog and mixed-signal, and intellectual property (IP) solutions, Gennum unveiled a new corporate identity and brand strategy. Designed to better position the Company in existing markets and gain recognition in new markets, the new brand is now more reflective of who Gennum is today and going forward.

Outlook
Semiconductor industry analysts have revised their forecasted yearly growth rate from an average of 7% to approximately 3% for 2008. With our focus in optical, analog and mixedsignal, and IP areas, we address a unique, high-growth segment of the semiconductor industry. We remain confident that our company is well positioned to continue to outpace the industry’s average growth rate in 2008.

As we progress through 2008, we will continue to invest in new products to drive increased design-wins, defend our position in our core markets and capitalize on new opportunities in adjacent markets. We remain committed to optimizing our overall sales, marketing and administration expenditures and investing in programs that are essential for our future growth and profitability.

On a product line basis, AMS revenues in the first quarter were up year over year. We expect the video broadcast and data communications markets to remain robust and to benefit from new products introduced to the market. Optical revenue is expected to show good growth over 2007, but the rate of growth by quarter in 2008 is expected to be more variable. IP revenue is on track to meet our 2008 revenue expectations.

Our gross margins are expected to remain strong. Our continued focus on driving operational efficiencies and increasing productivity is expected to help offset market price pressures. We are committed to meeting our operating margin target of greater than 20%.

With our final divestiture completed in February 2008, we are now fully focused on investing in and growing our core portfolio. We believe that we are now better positioned to capitalize on the strong demand in our core markets. Additionally, by leveraging our product and IP portfolio to address adjacent high-growth markets, we can significantly increase the total available market for Gennum products. Our expanded global sales and distribution network provides the conduit through which these products will more efficiently reach existing and new customers in regions critical to our future growth.

Management is confident the continued execution to its well-defined and focused growth plan will strengthen the Company and enhance shareholder value.

Dividend
Gennum’s Board of Directors has declared a regular cash dividend of 3.5 cents per share Canadian to be paid on April 23, 2008 to shareholders of record on April 9, 2008. The dividend is considered an "eligible dividend" for tax purposes.

Download the complete financial results (PDF)

About Gennum
Gennum Corporation (TSX: GND) designs innovative semiconductor solutions and intellectual property (IP) cores for the world’s most advanced consumer connectivity, enterprise, video broadcast and data communications products. Leveraging the company’s proven optical, analog and mixed-signal products and IP, Gennum enables multimedia and data communications products to send and receive information without compromising the signal integrity. An award winner for advances in high definition (HD) broadcasting, Gennum is headquartered in Burlington, Canada, and has global design, research and development and sales offices in Canada, Mexico, Japan, Korea, Germany, United States, Taiwan, India and the United Kingdom. www.Gennum.com.

Gennum Media Contact:
Keri Fraser
Gennum Corporation
613-270-0458 x 2909
keri.fraser@gennum.com

Gennum Investor Relations Contact:
Gord Currie
Senior Vice-President, Finance & Administration and CFO
Gennum Corporation
(905) 632-2999 x3060
gord.currie@gennum.com

Caution Regarding Forward-Looking Information
This news release contains statements which constitute forward-looking statements. These forward-looking statements are not descriptive of historical matters and refer to management’s expectations or plans. These statements include but are not limited to statements concerning: Gennum’s plans and expectations relating to improvements in profitability and cash flow and the achievement of business model targets and levels, the reduction of corporate and operations costs and capital expenditures and marketing, sales and administration expenses; expected operational expense savings and estimated severance and related costs, and the estimated charges relating thereto and to impairments; and Gennum’s business objectives and future financial performance and prospects. Inherent in forward-looking statements are risks and uncertainties beyond Gennum’s ability to predict or control including but not limited to risks associated with: Gennum’s ability to complete the actions referred to in this news release within anticipated timeframes and to successfully realize the expected improvements therefrom; compliance with local employment legislation and requirements and the possible initiation and outcome of legal proceedings; and other risks facing Gennum’s business including competitive and pricing pressures and economic cycles in the semiconductor industry, fluctuations in foreign exchange rates and their potential adverse impact upon Gennum’s financial results, and Gennum’s ability to attract and retain key personnel necessary for its business. Please also refer to the sections entitled “Risks and Uncertainties” in Gennum’s 2008 annual report and “Risk Factors” in Gennum’s annual information form dated February 23, 2009. Actual results and developments are likely to differ, and may differ materially, from those expressed or implied by the forward-looking statements contained in this news release. Such statements are based on a number of assumptions which may prove to be incorrect including but not limited to the following assumptions: Gennum is able to successfully complete the actions referred to herein within the timeframe and with associated expense savings generally as anticipated and without unforeseen significant costs or delays; assumptions relating to severance and related costs and to charges; customer demand for Gennum’s products remains generally as anticipated; Gennum’s is able to execute its product roadmap without delays or disruptions having a material impact on Gennum; Gennum’s expectations relating to competitive pressures, including pricing pressures, are not materially incorrect; significant fluctuations in foreign exchange rates which significantly adversely affect Gennum’s financial results do not arise; and Gennum is able to continue to retain and attract technical and other key employees. Readers are cautioned that the foregoing list of important factors and assumptions is not exhaustive. Forward-looking statements are not guarantees of future performance. Events or circumstances could cause Gennum’s actual results to differ materially from those estimated or projected and expressed in, or implied by, these forward-looking statements. Consequently, readers should not place any undue reliance on these forward-looking statements. Forward-looking statements are provided for the purpose of providing information about management’s current expectations and plans relating to the future. Readers are cautioned that such information may not be appropriate for other purposes. In addition, these forward-looking statements relate to the date on which they are made. Gennum disclaims any intention or obligation to update or revise any forward-looking statements or the foregoing list of factors, whether as a result of new information, future events or otherwise, except to the extent required by law.