Trident Microsystems (TRIDQ) 8-K Trident Microsystems Reports Second Quarter of Fiscal Year 2008 Results

Exhibit 99.1

Press Release

Trident Microsystems Reports Second Quarter of Fiscal Year 2008 Results

Santa Clara, Calif. — January 31, 2008: Trident Microsystems, Inc. (NASDAQ: TRID), a leader in high-performance semiconductor system solutions for the multimedia and digital television markets, today announced results for the second fiscal quarter of 2008, ended December 31, 2007. For the second quarter of fiscal 2008, the company reported net revenues of $75 million, representing a sequential decrease of 15 percent compared to net revenues of $88 million in the quarter ended September 30, 2007 and a 10% year-over-year increase from the $68 million reported in the quarter ended December 31, 2006.

For the second quarter of fiscal 2008, net income of $7.3 million was recorded on a generally accepted accounting (“GAAP”) basis, or $0.12 per share on a diluted basis, which included $8.4 million in stock-based compensation expense, $2.9 million in legal and accounting fees related to the company’s investigation into its historical stock option practices, $1.7 million relating to amortization of intangible assets and a $0.8 million gain from the sale of equity investments. This compares to net income of $10.1 million in the quarter ended September 30, 2007, on a GAAP basis, or $0.16 per share on a diluted basis, which included $10.4 million in stock-based compensation expense, $3.8 million in legal and accounting fees related to the company’s investigation into its historical stock option practices, $1.7 million relating to amortization of intangible assets and a $1.8 million gain from a cash dividend received as a shareholder of United Microelectronics Corporation.

Non-GAAP net income for the second quarter of fiscal 2008 was $19.4 million or $0.30 per share on a diluted basis, and excludes the items noted above. This compares to non-GAAP net income of $24.1 million or $0.37 per share on a diluted basis, in the first quarter of fiscal 2008 and to $18.1 million or $0.28 per share in the second quarter of fiscal 2007. Reconciliation between net income on a GAAP basis and non-GAAP net income is provided in a table following the non-GAAP Condensed Consolidated Statements of Income.

“Our second quarter results mark a period of solid financial performance for Trident. We exceeded the top end of our revenue guidance, held gross margins flat with the previous quarter, delivered non-GAAP net income of $19.4 million, and increased our cash position by 16% to $186 million over the prior quarter,” said Sylvia D. Summers, Trident’s Chief Executive Officer.

“Going forward, Trident will be in a period of product transition as we move to develop and deliver more SoC solutions. We foresee a more competitive environment ahead and expect our results to be impacted in calendar year 2008. Our intention is to leverage our technology leadership and focus our resources on implementing an aggressive plan for strategic growth in 2009.”

Current Outlook

Trident’s outlook for the second half of fiscal 2008 is based on current expectations and subject to various factors, including those set forth in the Forward-Looking Statement below.

— Trident expects net revenues for the second half of fiscal 2008 to be in the range of approximately $100-110 million.

— Non-GAAP gross margins are projected to decrease to the 45-47% range for this period. As the company’s SoC products ramp and the market matures, in the future, gross margins are projected to reach a level closer to 40%.

— Non-GAAP R&D expenses, for the second half of fiscal 2008, are projected to be approximately $11-14 million per quarter driven primarily by increased spending on NRE and further investing in engineering resources in the company’s China development centers.

— Non-GAAP SG&A expenses are projected to remain flat at approximately $6-7 million per Quarter in the second half of fiscal 2008.

Use of Non-GAAP Financial Information

To supplement the consolidated financial results prepared under GAAP, Trident uses a non-GAAP conforming, or non-GAAP, measure of net income that is GAAP net income adjusted to exclude certain costs, expenses and gains. Non-GAAP net income gives an indication of Trident’s baseline performance before gains, losses or other charges that are considered by management to be outside the company’s core operating results. In addition, non-GAAP net income is among the primary indicators management uses as a basis for planning and forecasting future periods. These measures are not in accordance with, or an alternative for, GAAP and may be materially different from non-GAAP measures used by other companies. Trident computes non-GAAP net income by adjusting GAAP net income for compensation expense, expenses related to the stock option investigation and related matters and those related to the acquisition of Trident’s minority interest held in its Taiwanese subsidiary (“TTI”), including amortization of intangible assets, capital gains and dividend income. A reconciliation between net income on a GAAP basis and non-GAAP net income is provided in a table following non-GAAP Consolidated Statements of Income.

Investor Conference Call

Trident will host a conference call today, January 31, 2008, at 2:00 p.m. PT/ 5:00 p.m. ET to discuss the quarterly results. Shareholders may participate in the call by calling 866-314-9013 or 617-213-8053 and entering passcode 34519135. This call is being webcasted by Thomson/CCBN and can be accessed at Trident’s web site at: http://www.tridentmicro.com. The webcast is also being distributed through the Thomsom StreetEvents Network to both institutional and individual investors. Individual investors can listen to the call at www.fulldisclosure.com, Thomson/CCBN’s individual investor portal, powered by StreetEvents. Institutional investors can access the call via Thomson’s password-protected event management site, StreetEvents (www.streetevents.com). A replay of the conference call will be available from 5:00 p.m. PT January 31, 2008 until midnight Pacific Time, on February 14, 2008 and can be accessed by calling 888-286-8010 (domestic) or 617-801-6888 (international) using access code 98368718.

Forward-Looking Information

This press release contains forward-looking statements, including statements regarding financial expectations for the second half of fiscal year 2008, the status of the market, Trident’s market share, Trident’s ability to develop and deliver SoC solutions, Trident’s ability to leverage its technology leadership to take advantage of the market changes and achieve its aggressive plan for strategic growth in 2009, challenges and competition that Trident faces in its markets, and Trident’s expectations regarding the market for its products and product introductions. The forward-looking statements above are subject to certain risks and uncertainties, and actual results could vary materially depending on a number of factors. These risks include, in particular, the timing of product introductions, the failure to obtain design wins among major OEMs for Trident’s products, and competitive pressures, including pricing and competitors’ new product introductions.

Additional factors that may affect Trident’s business are described in detail in Trident’s filings with the Securities and Exchange Commission available at www.sec.gov.

About Trident Microsystems, Inc.
Trident Microsystems, Inc., with headquarters in Santa Clara, California, designs, develops and markets digital media for the masses in the form of multimedia integrated circuits (ICs) for PCs and digital processing ICs for TVs and TV monitors. Trident’s products are sold to a network of OEMs, original design manufacturers and system integrators worldwide. For further information about Trident and its products, please consult the Company’s web site: http://www.tridentmicro.com.

NOTE: Trident is a registered trademark of Trident Microsystems, Inc., HiDTV™, DPTV(TM), SVP(TM) WX, SVP(TM) UX, SVP(TM) PXP and SVP(TM) CX are trademarks of Trident Microsystems, Inc. All other company and product names are trademarks and/or registered trademarks of their respective owners. Features, pricing, availability and specifications are subject to change without notice.

For More Information
The Blueshirt Group for Trident Microsystems
Suzanne Craig
Tel: +1-415-217-7722
Email: Suzanne@blueshirtgroup.com
Web site: http://www.tridentmicro.com

Trident Microsystems, Inc.
Condensed Consolidated Statements of Income (Unaudited)

	Three Months Ended									Six Months Ended
	December 31,			September 30,			December 31,			December 31,			December 31,
(In thousands, except per share data)	2007			2007			2006			2007			2006
Net revenues	$	74,984		$	88,174		$	68,260		$	163,158		$	139,623
Cost of revenues		38,602			45,035			33,647			83,637			69,678
Gross profit		36,382			43,139			34,613			79,521			69,945
Gross margin		48.5	%		48.9	%		50.7	%		48.7	%		50.1	%
Research and development expenses		12,633			13,912			10,973			26,545			20,376
% of net revenues		16.8	%		15.8	%		16.1	%		16.3	%		14.6	%
Selling, general and administrative expenses		13,970			17,301			12,864			31,271			25,523
% of net revenues		18.6	%		19.6	%		18.8	%		19.2	%		18.3	%
Income from operations		9,779			11,926			10,776			21,705			24,046
% of net revenues		13.0	%		13.5	%		15.8	%		13.3	%		17.2	%
Interest and other income, net		2,387			3,692			1,301			6,079			3,593
Income before income taxes		12,166			15,618			12,077			27,784			27,639
% of net revenues		16.2	%		17.7	%		17.7	%		17.0	%		19.8	%
Provision for income taxes		4,916			5,559			4,848			10,475			9,707
% of net revenues		6.6	%		6.3	%		7.1	%		6.4	%		7.0	%
Income before cumulative effect of change in accounting principle		7,250			10,059			7,229			17,309			17,932
% of net revenues		9.7	%		11.4	%		10.6	%		10.6	%		12.8	%
Cumulative effect of change in accounting principle		—			—			—			—			(190	)
% of net revenues		0.0	%		0.0	%		0.0	%		0.0	%		(0.1	)%
Net income	$	7,250		$	10,059		$	7,229		$	17,309		$	17,742
% of net revenues		9.7	%		11.4	%		10.6	%		10.6	%		12.7	%
Basic net income per share
Prior to cumulative effect of change in accounting principle	$	0.12		$	0.17		$	0.13		$	0.30		$	0.31
Cumulative effect of change in accounting principle		—			—			—			—			—
Basic net income per share	$	0.12		$	0.17		$	0.13		$	0.30		$	0.31
Common shares used in computing basic
per share amounts		59,269			58,851			57,748			58,617			57,527
Diluted net income per share
Prior to cumulative effect of change in accounting principle	$	0.12		$	0.16		$	0.11		$	0.28		$	0.28
Cumulative effect of change in accounting principle		—			—			—			—			—
Diluted net income per share	$	0.12		$	0.16		$	0.11		$	0.28		$	0.28
Common and common equivalent shares used in computing diluted per share amounts under GAAP basis		62,747			63,605			63,501			62,924			63,316

Trident Microsystems, Inc.
Non-GAAP Condensed Consolidated Statements of Income (Unaudited)

	Three Months Ended									Six Months Ended
	December 31,			September 30,			December 31,			December 31,			December 31,
(In thousands, except per share data)	2007			2007			2006			2007			2006
Net revenues	$	74,984		$	88,174		$	68,260		$	163,158		$	139,623
Cost of revenues		37,067			43,398			32,127			80,465			66,672
Gross profit		37,917			44,776			36,133			82,693			72,951
Gross margin		50.6	%		50.8	%		52.9	%		50.7	%		52.2	%
Research and development expenses		9,036			9,858			8,659			18,894			15,885
% of net revenues		12.1	%		11.2	%		12.7	%		11.6	%		11.4	%
Selling, general and administrative expenses		6,144			7,135			5,829			13,279			12,805
% of net revenues		8.2	%		8.1	%		8.5	%		8.1	%		9.2	%
Income from operations		22,737			27,783			21,645			50,520			44,261
% of net revenues		30.3	%		31.5	%		31.7	%		31.0	%		31.7	%
Interest and other income, net		1,628			1,909			1,301			3,537			3,593
Income before income taxes		24,365			29,692			22,946			54,057			47,854
% of net revenues		32.5	%		33.7	%		33.6	%		33.1	%		34.3	%
Provision for income taxes		4,916			5,559			4,848			10,475			9,707
% of net revenues		6.6	%		6.3	%		7.1	%		6.4	%		7.0	%
Net income		19,449			24,133			18,098			43,582			38,147
% of net revenues		25.9	%		27.4	%		26.5	%		26.7	%		27.3	%
Basic net income per share	$	0.33		$	0.41		$	0.31		$	0.74		$	0.66
Common shares used in computing basic
per share amounts		59,269			58,851			57,748			58,617			57,527
Diluted net income per share	$	0.30		$	0.37		$	0.28		$	0.68		$	0.59
Common and common equivalent shares used in computing diluted per share amounts under non-GAAP basis (a)		63,988			65,148			64,661			64,075			64,603

(a) Common and common equivalent shares used to calculate non-GAAP diluted net income per share excluded all the unamortized stock compensation of stock options and restricted shares when determining whether the awards are anti-dilutive. We also excluded unamortized stock compensation from the assumed proceeds under the treasury stock method. Non-GAAP results in the prior periods have been adjusted to reflect such exclusion.

Trident Microsystems, Inc.
A reconciliation between net income on a GAAP basis and a non-GAAP basis is as follows:

	Three Months Ended								Six Months Ended
	December 31,			September 30,			December 31,		December 31,			December 31,
(In thousands, except per share data, unaudited)	2007			2007			2006		2007			2006
GAAP net income	$	7,250		$	10,059		$	7,229	$	17,309		$	17,742
Amortization of intangibles
Cost of revenues		1,485			1,486			1,385		2,971			2,770
Selling, general and administrative expenses		167			167			134		334			268
Total amortization of intangibles (1)		1,652			1,653			1,519		3,305			3,038
Stock-based compensation expense
Cost of revenues		50			151			135		201			236
Research and development		3,597			4,054			2,314		7,651			4,491
Selling, general and administrative expenses		4,756			6,238			1,179		10,994			2,501
Total stock-based compensation expense (2)		8,403			10,443			3,628		18,846			7,228
Interest and other income, net (3)		(759	)		(1,783	)		—		(2,542	)		—
Stock options related professional fees		2,903			3,761			5,722		6,664			9,949
Cumulative effect of change in accounting principle (4)		—			—			—		—			190
Non-GAAP net income	$	19,449		$	24,133		$	18,098	$	43,582		$	38,147
Basic net income per share	$	0.33		$	0.41		$	0.31	$	0.74		$	0.66
Common shares used in computing basic per share amounts		59,269			58,851			57,748		58,617			57,527
Diluted net income per share	$	0.30		$	0.37		$	0.28	$	0.68		$	0.59
Common and common equivalent shares used in computing diluted per share amounts under non-GAAP basis		63,988			65,148			64,661		64,075			64,603

(1)	Amortization of intangible assets represents the amortization of identifiable intangible assets, acquired from the purchase of the minority interests of the Company’s TTI subsidiary during fiscal year ended June 30, 2005. Management deemed that these acquisition related charges are not related to Trident’s core operating performance and it is appropriate to exclude those charges from Trident’s non-GAAP financial measures, as it enhances the ability of investors to compare Trident’s period-over-period operating results.
(2)	Stock-based compensation expense relates primarily to the equity awards such as stock options and restricted stock. Stock-based compensation is an expense that varies in amount from period to period and is dependent on market forces that are often beyond Trident’s control. Hence, management excludes this item from the non-GAAP financial measures, as it enhances the ability of investors to compare Trident’s period-over-period operating results.
(3)	Capital gain and dividend income are excluded from the non-GAAP net income calculation. Management believes that such dividend income and gains/losses on the sale of Trident’s investments are not related to the ongoing business and operating performance of Trident. As such, management believes that it is appropriate to exclude investment-related gains/losses and dividend income from Trident’s non-GAAP financial measures. Management deemed that it can enhance the ability of investors to compare Trident’s period-over-period operating results.
(4)	The adoption of EITF 06-2 ,Accounting for Sabbatical Leave and Other Similar Benefits Pursuant to FASB Statement No. 43, Accounting for Compensated Absences,resulted in a cumulative effect from an accounting change of $0.2 million on sabbatical expenses for which expenses had already been recorded. Management deemed that those charges from the initial adoption of EITF 06-2 are not related to the ongoing business and operating performance of Trident.

Trident Microsystems, Inc.
Condensed Consolidated Balance Sheets (Unaudited)

	December 31,			September 30,		December 31,
(In thousands)	2007			2007		2006
ASSETS
Current assets Cash and cash equivalents	$	185,512		$	160,261	$	137,554
Short-term investment — UMC		36,233			41,960		51,990
Short-term investment — Others		717			1,435		—
Accounts receivable, net		15,747			29,131		8,665
Inventories		12,092			19,150		12,648
Prepaid expenses and other current assets		17,594			22,790		12,640
Deferred income taxes		83			83		622
Total current assets		267,978			274,810		224,119
Property and equipment, net		23,143			22,441		6,772
Intangible assets, net		9,540			11,192		16,152
Investments — other		2,079			2,597		4,280
Deferred income taxes		338			338		947
Other assets		5,940			8,573		12,979
Total assets	$	309,018		$	319,951	$	265,249
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	13,704		$	27,474	$	14,608
Accrued expenses		21,608			28,383		32,621
Income taxes payable		19,618			17,516		37,224
Total current liabilities		54,930			73,373		84,453
Long-term income taxes payable (1)		21,937			21,404		—
Deferred income tax liabilities		83			1,557		1,604
Total liabilities		76,950			96,334		86,057
Stockholders’ equity
Capital stock		197,907			191,851		169,238
Retained earnings		36,107			28,857		6,422
Accumulated other comprehensive income/(loss)		(1,946	)		2,909		3,532
Total stockholders’ equity		232,068			223,617		179,192
Total liabilities and stockholders’ equity	$	309,018		$	319,951	$	265,249

(1) On July 1, 2007, the Company adopted FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”). Implementation of FIN 48 resulted in the reclassification of 21.9 million to “Long-term income taxes payable”.