Attained gross margin of 62% in the fourth quarter

Achieved fourth quarter GAAP net income per diluted share of $0.07

Generated cash of $4.1 million in the fourth quarter

Recorded fiscal year net revenue of $67.6 million, representing an annual growth rate of 13%

Generated cash of $13.0 million in 2008

Fourth Quarter 2008 Results

Total revenue for the fourth quarter of 2008 was $16.5 million, compared to revenue of $16.5 million in the fourth quarter of 2007 and $18.5 million in the third quarter of 2008. Total revenue consisted of $13.8 million in security surveillance, $1.4 million in LCD display, $1.3 million in video decoders and $9,000 of other revenue.

Gross margin for the fourth quarter was 62% as compared to 63% in the preceding quarter and 61% in the same period a year ago. Operating expenses for the fourth quarter totaled $8.5 million, or 52% of total revenue, including around $1.0 million in tape out expense for new products. This compares to operating expenses of $8.0 million, or 43% of revenue, in the preceding quarter and $7.2 million, or 44% of revenue, in the same period a year ago.

Commenting on the fourth quarter, Hiro Kozato, techwell’s president and chief executive officer, stated, “During the quarter, the macroeconomic environment continued to weaken impacting our core security surveillance business, as well as our automotive and consumer businesses. Security surveillance revenue decreased from our original expectations as several of our customers pushed out orders due to decreasing demand. Similarly, the decline in overall consumer spending has had a significant effect on the automotive market and our LCD display business, even though design activity has remained strong.”

Kozato continued, “Throughout this past year, we have continued to execute on our new product roadmap, which we believe positions the company well for future growth in our target markets. As a result of these efforts, during the fourth quarter we announced the first comprehensive single-chip 16-channel video and graphic display controller with HD 1080p display capability for next generation security surveillance applications. The TW2880 significantly improves the quality of video images and has the capability to support 16 live video inputs and playback 16 pre-recorded inputs simultaneously. This product has been well received by our customers and positions us to capture a large%age of the semiconductor total available market in the security surveillance business. Also contributing to our future growth initiatives, we have significant activity in the automotive infotainment market with our LCD display products. Despite a significant slowdown in automobile manufacturing production, the number of LCD displays per automobiles manufactured continues to rise as OEMs look to support automotive infotainment applications, including navigation systems, DVD and backup cameras.”

Net income for the fourth quarter of 2008 was $1.6 million, or $0.07 per diluted share. This compares to net income in the third quarter of 2008 of $2.5 million, or $0.11 per diluted share, and net income of $4.2 million, or $0.19 per diluted share, in the fourth quarter of 2007. The effective tax rate for the fourth quarter of 2008 was 30%, compared to an effective tax rate of 39% in the preceding quarter. Due to the recently passed legislation renewing the research and development tax credits through 2009, the company realized all of its 2008 R&D tax credits in the fourth quarter.

Net income includes pre-tax stock-based compensation expenses of around $1.9 million, equating to a $0.09 per diluted share charge. Net income for the third quarter of 2008 included pre-tax stock-based compensation expenses of around $1.8 million, equating to a $0.08 per diluted share charge. Net income for the fourth quarter of 2007 included pre-tax stock-based compensation expenses of around $1.3 million, equating to a $0.06 per diluted share charge. Shares used to compute GAAP net income per diluted share for the fourth quarter of 2008 totaled 22.1 million shares.

Cash and cash equivalents, short and long term investments increased by $4.1 million in the fourth quarter, totaling around $81.4 million as of December 31, 2008, compared to around $77.3 million as of September 30, 2008 and $68.4 million as of December 31, 2007.

Fiscal 2008 Results

Revenue within each of the company’s product lines consisted of $52.7 million in security surveillance, $7.1 million in LCD display, $7.6 million in video decoders and $258,000 of other revenue.

Gross margin for the full year of 2008 was 62%, compared to gross margin of 60% in 2007. Operating expenses totaled $31.8 million or 47% of total revenue, as compared to $24.6 million, or 41% of revenue in 2007.

Net income for 2008 was $7.8 million, or $0.35 per diluted share, which included pre-tax stock based compensation expenses of $7.3 million. This compares to 2007 net income of $14.7 million, or $0.68 per diluted share, which included pre-tax stock-based compensation expenses of $4.6 million and the favorable tax effect from the release of a valuation allowance that allowed the company to record a tax benefit for the year of $0.5 million.

Cash, cash equivalents, short and long term investments increased by around $13.0 million, resulting in a total of around $81.4 million as of December 31, 2008, compared to around $68.4 million as of December 31, 2007.

Business Outlook

Kozato concluded, “Looking forward, we expect our results in the first quarter of 2009 to reflect continued weakness in the global economic climate, and as a result, we have implemented strict controls over discretionary spending in order to maintain non-GAAP profitability during this time. We remain focused on future revenue growth through continued investments in R&D and additional design wins in our target markets. We anticipate ongoing success in the security surveillance market, in particular from the TW2880 and other new products planned for 2009 that we believe will significantly contribute to our future results. Additionally, we expect that our designs wins in the automotive market have positioned us to begin ramping revenue when that market recovers. Although the overall business environment will remain challenging, we are anticipating demand to improve in the second half of the year once inventories have been corrected. As a result, we expect revenue for the first quarter of 2009 to range between $10 million and $11 million.”