Generally accepted accounting principles (GAAP) net income for the fourth quarter of 2008 was $7.7 million, or $0.16 per share, which included non-cash charges of $7.3 million for stock-based compensation, $2.9 million for amortization of acquired intangibles and impairment charges of $2.5 million related to certain investments of the company and the former headquarters in San Jose.

Non-GAAP net income for the fourth quarter of 2008 was $20.4 million or $0.41 per diluted share. Non-GAAP net income is defined as income and operating expenses adjusted for non-cash tax expense, acquired intangibles amortization, charges for acquired in-process research and development, and stock-based compensation expense. Non-GAAP net income per share equals non-GAAP net income divided by the non-GAAP weighted diluted share count as of that period end.

“Fourth quarter 2008 total revenues were up 30% and royalty and license fees were up 37% compared to last year’s fourth quarter, driven by stronger than expected royalty revenue from certain existing customers and option fees from Motorola,” said Henry R. Hank Nothhaft, president and chief executive officer, Tessera. “Although we are not immune to the current headwinds facing the semiconductor industry and there is a lot of uncertainty about the current and coming quarters, there are several factors that we believe will partially mitigate the negative impact of the current slowdown on Tessera. For example, we are paid on units shipped not on units manufactured. We remain confident in our business and expect to continue generating long-term growth.”

Revenue Highlights: Year Ended Dec. 31, 2008:

Royalty and license fees were $220.3 million.

Product and service revenues were $27.9 million.

Non-GAAP net income for the period was $45.9 million, or $0.93 per diluted share.

“For the full year 2008, total revenues were up 27 % and royalty and license fees were up 37% compared to 2007,” stated Michael Anthofer, chief financial officer, Tessera. “Litigation expenses in 2008 were $84.3 million, up from $22.3 million in 2007. This year-over-year increase in litigation is the principal reason for the lower 2008 GAAP and Non-GAAP net income measures as compared to 2007.”

“We remain committed to protecting our intellectual property and leveling the playing field for our customers. Our IP protection efforts in 2008, which included litigation and compliance efforts, resulted in increased royalty payments from various licensees. We ended 2008 with a solid foundation upon which to enter 2009, with $298.6 million in cash, cash equivalents and investments, and no debt.”

Litigation Review and Update:

Amkor Arbitration On January 14, 2009, the International Chamber of Commerce’s International Court of Arbitration issued to Tessera an award of $64.1 million, due by February 15, 2009, for Amkor’s material breach of its license agreement. This amount covers the time period March 2, 2002 through December 1, 2008 and includes pre-judgment interest.

Investigation No. 337-TA-630 (DRAM ITC Action) On January 6, 2009, the International Trade Commission (ITC) Administrative Law Judge (ALJ), citing the Court’s current caseload and responsibilities in other investigations, extended the deadline for issuing the Initial Determination in the action from January 14, 2009 to March 6, 2009, and the date for issuance of the Final Determination (the target completion date) in the action from April 14, 2009 to July 6, 2009.

Investigation No. 337-TA-605 (Wireless ITC Action) On January 30, 2009, the ITC granted Tessera’s Petition for Review and will review the Initial Determination by the ALJ. The ITC’s Final Determination remains scheduled to be issued by April 3, 2009.

Investigation No. 337-TA-649 (Subcon ITC Action) On February 2, 2009, Tessera requested that the ITC pause the proceedings until the ITC has made a Final Determination in the Wireless ITC Action. The chief reason for Tessera’s request is that there are disputes common to both the Subcon ITC Action and the Wireless ITC Action now under review by the full ITC, so that it would be a waste of judicial resources, as well as the parties’ resources, to proceed to trial before the ALJ in the Subcon ITC Action until both the Court and the parties have the benefit of the ITC’s Final Determination in the Wireless ITC action.

First Quarter 2009 Financial Guidance:

Beginning in January 2009, Tessera will have the following two reporting segments, Micro-electronics and Imaging & Optics. Within each, the company will have two revenue categories: Royalty & License Fees and Products & Services.

First quarter 2009 total revenues are expected to range between $54.0 million and $58.0 million, exclusive of the Amkor award. This compares to first quarter 2008 total revenues of $59.3 million.

First quarter 2009 Micro-electronics revenue is expected to range between $46.0 million and $48.0 million, all of which will be royalty and license related. As the company has disclosed previously, this revenue will be impacted by the volume-based incentive pricing programs Tessera has with two of its major customers. Revenue will also be impacted by the weaker fourth quarter financial performance of the majority of the company’s DRAM and Wireless licensees, which reflects the macro economic conditions in the served markets of Tessera’s customers. Although the $64.1 million Amkor award mentioned above in the litigation update would, from a segment reporting standpoint, be reflected in Micro-electronics royalty and license fees, it should be noted that the company’s first quarter 2009 guidance does not include the Amkor award.

As a comparison, in the first quarter of 2008, Micro-electronics royalty and license fees were $46.2 million and products and services revenue was $2.5 million, for a total of $48.7 million for this segment.

First quarter 2009 Imaging & Optics revenue, in total, is expected to range between $8.0 million and $10.0 million. Imaging & Optics royalty and license revenue will range between $5.0 million and $6.0 million. Imaging & Optics products and services revenue will range between $3.0 million and $4.0 million. This compares to Imaging & Optics royalty and license revenue of $4.0 million and products and services revenue of $6.6 million in the first quarter of 2008, which totaled $10.6 million for this segment. The products and services revenue is down year-over-year primarily due to lower demand from the company’s lithography customers.

Non-GAAP operating expenses for the first quarter of 2009 are projected to range between $32.0 million and $33.0 million, excluding litigation expenses.