Highlights:

Fourth quarter fiscal 2009 revenues of $51.2 million, above high end of guidance,

Expect about a 10% sequential increase in first quarter fiscal 2010 revenues and second quarter fiscal 2010 revenues to be sequentially higher,

PC inventories have returned to healthy levels,

Expect to achieve operational cash breakeven in first quarter fiscal 2010.

We are currently seeing some signs of business improvement, said Christine King, President & Chief Executive Officer. PC inventories have returned to healthy levels and a slight improvement in end customer demand, particularly for notebooks and low end PCs, has contributed to a current book-to-bill ratio that is over 1.1. For these reasons, we expect first quarter fiscal 2010 revenues to be up around 10 percent sequentially and anticipate further improvement in the second quarter.

King continued, We have completed our cost reductions which will result in an approximate $6 million of quarterly savings starting in the first quarter of fiscal 2010 and facilitate meeting our objective of being operationally cash neutral in the same period. We will remain focused on managing expenses throughout the year to position SMSC to deliver improved cash flow and positive earnings as demand returns.

Total revenues for the quarter were $51.2 million, a decrease of 39% sequentially and 46% when compared to the same period in the prior year.

The GAAP net loss for the fourth quarter of fiscal 2009 was $71.6 million, or $3.30 per diluted share, compared to GAAP net income of $11.7 million or $0.50 per diluted share for the same period in the prior year. The GAAP net loss includes a non-cash goodwill impairment charge of $52.3 million and a restructuring charge of $5.2 million (before tax) associated with the cost reduction actions announced on January 14, 2009. Non-GAAP net loss for the fourth quarter of fiscal 2009 was $11.8 million or $0.54 per diluted share, compared to net income of $11.5 million or $0.49 per diluted share in the fourth quarter of fiscal 2008.

During the fourth quarter of fiscal 2009, the company used $3.4 million of cash in support of operations and the sum of cash and long-term investments decreased by $10.2 million from $176.6 million at November 30, 2008 to $166.4 million. For the three months ended February 28, 2009, arountd $8.3 million of auction rate securities were redeemed at par, as well as an additional $8 million to date in the first quarter of fiscal 2010.

The fiscal 2009 GAAP net loss includes the above mentioned non-cash goodwill impairment charge of $52.3 million. On a non-GAAP basis, net income for the twelve months of fiscal 2009 was $16.3 million, or $0.73 per diluted share, compared to non-GAAP net income of $45.4 million or $1.92 per diluted share, in the twelve months of fiscal 2008.

Business Outlook

Looking ahead to the first quarter of fiscal 2010, the company expects:

Revenues in the range of $55 to $58 million,

Non-GAAP gross margin around flat sequentially,

Non-GAAP operating expenses down 5% to 8% from the fourth quarter of fiscal 2009,

Non-GAAP loss per diluted share in the range of $0.20 to $0.28,

Cash and investment balances (excluding cash for restructuring) around flat.