LOS GATOS, Calif. -- Hifn(TM) (Nasdaq: HIFN - News) today reported financial results for the second quarter and six months ended March 31, 2004.

Revenues for the second quarter of fiscal 2004 were $10.4 million, an increase of 45% from the $7.1 million in revenues reported in the previous quarter and an increase of 128% from the $4.5 million in revenues reported in the second quarter of fiscal 2003. Revenues for the six months ended March 31, 2004 were $17.5 million, an increase of 95% from the $9.0 million reported for the six months ended March 31, 2003.

Net loss for the second quarter ended March 31, 2004 was $2.6 million, or $0.20 per diluted share, as compared to net loss of $5.3 million, or $0.50 per diluted share, for the second quarter of fiscal 2003 ended March 31, 2003. Net loss for the six months ended March 31, 2004 was $7.7 million, or $0.63 per diluted share, including an in-process research and development charge of $3.3 million related to the asset and intellectual property acquisition of IBM's network processor product line completed on December 31, 2003, as compared to net loss of $10.4 million, or $0.98 per diluted share, for the six months ended March 31, 2003.

"Sales of Hifn's products are increasing as a reflection both of market recovery and the production ramping of significant design wins. The integration of the IBM network processor acquisition is progressing as expected, with revenue for the network processor product line of approximately $2 million for the quarter, in line with our expectations for a transitional period. We expect network processor revenue for the June quarter will be between 50% and 75% higher with added increases in future quarters from key customers like Huawei Technologies and Cisco Systems, while overall revenue for June will grow to between $11 million and $12 million," said Chris Kenber, Hifn's Chairman and CEO. "During the quarter, we committed to the follow-on program for the network processor begun by IBM which we own as a consequence of the IBM transaction. This new device will provide substantially greater performance headroom, and will provide the growth platform for the network processor business and our base security services business well into the future. This will cause a minor increase of about 5% in operating expense over the next two to three quarters, but will return major benefits to Hifn."

"Hifn also began operations earlier this month in Hangzhou, People's Republic of China, with the opening of its wholly-owned subsidiary, Saian Microsystems. This subsidiary, consisting initially of a team of 14 design and verification engineers, will develop next generation products, including processors, software and tools. We are also developing a sales and marketing capability to service our current customers and develop the major market opportunity in mainland China," Kenber continued. "Additionally, this past February, Hifn and Zhejiang University in Hangzhou jointly established a network security laboratory to collaborate on research in the area of network security, and to provide personnel and academic exchange opportunities for both parties. Zhejiang University, a key comprehensive university with a strong focus on silicon design engineering, is under the direct administration of China's Ministry of Education," he added.

"The formation of Saian Microsystems along with the opening of Zhejiang University's network security laboratory are clear indications of our interest in establishing a strong presence in the growing Chinese marketplace," said Chris Kenber.

Hifn Inc.