MOUNTAIN VIEW, Calif. -- NetLogic Microsystems, Inc. (Nasdaq:NETL), the leader in the design and development of knowledge-based processors, today announced record financial results for the first quarter ended March 31, 2005.

Partly driven by a one-time event and a customer pull-in, revenue in the first quarter of 2005 was $21.8 million, an increase of 43 percent over fourth quarter revenue of $15.2 million.

Net income, in accordance with generally accepted accounting principles (GAAP), was $5.4 million or $0.29 per share, compared with a net loss of $75,000 in the fourth quarter of 2004. Pro forma net income, which excludes amortization of stock-based compensation in the first quarter of 2005, was $6.1 million or $0.33 per share, compared with pro forma net income of $820,000, or $0.05 per share, in the fourth quarter of 2004.

The company believes the additional non-GAAP measures provided are useful to investors for performing financial analysis, because they highlight the company's operating activities. The company's management uses this pro forma measure internally to evaluate its operating performance and plan for its future periods. However, pro forma measures are not a substitute for GAAP measures. For a reconciliation of GAAP versus pro forma financial information on a quarterly basis, please see the attached schedule.

"Demand for our knowledge-based processors continued to grow as customers migrated to 10 Gigabit Ethernet (10GbE) infrastructure to handle increased processing needs," said Ron Jankov, president and CEO. "Two major events drove the first quarter's revenue increase. First, we saw a significant order late in the quarter as a current customer needed additional product to stock a new production line in Asia. We view this stocking order as a one-time event. Second, we received a pull-in of an order for a major build of a new product."

Gross margins in the first quarter of 2005 were 56.5 percent, up 8.3 percent from the 48.2 percent reported in the fourth quarter. The improvement in gross margins was partially driven by the sale of products that had been written off in prior periods and, accordingly, had no associated cost of revenue. Sales of the written off products contributed approximately 4.4 percent to the first quarter gross margins. The company does not expect significant contributions to product gross margins in its second quarter from the sale of products that had been written off in prior periods. Significantly, the company also improved its manufacturing performance by achieving higher product yields for the third version of its knowledge-based processors, and by increasing shipments of the lower-cost fourth version of its knowledge-based processors. These two factors contributed approximately 4.0 percent to the first quarter gross margins.

"Because the increase in first quarter revenue was driven by a one-time order to stock a customer's new line in Asia, as well as a pull-in for a major build of a new product, we expect our second quarter revenue to be more reflective of growth relative to the base business established in the fourth quarter of 2004. Therefore, we anticipate second quarter revenue to be between $16.7 million and $17.7 million, or a 10 to 16 percent increase over fourth quarter revenue of $15.2 million," said Jankov.

"In addition to our excellent operating performance, we were also pleased to have lowered research and development expenses in the first quarter, as two of our new products went directly to production from first tape-out, an amazing feat considering the complexity of our products. We are immensely proud of our engineering and manufacturing teams for making this happen," Jankov said.

NetLogic Inc.