COMPANY PRESS RELEASE: Following the reduction in workforce of the Multibeam division which Zen Research plc announced in its previous quarterly report, Zen has ceased support for all Multibeam projects with previous licensing partners.
The Multibeam group’s primary activities have been reduced to protecting patents, continuing to improve its intellectual property, and exploring opportunities and applications for the use of Multibeam.
Zen currently has no active projects in Multibeam and at this stage has no revenue expectations from previous Multibeam projects.
The Company continues to work with the video player licensee and nonrecurring engineering revenues are being recorded which cover Zen’s development costs only. Completion of this project is expected before the end of 2002.
New Silicon Value (NSV) employs proprietary full-custom design techniques in an automated fashion with a view to providing its customers with efficient and cost effective application specific integrated circuits (ASICs).
Market conditions within the semi-conductor industry have become more challenging. Manufacturers remain hesitant to commission new ASIC designs. The business, and outlook for, New Silicon Value (NSV) are accordingly adversely affected as existing customers have lowered their internal forecasts for ASIC production for the year ended 2002.
NSV is progressing as planned with design work for its existing customers. Engineering fees will be received for designing these ASICs. Experience has been that a significant proportion of ASIC designs are either not incorporated into saleable products or do not result in volume shipments by customers so there can be no assurance that these customers will ever utilize these designs in production.
Zen continues to believe in the long-term potential for NSV when the ASIC market recovers. Accordingly, while recognizing its need to continue to monitor progress and business performance, Zen expects to continue substantial funding of NSV during the market downturn. In 2002 this investment is likely to range from US$9 million to US$12 million depending upon market conditions.
Turnover for the three and twelve months ended 31 December 2001 increased compared to the comparable periods ended 31 December 2000. This increase was mainly due to the turnover generated by New Silicon Value, which was acquired in April 2001, although turnover from continuing operations also increased in the periods. Turnover from continuing operations was generated from engineering fees for development work during 2001, whereas the turnover during the comparable three and twelve-month periods was generated from royalties and engineering fees. Sequential turnover from continuing operations increased from US$139,000 to US$300,000 at 31 December 2001 due to the timing of billable milestones for a certain development project during the period. Turnover from acquisitions was generated from shipments of ASICs and engineering fees for development work.
For continuing operations, research and development expenses decreased during the three-month period ended 31 December 2001 compared to the corresponding period. This decrease reflects the reduction in headcount and related expenses and expenditures on outside engineering services. The increase in expenses for the twelve-month period ended 31 December 2001 was due to a higher rate of spending compared to the corresponding period prior to the restructuring activities detailed below. Spending was focused on the development and enhancement of Zen’s intellectual property. During 2001, the Company made two restructurings of its research and development department due to market conditions.
Sequential expenditures from continuing operations decreased during the three months ended 31 December 2001, due to a reduction in salary and related expenses, as a result of the restructuring taken during the prior quarter, third party engineering services and other expenses.
Expenditures for research and development for New Silicon Value represent costs related to the ongoing development of software tools and technologies and include a charge for share options issued to NSV employees.
