Spreadtrum Communications, Inc. Announces Third Quarter 2009 Results

Spreadtrum Communications, Inc. Announces Third Quarter 2009 Results

SHANGHAI, Nov. 16 /PRNewswire-Asia-FirstCall/ -- Spreadtrum Communications, Inc. (Nasdaq: SPRD; "Spreadtrum" or the "Company"), one of China's leading wireless baseband chipset providers, today announced its unaudited financial results for the third quarter 2009.

   THIRD QUARTER 2009 FINANCIAL SUMMARY:   -- Total revenue increased 137% quarter-over-quarter and 92%      year-over-year to US$38.4 million, exceeding the Company's previously      guided range of US$31-$36 million.   -- Gross profit was US$15.0 million, up 292% quarter-over-quarter and 71%      year-over-year. Gross margin was 39.0% compared to 23.6% in the      previous quarter and 43.7% in the third quarter 2008.   -- Cash flows from operations were US$11.5 million, compared with      US$-0.9 million for the previous quarter, and compared with      US$0.2 million for the third quarter in 2008.   -- GAAP net income was US$0.6 million, compared to a net loss of      US$13.1 million in the second quarter 2009 and net loss of      US$31.3 million in the third quarter 2008.   -- GAAP net income per basic and diluted ADS was US$0.01, an improvement      from a loss of US$0.29 per basic and diluted ADS in the second quarter      2009 and a loss of US$0.71 per basic and diluted ADS in the third      quarter 2008.   -- Non-GAAP net income was US$2.9 million, compared to a net loss of      US$7.2 million in the second quarter 2009 and net loss of      US$4.3 million in the third quarter 2008. Non-GAAP net income per      diluted ADS was US$0.06, an improvement from a loss of US$0.15 per      diluted ADS in the second quarter 2009 and a loss of US$0.10 per      diluted ADS in the third quarter 2008.    BUSINESS HIGHLIGHTS:   -- Spreadtrum returned to profitability in Q309, with a strong sequential      revenue increase and improved gross margin;   -- As a result of increased demand from customers and improved product      quality, baseband shipments increased by 168% and radio frequency (RF)      transceivers shipments increased by 142%, sequentially;   -- Spreadtrum's focus on product quality helped attract a diverse line-up      of new customers, including a key design win of a tier one handset      manufacturer to supply a GSM/GPRS dual sim baseband chipset with      multimedia feature for its mobile phone models.   

Commenting on the results, Spreadtrum's President and CEO, Dr. Leo Li said, "The third quarter of 2009 was a critical transition point for Spreadtrum, as our focus on improving product quality and providing excellent customer service resulted in increased demand from both existing and new customers. We are pleased to report that on the back of this increased demand, Spreadtrum has returned to profitability after four consecutive quarters of losses. We not only exceeded our revenue guidance in the third quarter, but also delivered substantial margin improvement due to our strong execution on the sales front coupled with our ability to effectively control costs. We still face several challenges such as unpredictable industry dynamics and the potential for political and economic changes that could impact the handset business. Competition in the GSM handset markets also remains tough. That said, our Q3 results demonstrate our ability to execute as we have now turned the corner to profitability. Looking ahead to the fourth quarter, we expect revenue to be in the range of $37-$40 million, with flat margins from the previous quarter."

Spreadtrum's Vice President of Finance, Shannon Gao added, "Spreadtrum delivered strong Q3 results achieving top-line growth and positive cash flow. We are confident that our financial fundamentals and controls are sound and healthy. In an effort to maintain the positive momentum generated in the third quarter and achieve sustained profitability, we will also remain diligent in moderating costs."

   THIRD QUARTER 2009 FINANCIAL REVIEW:    Revenue  

Revenue in the third quarter totaled US$38.4 million, representing an increase of 137% from US$16.2 million in the second quarter 2009 and up 92% year-over-year from US$20.0 million.

Revenue from baseband and RF semiconductors was US$38.3 million, or 99.9% of total revenue, up 137.9% sequentially from US$16.1 million and up 103.7% from US$18.8 million in the third quarter 2008 as a result of rebounding demand on the back of improved product quality.

Unit shipments of baseband and RF semiconductors increased 153% sequentially and increased 295% year-over-year.

Gross Profit and Margin

Gross profit for the quarter was US$15.0 million, up 292% from $3.8 million in the second quarter 2009 and up 71% from US$8.7 million in the third quarter 2008. Gross margin for the quarter was 39.0%, up from 23.6% in the second quarter 2009, and down from 43.7% in the third quarter 2008. Non-GAAP gross margin, adjusted to exclude share-based compensation, was 39.3%, up sequentially from 24.0% and down year-over-year from 44.3%.

Cost of revenue in the third quarter 2009 totaled US$23.4 million, representing an increase of 89% from the previous quarter and an increase of 108% from the third quarter 2008 resulting from an increase in baseband and RF product sales volumes.

Operating Margin

The Company's operating margin for the quarter was 4.1%, compared to -85.7% in 2Q09 and -159.0% in 3Q08. The sequential improvement in operating margin was primarily due to increases in sales volumes and gross margin and a decrease of US$3.6 million in share-based compensation expense. The year-over-year increase in operating margin was primarily attributable to an increase in sales volumes and the fact that certain expenses were incurred in 3Q08 but not in 3Q09, mainly a US$17.5 million impairment loss on long-lived assets and a US$6.6 million IPR&D expense resulting from the Quorum acquisition. Non-GAAP operating margin, adjusted to exclude share-based compensation expense, the amortization of intangibles from the Quorum acquisition, the aforementioned impairment loss on long-lived assets and the IPR&D expense related to the Quorum acquisition, was 10.0%, compared to -49.6% in 2Q09 and -24.1% in 3Q08.

Total operating expenses in the third quarter 2009, including selling, general and administrative (SG&A) expenses and research and development (R&D) expenses, were US$13.4 million, representing a decrease of 24% from US$17.7 million in the second quarter 2009 and a decrease of 67% from US$40.5 million in the third quarter 2008. The sequential decline was driven primarily by a US$3.6 million decrease in share-based compensation and a US$0.8 million decrease in employee compensation expense. The year-over-year decrease was primarily attributable to expenses incurred in the third quarter 2008 period, but not incurred in 2009, mainly a US$17.5 million impairment loss of long-lived assets and a US$6.6 million IPR&D expense resulting from the Quorum acquisition. A decrease of US$1.3 million decrease in employee compensation expense also contributed to the year-over-year decrease.

Recurring R&D expenses decreased 18% year-over-year, but increased 20% sequentially to US$9.7 million in the third quarter 2009. The sequential increase was driven primarily by higher share-based compensation related to the Company's R&D function and higher intangible asset amortization expenses. The year-over-year decrease was primarily due to lower tape-out cost, lower intangible asset amortization expenses and lower employee compensation expenses.

SG&A expenses decreased 62% sequentially and 21% year-over-year to US$3.7 million in the third quarter 2009. The sequential decrease resulted mainly from lower share-based compensation, an earn-out payment provision related to the Quorum acquisition which was incurred in 2Q09 but not in 3Q09, lower employee compensation expenses and lower audit fees. The year-over-year decrease was driven primarily by lower employee compensation expenses and lower audit fees.

Non-Operating Income

In the third quarter 2009, the Company recorded net interest income of US$0.5 million, representing a sequential increase from US$0.3 million and flat compared with US$0.5 million in the third quarter of 2008. The sequential increase resulted from investing a higher balance of term deposits with maturity dates over 90 days and a higher balance of restricted cash which was available for use when the related expenses occurred and appropriate documents were submitted.

Other income in the third quarter 2009 was US$0.1 million, a decrease from US$0.2 million in both the second quarter 2009 and the third quarter 2008. The year-over-year decrease was primarily due to a decline in foreign exchange gain. The sequential decrease was primarily attributable to the receipt of an income tax refund from Chinese tax bureau in 2Q09 but not in 3Q09.

Net Income/Loss

The Company's net income totaled US$0.6 million in the third quarter 2009, compared to a net loss of US$13.1 million in the second quarter 2009 and a net loss of US$31.3 million in the corresponding period of 2008. The return to profitability was the result of increased sales volumes, the reduction of old, discounted inventory and vigilant cost management. Net margin was 1.6%, up significantly from -80.7% in the second quarter 2009 and up from -156.5 % in the third quarter 2008. Basic and diluted income per ADS was US$0.01 in the third quarter 2009, compared to a loss of US$0.29 per basic and diluted ADS in the second quarter 2009 and a loss of US$0.71 per basic and diluted ADS in the third quarter 2008.

Excluding share-based compensation expenses and the amortization of intangibles from the Quorum acquisition, the Company's non-GAAP net income for the third quarter 2009 would have been US$2.9 million, up from a non-GAAP net loss of US$7.2 million in the second quarter 2009 and up from non-GAAP net loss of US$4.3 million in the third quarter 2008. Diluted non-GAAP income per ADS in the third quarter 2009 was US$0.06, up from a non-GAAP diluted loss per ADS of US$0.15 in the prior quarter, and up from a non-GAAP diluted loss per ADS of US$0.10 in the third quarter 2008.

Balance Sheet and Cash Flow

As of September 30, 2009, the Company had US$47.8 million in cash and cash equivalents, a decrease from US$50.6 million as of June 30, 2009. The Company also had US$51.3 million in term deposits with maturity dates over 90 days and US$5.7 million in restricted cash which was available for use when the related expenses occurred and appropriate documents were submitted. In the third quarter 2009, the Company generated US$11.5 million cash from operating activities, used US$0.9 million cash toward property and equipment and US$1.4 million toward intangible asset acquisitions.

Accounts receivable and notes receivable (collectively, "A/R") increased by US$5.0 million from US$5.9 million as of June 30, 2009 to US$10.9 million as of September 30, 2009. Average A/R days decreased sequentially from 30 days to 20 days as a result of higher sales volumes. Inventory as of September 30, 2009 was US$20.6 million, an increase of US$11.0 million from June 30, 2009. This increase was the result of a buildup of new product inventory in response to increased demand for Spreadtrum's products. Inventory days increased from 70 days to 81 days as a result of the higher inventory balance, partially offset by higher sales volumes. Total assets as of September 30, 2009 were US$209 million, up US$29 million from US$180 million as of June 30, 2009. The increase in total assets was primarily attributable to increases of US$5.7 million in restricted cash, US$5.9 in term deposits with maturity dates over 90 days, US$11.0 million in inventory and US$5.0 million in accounts receivable.

Current liabilities increased from US$23.1 million as of June 30, 2009 to US$49.4 million as of September 30, 2009, as a result of an increase in accounts payable attributable to building up new product inventory in response to increased demand for the Company's products, and an increase in advances from customers resulting from higher sales volumes. Long-term liabilities as of September 30, 2009 were US$50.4 million, flat compared to US$50.3 million as of June 30, 2009.

BUSINESS OUTLOOK:

Spreadtrum currently expects revenue in the fourth quarter of 2009 to be in the range of US$37-40 million. The Company also estimates that gross margin will be flat on a sequential basis in the fourth quarter.

WEBCAST OF CONFERENCE CALL:

The Company's management team will conduct a conference call at 8:00 am (Eastern) on Tuesday, November 17, 2009. A webcast of the conference call will be accessible on the Company's web site at http://www.spreadtrum.com/ . The conference call can also be accessed via the following telephone numbers:

                         Toll Free                       Toll   United States         1-866-831-5605                  1-617-213-8851   China                 10-800-130-0399   South China           China Telecom - 10-800-130-0399                         China Netcom  - 10-800-852-1490   North China           China Telecom - 10-800-152-1490   Hong Kong             800-96-3844   United Kingdom        00-800-280-02002   Participant Passcode: Spreadtrum   

A telephone replay will be available shortly after the call until November 24, 2009 at (US Toll Free) 1-888-286-8010 or (US Toll) 1-617-801-6888. Passcode: 43339402.

A live webcast of the conference call and replay will be available in the investor relations section of the Company's website.

DISCUSSION OF NON-GAAP FINANCIAL MEASURES:

In addition to disclosing financial results prepared in accordance with US GAAP, the Company's earnings release contains non-GAAP financial measures that exclude the effects of share-based compensation, amortization of intangibles from the Quorum acquisition, in process R&D expense from the Quorum acquisition, and impairment loss of long-lived assets. The non-GAAP financial measures used by management and disclosed by the Company exclude the income statement effects of all forms of share-based compensation, amortization of intangibles from the Quorum acquisition, in process R&D expense from the Quorum acquisition, and impairment loss of long-lived assets.

The non-GAAP financial measures disclosed by the Company should not be considered a substitute for financial measures prepared in accordance with US GAAP. The financial results reported in accordance with US GAAP and reconciliation of GAAP to non-GAAP results should be carefully evaluated. The non-GAAP financial measures used by the Company may be prepared differently from and, therefore, may not be comparable to similarly titled measures used by other companies.

The Company believes that the presentation of non-GAAP gross margin, non- GAAP operating margin, non-GAAP net income (loss), and non-GAAP diluted earnings per ADS provides important supplemental information to management and investors regarding financial and business trends relating to the Company's financial condition and results of operations. The non-GAAP diluted earnings per ADS are calculated by dividing non-GAAP net income (loss) by the US GAAP weighted average diluted shares outstanding.

Listed below are the share-based compensation amounts included in net income that management excludes in computing the non-GAAP financial measures referred to in the text of this press release. A reconciliation of GAAP to non-GAAP results is presented after the consolidated balance sheets.

                Three months ended(in thousands of US dollars)                                          September        June   September                                           30, 2008    30, 2009    30, 2009                                         (unaudited) (unaudited) (unaudited)   Share-based compensation:   Cost of revenue                             $121         $60        $106   Research and development                  $1,185        $632      $1,126   Selling, general, and administrative      $1,108      $4,898        $777                             Spreadtrum Communications, Inc.                    Condensed Consolidated Income Statements      (in thousands of US dollars, except per share data and percentages)                                  (unaudited)                                     Three months ended                             September        June   September   Change from                              30, 2008    30, 2009    30, 2009   3Q08   2Q09    Revenue                     $19,977     $16,218     $38,379    92%   137%   Cost of revenue              11,242      12,396      23,414   108%    89%   Gross profit                  8,735       3,822      14,965    71%   292%   Operating expenses    Research & development      11,756       8,100       9,696   (18%)   20%    Selling, general &     administrative              4,647       9,618       3,683   (21%)  (62%)    IPR&D expense acquired     per Quorum acquisition      6,612          --          --    Impairment loss of     long-lived assets          17,484          --          --   Total operating expenses     40,499      17,718      13,379   (67%)  (24%)   Operating income (loss)     (31,764)    (13,896)      1,586  (105%) (111%)   Non-operating income    (expense)    Interest income                530         334         463   (13%)   39%    Interest expense               (54)        (66)       (352)  552%   433%    Other income, net              289         232          95   (67%)  (59%)   Total non-operating    income                         765         500         206   (73%)  (59%)   Income (loss) before tax    (30,999)    (13,396)      1,792  (106%) (113%)   Income tax    expense(benefit)               259        (306)      1,162   349%  (480%)   Net income (loss)          $(31,258)   $(13,090)       $630  (102%) (105%)   Income (loss) per ADS,    basic                       $(0.71)     $(0.29)      $0.01  (101%) (103%)   Income (loss) per ADS,    diluted                     $(0.71)     $(0.29)      $0.01  (101%) (103%)   Margin analysis:   Gross margin                  43.7%       23.6%       39.0%   Operating margin            (159.0%)     (85.7%)       4.1%   Net margin                  (156.5%)     (80.7%)       1.6%   Weighted average ADS    equivalent: (1)   Basic                    43,935,121  44,606,747  44,984,608   Diluted                  43,935,121  44,606,747  47,147,653   ADS equivalent    outstanding at end of    period                  43,991,458  44,836,196  45,126,407    (1) Assumes all outstanding ordinary shares are represented by ADSs. Each   ADS represents three ordinary shares.                            Spreadtrum Communications, Inc.                         Consolidated Income Statements      (in thousands of US dollars, except per share data and percentages)                                  (unaudited)                                                Nine months ended                                            September     September                                             30, 2008      30, 2009   Change    Revenue                                    $99,702       $62,813     (37%)   Cost of revenue                             55,051        42,432     (23%)   Gross profit                                44,651        20,381     (54%)   Operating expenses    Research & development                     34,039        25,580     (25%)    Selling, general & administrative          14,597        16,674      14%    IPR&D expense acquired per Quorum     acquisition                                6,612            --    Impairment loss of long-lived assets       17,484            --   Total operating expenses                    72,732        42,254     (42%)   Operating income (loss)                    (28,081)      (21,873)    (22%)   Non-operating income (expense)    Interest income                             1,860         1,041     (44%)    Interest expense                             (131)         (461)   (252%)    Other income, net                           1,870           743     (60%)   Total non-operating income                   3,599         1,323     (63%)   Income (loss) before tax                   (24,482)      (20,550)    (16%)   Income tax expense (benefit)                 1,385           215     (84%)   Net income (loss)                         $(25,867)     $(20,765)    (20%)   Income (loss) per ADS, basic                $(0.59)       $(0.47)    (20%)   Income (loss) per ADS, diluted              $(0.59)       $(0.47)    (24%)   Margin analysis:   Gross margin                                 44.8%         32.4%   Operating margin                            (28.2%)       (34.8%)   Net margin                                  (25.9%)       (33.1%)   Weighted average ADS equivalent: (2)   Basic                                   43,784,579    44,569,911   Diluted                                 43,784,579    44,569,911     (2) Assumes all outstanding ordinary shares are represented by ADSs. Each    ADS represents three ordinary shares.                            Spreadtrum Communications, Inc.                     Condensed Consolidated Balance Sheets                         (in thousands of US dollars)                                                       As of                                          March 31,    June 30,   September                                            2009        2009      30, 2009                                         (unaudited) (unaudited) (unaudited)    Cash and cash equivalents                $52,163     $50,553     $47,832   Restricted cash                               --          --      $5,741   Short term deposits                       $5,189      $1,463      $7,322   Notes receivable                              --        $117      $1,356   Accounts receivable, net                  $4,744      $5,769      $9,591   Inventories                              $11,990      $9,551     $20,562   Deferred tax assets                       $2,115      $2,084      $2,085   Prepaid expenses and other current    assets                                   $4,925      $4,464      $5,596   Total current assets                     $81,126     $74,001    $100,085   Property and equipment, net              $29,785     $28,850     $27,405   Acquired intangible assets, net          $20,376     $24,333     $27,088   Equity Investment                           $724        $719        $713   Deferred tax assets                         $680      $1,060      $1,060   Goodwill                                      --          --      $2,000   Long term deposits                            --     $43,912     $43,930   Other long term assets                    $7,157      $7,126      $7,055   Total assets                            $139,848    $180,001    $209,336   Current portion of long term loan         $3,657        $732          --   Accounts payable                          $5,613      $7,415     $22,098   Advances from customers                     $162        $280      $5,848   Income tax payable                        $2,997      $2,505      $3,487   Current deferred income tax    liabilities                                 $53         $53         $53   Accrued expenses and other current    liabilities                             $12,903     $12,147     $17,871   Total current liabilities                $25,385     $23,132     $49,357   Long term loan                                --     $43,912     $43,930   Other long-term obligations                 $611      $6,434      $6,476   Total long term liabilities                 $611     $50,346     $50,406   Total liabilities                        $25,996     $73,478     $99,763   Shareholders' equity                    $113,852    $106,523    $109,573   Total liabilities & shareholders'    equity                                 $139,848    $180,001    $209,336                             Spreadtrum Communications, Inc.                            Supplemental Information                (in thousands of US dollars, except percentages)    Revenue                                  4Q07     1Q08     2Q08     3Q08   Baseband and RF Semiconductor          $44,971  $35,532  $38,713  $18,765   Turnkey Solutions                       $3,571   $3,966   $1,514   $1,212   Total                                  $48,542  $39,498  $40,227  $19,977   As % of Total Revenue   Baseband Semiconductor                   92.6%    90.0%    96.2%    93.9%   Turnkey Solutions                         7.4%    10.0%     3.8%     6.1%   Gross Margin                             45.5%    44.9%    45.2%    43.7%    Revenue                                   4Q08     1Q09     2Q09     3Q09   Baseband and RF Semiconductor           $9,298   $8,007  $16,071  $38,349   Turnkey Solutions                         $937     $209     $147      $30   Total                                  $10,235   $8,216  $16,218  $38,379   As % of Total Revenue   Baseband and RF Semiconductor            90.8%    97.5%    99.1%    99.9%   Turnkey Solutions                         9.2%     2.5%     0.9%     0.1%   Gross Margin                            -26.8%    19.4%    23.6%    39.0%                            Spreadtrum Communications, Inc.                   Reconciliation of GAAP to Non-GAAP Results      (in thousands of US dollars, except per share data and percentages)                                  (unaudited)                                                  Three months ended                                           September      June     September                                            30, 2008    30, 2009    30, 2009    Cost of revenue                           $11,242     $12,396     $23,414    Adjustment for share-based     compensation                               (121)        (60)       (106)   Cost of revenue (non-GAAP)                $11,121     $12,336     $23,308   Operating income (loss)                  $(31,764)   $(13,896)     $1,586    Adjustment for share-based     compensation within: Cost of     revenue                                     121          60         106    Research and development                   1,185         632       1,126    Selling, general, and administrative       1,108       4,898         777    Adjustment for amortization of     intangibles from Quorum acquisition     within research and development             435         255         255    Adjustment for IPR&D expense     acquired per Quorum acquisition           6,612          --          --    Adjustment for impairment loss of     long-lived assets                        17,484          --          --   Operating income (loss) (non-GAAP)        $(4,819)    $(8,051)     $3,850   Net income (loss)                        $(31,258)   $(13,090)       $630    Adjustment for share-based     compensation within: Cost of     revenue                                     121          60         106    Research and development                   1,185         632       1,126    Selling, general, and administrative       1,108       4,898         777    Adjustment for amortization of     intangibles from Quorum acquisition     within research and development             435         255         255   Adjustment for IPR&D expense acquired    per Quorum acquisition                     6,612          --          --   Adjustment for impairment loss of    long-lived assets                         17,484          --          --   Net income (loss) (non-GAAP)*             $(4,313)    $(7,245)     $2,894   Income (loss) per ADS, diluted             $(0.71)     $(0.29)      $0.01    Adjustment for share-based     compensation                               0.05        0.13        0.04    Adjustment for amortization of     intangibles from Quorum acquisition        0.01        0.01        0.01   Adjustment for IPR&D expense acquired    per Quorum acquisition                      0.15          --          --   Adjustment for impairment loss of    long-lived assets                           0.40          --          --   Income (loss) per ADS, diluted (non-    GAAP)*                                    $(0.10)     $(0.15)      $0.06   Gross margin                                43.7%       23.6%       39.0%    Adjustment for share-based     compensation                               0.6%        0.4%        0.3%   Gross margin (non-GAAP)                     44.3%       24.0%       39.3%   Operating margin(loss)                    (159.0%)     (85.7%)       4.1%    Adjustment for share-based     compensation                              12.1%       34.5%        5.2%    Adjustment for amortization of     intangibles from Quorum acquisition        2.2%        1.6%        0.7%   Adjustment for IPR&D expense acquired    per Quorum acquisition                     33.1%          --          --   Adjustment for impairment loss of    long-lived assets                          87.5%          --          --   Operating margin(loss) (non-GAAP)          (24.1%)     (49.6%)      10.0%   Net margin(loss)                          (156.5%)     (80.7%)       1.6%    Adjustment for share-based     compensation                              12.1%       34.5%        5.2%    Adjustment for amortization of     intangibles from Quorum acquisition        2.2%        1.6%        0.7%   Adjustment for IPR&D expense acquired    per Quorum acquisition                     33.1%          --          --   Adjustment for impairment loss of    long-lived assets                          87.5%          --          --   Net margin(loss) (non-GAAP)*               (21.6%)     (44.6%)       7.5%    Operating expenses                       $40,499     $17,718     $13,379    Adjustment for share-based     compensation:    Research and development                  (1,185)       (632)     (1,126)    Selling, general, and administrative      (1,108)     (4,898)       (777)    Adjustment for amortization of     intangibles from Quorum acquisition        (435)       (255)       (255)   Adjustment for IPR&D expense acquired    per Quorum acquisition                    (6,612)         --          --   Adjustment for impairment loss of    long-lived assets                        (17,484)         --          --    Operating expenses (non-GAAP)            $13,675     $11,933     $11,221     * The non-GAAP adjustment does not take into consideration the impact of    taxes.    ABOUT SPREADTRUM COMMUNICATIONS, INC.:  

Spreadtrum Communications, Inc. (NASDAQ: SPRD; the "Company") is a fabless semiconductor company that designs, develops, and markets baseband processor solutions for the mobile wireless communications market. The Company combines its semiconductor design expertise with its software development capabilities to deliver highly-integrated baseband processors with multimedia functionality and power management. The Company has developed its solutions based on an open development platform, enabling its customers to develop customized wireless products that are feature-rich and meet their cost and time-to-market requirements.

SAFE HARBOR STATEMENT:

This press release contains "forward-looking statements" within the meaning of the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. Such forward-looking statements include, without limitation, statements regarding possibility for continued growth in the Company's business in 4Q09, the results for 3Q09 not being meaningful indicator of the Company's operational performance or potential for long-term success, the Company's ability in achieving margin expansions, and the Company's expectations with respect to revenue in the range of US$37-40 million with improving margins for the third quarter. The Company uses words like "believe," "anticipate," "intend," "estimate," "expect," "project" and similar expressions to identify forward-looking statements, although not all forward-looking statements contain these words. These statements are forward-looking in nature and involve risks and uncertainties that may cause actual market trends and the Company's actual results to differ materially from those expressed or implied in these forward-looking statements for a variety of reasons. Potential risks and uncertainties include, but are not limited to, continuing competitive pressure in the semiconductor industry and the effect of such pressure on prices; unpredictable changes in technology and consumer demand for mobile phones; the rate at which the commercial deployment of TD-SCDMA technology will grow; market acceptance of products utilizing TD-SCDMA technology; the Company's ability to sustain recent rates of growth; the state of and any change in the Company's relationship with its major customers and Chinese government agencies; the Company's ability to successfully complete the project of the Chinese TD-SCDMA operator, and changes in political, economic, legal and social conditions in China. For additional discussion of these risks and uncertainties and other factors, please consider the information contained in the Company's filings with the U.S. Securities and Exchange Commission (the "SEC"), including the registration statement on Form F-1 filed on June 26, 2007, as amended, and the annual report on Form 20-F filed on June 30, 2009, especially the section under "Risk Factors" and such other documents that the Company may file with the SEC from time to time, including on Form 6-K. The Company assumes no obligation to update any forward-looking statements, which apply only as of the date of this press release, and does not intend to update any forward-looking statement whether as a result of new information, future events or otherwise except as required by law.

   For further information, please contact:    Investor Relations   Tel:   +86-21-5080-2727   Email: ir@spreadtrum.com   Web:   http://www.spreadtrum.com/  

Source: Spreadtrum Communications, Inc.

CONTACT: Investor Relations, +86-21-5080-2727, ir@spreadtrum.com

Web site: http://www.spreadtrum.com/

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