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Zilog Board of Directors Declines Universal Electronics Inc.'s Unsolicited Proposal

SAN JOSE, Calif., Feb 04, 2008 /PRNewswire-FirstCall via COMTEX News Network/ -- Zilog, Inc. (Nasdaq: ZILG) announced today that its Board of Directors has turned down the unsolicited, conditional proposal by Universal Electronics, Inc. (UEI) to purchase the company for $4.50 per share. The Board of Directors reached this unanimous decision after careful consideration and in consultation with senior management as well as the company's financial and legal advisors. The Board concluded that the UEI proposal, which expired at the close of business on Friday, February 1, 2008, did not adequately reflect Zilog's strategic value or the potential future value enhancements associated with the company's new growth strategy.

"We are 12 months into our strategic growth plan and in that short span we have achieved several key milestones, begun key initiatives and built a strong foundation that we believe will drive strong future growth," commented Darin G. Billerbeck, chief executive officer of Zilog. "The decision by the Board reflects the confidence of the management and the Board about the company's future prospects. As a result, the Board concluded that the UEI proposal is not in the best interests of Zilog's shareholders."

The entire Board reviewed the strategic plans in place and the growth prospects for the company and concluded that the continued implementation of those plans is preferable, as a means of maximizing shareholder value, to selling the company at this time for $4.50 per share. The Board has always been open to alternative ways of maximizing shareholder value, and that will continue to be the company's policy going forward.

As part of the company's strategic growth plan, Billerbeck noted the following accomplishments of the past 12 months:

  • A new and experienced marketing team was put in place that includes seasoned industry veterans.
  • The consolidation of Zilog's engineering efforts has achieved greater synergies and improved productivity. As part of this consolidation, Zilog closed two of its four development sites last year.
  • The worldwide sales organization has been completely revamped. Zilog hired a proven worldwide sales vice president and recruited three key senior sales directors formerly from leading global brands such as Freescale and Microchip. The new sales organization is driving sales growth opportunities both through direct accounts as well as through a strengthened worldwide distribution channel.
  • Zilog launched and is shipping to leading point-of-sale customers the first family of products for the secured transaction market. Its new Zatara(TM) single chip ARM core based 32-bit secured transaction solution is leading the way for today's and the next-generation of point of sale applications.
  • Zilog strengthened its universal remote control business by expanding its industry leading Z-base(TM) database. The company also introduced new learning chip capabilities and its first family of Crimson(TM) core products with integrated embedded flash. These universal infrared remote (UIR) flash products will begin to ship to existing and new customers this calendar year.
  • Zilog implemented gross margin improvement programs throughout the year, focusing on cost reduction initiatives. It recently implemented the outsourcing of its production test activities as part of its cost reduction strategy. When these test activity transfers are completed as expected in the September quarter of this year, the company will have 100 percent of its manufacturing activities outsourced.
  • The company launched several new products, including zdots(TM), a new module-based solution initially for wireless communications applications. We already have customer commitments for FY08 of an estimated $2 million in orders.
  • The company also test marketed an innovative new solution for remote home automation control, which received widespread interest at the Consumer Electronics Show (CES) in Las Vegas in January.


As previously announced, the company's preliminary guidance for the fiscal year ending March 31, 2009 is as follows:

  • Revenue is expected to be between $81 million and $83 million based on our existing products and new sales pipeline.
  • Adjusted EBITDA is expected to be in the range of 8 to 10 percent of sales.
  • Positive GAAP earnings for the year in the range of 0.09 cents to 0.11 cents per share.


The company has included Non-GAAP financial measures in this press release. Management believes that these Non-GAAP measures are useful measures of operating performance and liquidity because they may exclude the impact of certain items, such as amortization of intangible assets, stock-based compensation, depreciation, non-operating interest, income taxes and special charges. However, these Non- GAAP measures should be considered in addition to, not as a substitute for, or superior to, net cash provided by (used in) operating activities, or other financial measures prepared in accordance with GAAP.

EBITDA reflects our Earnings or loss Before Interest, Taxes, Depreciation and Amortization. Additionally, management uses separate "Adjusted EBITDA" calculations for purposes of determining certain employees' incentive compensation and, subject to meeting specified Adjusted EBITDA amounts, for accelerating the vesting of EBITDA-linked stock options. Adjusted EBITDA, as we define it, excludes interest, income taxes, effects of changes in accounting principles and non-cash charges such as depreciation, amortization, in-process research and development, and stock-based compensation expense. It also excludes cash and non-cash charges associated with reorganization items and special charges and credits, which represent operational restructuring charges, including asset write-offs, employee termination costs, relocation costs and lease termination costs. Adjusted EBITDA also excludes changes in operating assets and liabilities which are included in net cash used by operating activities. Our management uses Adjusted EBITDA as a supplement to cash flows from operations as a way to assess the cash generated from our business available for capital expenditures and the servicing of other requirements including working capital. This Non-GAAP Adjusted EBITDA measure allows management to monitor cash generated from the operations of the business. However, this Non-GAAP measure should be considered in addition to, not as a substitute for, or superior to, net loss and net cash provided or used in operating activities prepared in accordance with GAAP.

About Zilog:

Founded in 1974, Zilog is a global supplier of 8, 16 and 32-bit microcontroller and microprocessor "system-on-a-chip" (SoC) solutions that allow design engineers the freedom and creativity required for continued innovation in embedded design. The company won international acclaim for designing one of the first architectures in the microprocessors and microcontrollers industry. Today, Zilog designs, develops and markets a broad portfolio of devices for embedded control and communication applications used in consumer electronics, home appliances, security systems, point of sales terminals, personal computer peripherals, as well as industrial and automotive applications. Zilog is headquartered in San Jose, California, and employs approximately 500 people worldwide with sales offices throughout Asia, Europe and North America. For more information about Zilog and it products visit www.zilog.com

EZ80ACCLAIM!, CRIMZON, Zatara, Zilog, Z8, Z80, eZ80, Z8 ENCORE!, Encore!XP and Zneo are registered trademarks of Zilog, Inc. in the United States and in other countries. ARM is a registered trademark of ARM Limited in the EU and other countries. Other product and or service names mentioned herein may be trademarks of the companies with which they are associated.

Cautionary Statements

This release contains forward-looking statements (including those related to our expectations for our fiscal year ending March 31, 2009 and the timing of the transfer of test activities) relating to expectations, plans or prospects for Zilog, Inc. that are based upon the current expectations and beliefs of Zilog's management and are subject to certain risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. These risks and uncertainties include those related to declining product demand in the end markets for our classic products, the anticipated ramp for our 32-bit ARM products, which will depend on the timing of orders from one key customer which is beyond our control, the market place reception to the product offerings of our customers, and any disruptions in the business of our outsourced providers, general slow- down in the economy as well as those matters referenced in our annual report and other documents on file with the SEC. We expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any statements to reflect any change in the company's expectations or any change of events, conditions or circumstances on which any such statements are based.

For a detailed discussion of these and other cautionary statements, please refer to the risk factors discussed in filings with the U.S. Securities and Exchange Commission ("SEC"), including but not limited to, the company's Annual Report on Form 10-K for the fiscal year ended March 31, 2007, and any subsequently filed reports. All documents also are available through the SEC's Electronic Data Gathering Analysis and Retrieval system (EDGAR) at http://www.sec.gov or from the company's website at http://www.Zilog.com.

Stew Chalmers
Director Corporate Communications
(818) 681-3588

SOURCE Zilog, Inc.


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