GSI Technology, Inc. (Nasdaq: GSIT) reported net income of $3.3 million, or $0.11 per diluted share, on net revenues of $23.0 million in its first fiscal quarter ended June 30, 2011, compared to net income of $4.4 million, or $0.15 per diluted share, on net revenues of $22.9 million in the comparable period a year ago. In the prior quarter ended March 31, 2011, the Company earned $3.4 million, or $0.11 per diluted share, on net revenues of $21.9 million.
First-quarter gross margin and operating margin were, respectively, 44.2% and 18.0% compared to 47.2% and 23.8% a year ago and 44.1% and 20.9% in the prior quarter. "Gross margin was in line with expectations, but operating margin, which we had expected to be closer to 20%, reflected a greater-than-anticipated increase in selling, general and administrative expenses," said Lee-Lean Shu, Chairman and Chief Executive Officer of GSI, who noted that research and development expense for the quarter was essentially flat at $2.6 million.
"Of the $929,000 increase in SG&A — to $3.4 million, or 14.8% of net revenues, from $2.5 million, or 11.3% of net revenues, in the prior quarter — approximately $800,000 was attributable to legal expenses related to the defense of the previously disclosed patent infringement lawsuit filed against us by Cypress Semiconductor Corporation on March 30, 2011, and the subsequent complaint filed by Cypress with the U.S. International Trade Commission, as well as the antitrust complaint that we filed against Cypress on July 22, 2011. As previously announced, each of these legal proceedings is principally related to our SigmaQuad™ and SigmaDDR™ families of SRAM memory products.
"These products — whose performance characteristics are among the highest in the industry — have been years in development, are being well received by our customers, and are expected to play a significant role in GSI's future growth. With this in mind, and in the firm belief that both the law and the facts are on our side, we intend to vigorously defend both the patent litigation and the ITC complaint and to vigorously prosecute our antitrust claim against Cypress. Absent a speedy resolution of these matters, we expect to incur significant legal expenses in defending our position, although at this time we cannot with any precision estimate what the cost will be," said Shu.