GSI Technology, Inc. (Nasdaq: GSIT) reported net income of $991,000, or $0.03 per diluted share, on net revenues of $20.0 million in its third fiscal quarter ended December 31, 2011, compared to net income of $5.8 million, or $0.20 per diluted share, on net revenues of $26.2 million in the third quarter of fiscal 2011.
Third-quarter fiscal 2012 results were impacted by $3.0 million in litigation related expenses, whereas there were no such expenses in the comparable period a year ago. In the prior quarter ended September 30, 2011, during which the Company incurred $1.9 million in litigation related expenses, net income was $1.7 million, or $0.06 per diluted share, on net revenues of $20.8 million. The litigation related expenses were primarily associated with a previously announced patent infringement proceeding pending before the United States International Trade Commission (the “ITC”) that was instituted on July 21, 2011 and is scheduled for trial in March 2012.
For the nine months ended December 31, 2011, net income was $5.9 million, or $0.20 per diluted share, on net revenues of $63.8 million, compared to net income of $15.5 million, or $0.53 per diluted share, on net revenues of $75.9 million in the first nine months of fiscal 2011.
Third-quarter revenues were higher than had been anticipated when the Company first provided guidance for the third quarter last October, due in large part to higher-than-expected sales to Cisco Systems, the Company's largest customer, largely as a result of production problems experienced by another supplier. Direct and indirect sales to Cisco were $9.9 million in the third quarter compared to $7.9 million in the second quarter and $9.8 million in the third quarter of fiscal 2011. The increased sales to Cisco Systems more than offset slightly weaker-than-expected sales in Asia.Third-quarter gross margin and operating margin were, respectively, 43.9% and 3.4% compared to 46.2% and 25.5% a year ago and 43.6% and 9.2% in the second quarter. Research and development expense of $2.6 million was unchanged from a year ago and only slightly lower than the $2.7 million reported in the second quarter. Including the aforementioned litigation related expenses, selling, general and administrative expense was $5.5 million in the third quarter compared to $4.4 million in the second quarter and $2.8 million a year ago.