Updated from 5:10 p.m. EDT

A year-ago profit turned into a first-quarter loss at Zoran ( ZRAN), as acquisition-related charges outweighed a doubling of revenue.

After hours, the company's shares were recently down $1.40, or 7.8%, to $16.55. Zoran's stock closed regular trading at $17.95, up 30 cents, or 1.7%.

On a generally accepted accounting principles basis, the chipmaker lost $10.69 million, or 25 cents a share, on $80.64 million in revenue. In the first quarter a year ago, the company earned $193,000, or 1 cent a share, on revenues of $37.83 million.

Excluding charges related to the company's purchase of Oak Technology in August, Zoran would have earned $2.2 million, or 5 cents a share.

That pro forma result topped the company's guidance and analysts' expectations of earnings per share of 4 cents on $76.94 million in sales, according to Thomson First Call. In February, the company projected it would earn 3 cents to 5 cents a share, excluding charges, in the first quarter on revenue ranging from $76 million to $78 million.

The company offered mixed guidance: Zoran warned that it might not meet analysts' second-quarter earnings projections, but should top expectations for the full year.

In its current quarter, Zoran forecast it will lose 18 cents to 21 cents a share on a GAAP basis -- which would translate into a pro forma profit of 8 cents to 11 cents a share -- on sales ranging from $90.32 million to $95.16 million. Analysts had projected the company would earn 10 cents a share, excluding charges, in the second quarter on $83.11 million in sales.

For the full year, the company now expects to lose 44 cents to 47 cents a share on a GAAP basis -- equivalent to 65 cents to 70 cents a share in pro forma profits -- on total revenue ranging from $370 million to $390 million.

Analysts had previously predicted that the company would earn 65 cents a share, excluding charges, on revenue of $368.19 million.

In the first quarter, Zoran saw a surge in both its product revenues and its revenues from software and other sources. Revenues from its chip products jumped 83.4% to $68.03 million, while software sales swelled to $12.61 million, from just $736,000 in the year-ago period.

But at least part of Zoran's revenue gains came from its Oak Technology acquisition. Oak posted $25.87 million in total revenue in the first quarter last year, $8.62 million of which came from software sales.

Comparing apples to apples, Zoran's total revenue would have grown by 26.6% in the just completed quarter if Oak's results had been included in Zoran's year-ago revenue figures. Likewise, the company's software sales would have grown by 34.7%.

Zoran's gross margin in the quarter -- the difference between what the company charges its customers for its products and its direct costs of producing and supplying those products -- jumped to 43.8% of revenues from 29.4% in the year-ago period. Part of that increase had to do with the mix of the company's products sold in the quarter, Zoran officials said on a conference call.

But offsetting that gain was a sharp rise in the company's operating costs. Such expenses rose 274.5% to $46.34 million. Part of that increase was due to the non-cash acquisition charges. Amortization of goodwill, for instance, totaled $10.34 million in the quarter, compared to $943,000 in the year-ago period. Deferred stock compensation cost the company $2.53 million in the quarter, up from $10,000 in the first quarter last year.

However, much of the increase came from a huge rise in marketing and research expenses. Research and development costs rose 316% to $18.65 million. Marketing and administrative expenses jumped 113% to $14.82 million.

Zoran's operating expenses were "in line" with the company's expectations, company CFO Karl Schneider said on the conference call.
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