Saifun Semiconductors ( SFUN) sales dipped in the second quarter, although the Israeli chipmaker's earnings beat Wall Street expectations. Saifun generated $17.4 million in sales during the three months ending June 30, with a net income of $10.1 million, or 33 cents a share. Analysts polled by Thomson Financial were looking for Saifun to earn 27 cents a share on $16.8 million in revenue. The results were below what the company achieved at this time last year, when it posted a $13.3 million profit on $21.8 million in sales. But last year's results included $6.8 million in noncash revenue from the termination of the company's joint venture with Infineon Technologies ( IFX). Excluding that benefit from the comparison, Saifun's results for the recently ended quarter were up year over year, thanks to increasing service revenue. Saifun provides technical expertise to help companies manufacture flash chips based on its NROM technology, which it licenses to some half-dozen companies. While service revenue nearly doubled from a year ago to $6.2 million, licensing revenue was down slightly to $11.1 million vs. $11.7 million in the second quarter of 2005. Saifun is preparing to roll out a new generation of flash chips that store 4 bits of data per cell , which President Kobi Rozengarten characterized as a revolution in flash technology. M-Systems ( FLSH), another Israeli firm, is pushing a competing version of 4-bit flash technology, also expected to hit the market in 2007. "During the next six months, we expect to see Saifun's licensees release engineering samples of new flash products utilizing our Quad NROM technology, with their volume production expected to commence in early 2007," Rozengarten said in a statement. Shares of Saifun were up 0.5%, or 14 cents, to $27.25 in midday trading Wednesday.