Dear Shareholders,
In last year’s letter to you, we left off with a record year of growth in our fiscal 2008. At that time we had only seen the very beginnings of what would be the most difficult business environment since the Great Depression, a moment in time that changed things for our customers, our industry and our company. But change can often be a good thing. In the Chinese language the word for crisis is wei ji, and it shares the character ji with the word for opportunity. While we’ve seen crisis and many resulting changes this past year, we’ve also been open to the new opportunities that change can bring. Thanks to a strong balance sheet, a wide range of high-quality products and a renewed effort towards efficiency, we were able to weather the storm and are again optimistic, ready for the opportunities and challenges of 2010 and beyond.
Difficult Times Bring Change
The global recession had a major impact on the financial performance of companies of all kinds, and we too were affected. As a result, after two sequential years of record growth, our fiscal 2009 saw annual net revenue decrease 21% to $128.6 million, with operating income of $3.0 million and net income of $6.1 million. However, our cash and investments totaled $124.6 million as of June 27, 2009, providing ample resources to fund new opportunities and growth. We kept our focus on the most important long-term and short-term opportunities for growth, as well as reducing costs and increasing efficiency. We were able to reduce our operating expenses down from $11.1 million in the first quarter fiscal 2009 to $10.0 million in Q2, $9.4 million in Q3 and $9.5 million in Q4, with restructuring and other cost saving initiatives throughout the fiscal year, and we will continue to keep a keen eye on controlling costs for our fiscal 2010. We also had to make some tough decisions, including some job eliminations, but with the extraordinary efforts made by our dedicated and talented work force, we were able to focus our resources on the most essential business objectives at hand. These steps have made Pericom a stronger company; we are more agile, efficient and competitive than ever before.
Driving Technology Forward
Despite the difficult economic conditions, we introduced an impressive range of innovative new serial connectivity solutions to the marketplace. Our expertise in serial protocol deployment—essential for high-speed serial signals—is the cornerstone to keeping ahead of our competition. It will allow us to take advantage of the new opportunities presented by the demands for high-speed performance in every kind of application, from notebooks to servers to digital media like television and display. Serial protocols such as PCI Express®, DisplayPort™ and USB continue to evolve to faster speeds, driving innovation and opportunity across our computer, consumer and communication markets.
Accordingly, we introduced a total of 40 new products in our fiscal 2009 addressing our key product families of signal integrity, connectivity and timing. A number of these products were “Industry Firsts” in their respective market segment. We kept a keen focus on the protocols required to deliver high-speed serial connectivity, such as PCI Express®, DisplayPort™, HDMI™ and SATA2. These new products leverage our previous innovations in technology, and capitalize on the world’s rapid migration to high-speed serial connectivity.
Solid Foundations Position Us for the Future
Our fiscal 2009 was the second year running that we were recognized by Fortune’s Small Business Top 100 Companies (FSB 100 July 2008, and FSB 100 July 2009). We were also listed in The San Francisco Chronicle Bay Area’s Top Companies List for 2008 and 2009, as well as in The Mercury News Top 150 Silicon Valley Companies list for 3 consecutive years, 2007, 2008 & 2009. We plan to continue this growth trend moving forward.
We are well positioned for future growth because our core technologies are even more essential to electronic design, addressing demands of high-speed connectivity in a world where increased performance, smaller footprint and power constraints create new challenges for our customers. Leveraging high-growth markets, finding opportunities in emerging high-speed serial connectivity applications, and achieving technological as well as operational excellence, and improving gross margins continue to be our core focus for success. The same strategies that helped us through the downturn will help us create new opportunities as the economy recovers. A difficult economic climate made our fiscal 2009 a challenging year for our entire industry and the economy is likely to remain challenging for some time. But our core values—fiscal conservatism, a broad customer base, and a deep commitment to the power of enabling serial connectivity—keep us moving forward. We see our opportunities as greater than ever before and we will continue to deliver solutions that drive the innovations that will fuel the economic recovery around our ever changing world.
I must thank all of our talented employees for their dedication, integrity, diligence and hard work. I’d also like to thank our customers, suppliers, and investors for their continued support and partnership that make it possible for us to continue to explore new opportunities and innovate for serial connectivity.
Alex Hui
CEO, Founder & Chairman