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| Annual Report Introduction  |
Letter to Our Shareholders (THIS PAGE) |
Diversified Markets |
Diversified Products |
Strategic Manufacturing |
| By any measure, fiscal 1996 was a dynamic year for Alliance Semiconductor. The Company's rapid growth in the first half of the fiscal year was followed by a sudden downturn in the market that had an adverse effect on Alliance's financial performance, breaking a string of twelve consecutive quarters during which we reported record revenues and net income. In spite of the difficulties encountered in the second half of the fiscal year, Alliance made great strides in implementing its product and manufacturing diversification strategy. We believe this strategy will provide numerous opportunities for the Company to return to the growth and profitability that has characterized our performance in recent years. | ||
| For the fiscal year ended March 30, 1996, Alliance reported revenues of $201.1 million, a 69% increase compared to revenues of $119.3 million in fiscal 1995. Net income for the year was $10.7 million, or $0.26 per share, compared to 1995's net income of $23.9 million, or $0.69 per share. These results included pre-tax charges of $55 million taken in the latter half of the fiscal year primarily to adjust the valuation of Alliance's inventory to reflect a decline in market value for certain of its products. The Company ended the fiscal year with a cash and cash equivalents balance of $80.6 million, compared to a year-end balance of $75.6 million in fiscal 1995. | ||
| Although Alliance's revenues reached an all-time high during fiscal 1996, the Company's net income suffered in comparison to recent years. A number of factors contributed to this decline. After several years marked by brisk sales of static random access memories (SRAMs)-Alliance's principal revenue-generating product line-the SRAM market suddenly experienced a sharp downturn at the end of calendar year 1995. Alliance currently believes that many personal computer manufacturers discovered that they had built up excess SRAM inventory at such time, and that when demand for their PCs failed to materialize as Christmas approached, these customers canceled or rescheduled orders to SRAM suppliers such as Alliance. | ||
| To exacerbate matters, some suppliers released portions of their SRAM inventory into the market. This additional source of supply, coupled with a lingering softness in the market that has lasted through the present time, triggered sharp reductions in SRAM prices across the worldwide marketplace. Concurrent with these difficult conditions, Alliance experienced wafer manufacturing problems that resulted in lower product yields and delayed deliveries, further impacting our financial performance. | ||
| I'm pleased to report that we've taken a number of steps to overcome the obstacles we faced in the latter half of the fiscal year. On the manufacturing front, we were able to successfully identify the primary cause of our wafer fabrication yield concerns and implement a recovery plan. We've successfully made the transition from 6-inch to 8-inch wafer fabrication-a move that is now providing better quality and higher yields in the volume production of our high-performance products. In addition, Alliance is an equity partner in three 8-inch wafer fabrication facilities located in the Pacific Rim, with the purpose of ensuring wafer supply in the future during upturns in the overall semiconductor market, when capacity may become an issue. Two of these facilities are up and running in production mode, with the other slated to come online in 1998. | ||
| Even more importantly, we've made excellent progress in diversifying Alliance's product offerings-a strategy designed to make the Company less vulnerable to the kind of downturn that affected the SRAM market last year. Several years ago, we realized the need to broaden our product portfolio to optimize our growth prospects for the future. These efforts were already well underway as we entered fiscal 1996. As a result, Alliance is a company that has expanded beyond a principal focus on the SRAM market-which continues to remain soft-to also include three other product lines: dynamic random access memories (DRAMs), Flash memory products and multimedia user interface (MMUI) accelerators. | ||
| All three of our newer product lines are synergistic with Alliance's long-standing expertise in designing and manufacturing high-performance memory products. All depend on the same general proprietary design methodologies and simplified process and manufacturing technology that historically have been the source of Alliance's competitiveness. And all of our product lines feed into the same markets that have always represented the core of our business over the years. The question-and-answer section of this report explores Alliance's markets, diversified product portfolio and manufacturing strategy in greater detail. | ||
| In further news of note, Alliance's headcount nearly doubled during the last year to more than 130 people. This growth is designed to provide us with an infrastructure capable of supporting the Company's diversified product line and new manufacturing facilities. With all of these pieces in place, we believe that Alliance is now positioned to move forward and take advantage of broader opportunities in a much wider marketplace. | ||
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In summary, fiscal 1996 was a difficult time for Alliance Semiconductor; what started out auspiciously as a banner year for the Company was marred by an unexpected decline in the SRAM market, slowing down the momentum we had gathered at the beginning of the fiscal year. Throughout these difficulties, however, our people have been able to execute our strategies and pave the way for future growth. I want to thank our shareholders, customers, partners, suppliers and employees for their support. And I look forward to meeting the challenges that lie ahead as we continue to expand the Company's horizons in the years to come.
N. Damodar ReddyChairman, President, and Chief Executive Officer,
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| Annual Report Introduction |
Letter to Our Shareholders (THIS PAGE) |
Diversified Markets |
Diversified Products |
Strategic Manufacturing |
