FOOL CONFERENCE CALL SYNOPSIS*
By Debora Tidwell (MF Debit)

Alliance Semiconductor Corporation <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ALSC)") else Response.Write("(Nasdaq: ALSC)") end if %>
3099 North First Street
San Jose, CA 95134-2006
(408) 383-4900
http://www.alsc.com

UNION CITY, Ca., January 19, 1997/FOOLWIRE/ --- Alliance Semiconductor released their third quarter fiscal 1997 results on Thursday after the market close. Revenues for the quarter were $25.2 million compared to $46.4 million in the same period last year. This compares to net revenue of $13.1 million for the prior quarter ended September 28th, representing a 92% sequential increase. This increase was due to the new product offerings in the DRAM and graphics product lines. Net loss for the quarter was -$1.3 million or -$0.03 per share. Net income for the same quarter last year was $2.2 million or $0.05 per share.

REVENUE MIX. DRAMs and graphics have provided the most significant revenue growth in the current quarter. DRAMs contributed approximately 50% to revenue, compared to 44% in the second quarter. Graphics contributed roughly 30% compared to 2% in the second quarter. SRAM has decreased as a percentage of revenue to approximately 30% from 60% in the second quarter.

GROSS MARGINS. Gross margins in the quarter were $3.4 million or 13% of revenues versus gross margin of $10.4 or 22% of revenues for the same period last year. Once again, their gross margins are below those of their target levels due to the continued weakness in the average selling price of SRAM and DRAM.

EXPENSES. R&D for the quarter was $3.7 million or 15% of revenues compared to 8% of revenues for the same quarter last year. They look for R&D costs to remain at these levels for the next quarter. SG&A was 8% of revenues compared to 11% in the same quarter last year. They expect SG&A expenses to remain at these levels for the next quarter.

BALANCE SHEET HIGHTLIGHTS. Their cash position remains steady at $26.8 million compared to $26.9 million in the previous quarter. Their inventory was $37.4 million compared to $31.4 million as of the end of last quarter. Accounts receivable was $11.2 million compared to $6.4 million last quarter.

REVENUE DISTRIBUTION. Revenue distribution by geography was still 60% of revenues from domestic markets and roughly 30% from Southeast Asia and 8% from Europe. This is compared to 58% domestic last quarter, 32% Southeast Asia and 7% Europe. Revenue distribution by market -- roughly 74% of revenues came from the PC market compared to 26% non-PC and this is in line with last quarter. This quarter, distributor sales were approximately 10% which is a part of their domestic sales compared with 22% last quarter. The majority of their sales this quarter went to OEM customers. DRAMs contributed 50% of their revenues, SRAMs were 30%, and graphics products were approximately 20%. Flash memory is a fraction of a percent.

PRODUCT DISTRIBUTION BY UNITS SHIPPED. The product distribution based on units breaks down as follows: 55% of units were DRAMs, 41% of units shipped were SRAMs, graphics products were 4%, and flash was less than a fraction of a percent. Shipment growth was roughly 53% compared to the September quarter. Going forward, their goal is to maintain roughly 40-45% in DRAMs, roughly 35% in SRAMs, and the balance coming from graphics and flash for the next couple quarters. They think they will see sequential unit growth in the March quarter also, somewhere around 20-25%.

AVERAGE SELLING PRICES. For the first time they have seen percentage growth in average selling prices (ASPs) overall in the quarter. Compared to the September quarter, ASPs increased by approximately 10%. Pricing on the SRAM side was relatively stable for old products. For new products, the ASPs are fairly good at this time. For DRAMs, they saw fairly good pricing stability during October and November but the price erosion was roughly 15-20% in December. That was one of the reasons they saw some gross margin erosion.

STRATEGY GOING FORWARD. Going forward, they don't want to go after additional market share on the DRAM side. They will look at the ASPs and will blend the mix to be profitable. They feel that is critical and that they aren't going to change the DRAM market at this point. They think if they maintain the levels of the December quarter this quarter, they will be profitable. For the quarter, they think ASPs for the blend should increase at least 10%.

EXPANDING CUSTOMER BASE. The top 5 customers accounted for 34% of total revenue and the total number of customers (OEMs) at the end of the quarter was 106 and they had roughly 20 major distributors (that includes regional as well as national distributors). They have an account base of roughly 400-500 customers.

MANUFACTURING. Capacity is a non-issue, there is excess capacity available right now. Alliance's goal was to introduce their products on a leading edge technology. In the quarter they think they achieved phenomenally good results in ramping up their products in the 8-inch fab, particularly the United Semiconductor Corporation fab. They have gone through the transition and it is fine. They are running DRAMs, SRAMs, as well as graphics products in that fab.

The joint venture became profitable in the December quarter also. Alliance feels they are on the right track as far as the investment in the fab is concerned and are utilizing the capacity to its full extent. They have additional capacity available in the foundries. At the same time, in the quarter they successfully ramped up the 4-meg asynchronous SRAM, 256K x 16 DRAM for specialty applications, and a graphic accelerator product into production.

PRODUCT REVENUES GOING FORWARD. In the graphics market, in the September quarter only 2% of revenues came from graphics and in the most recent quarter it was almost 20%. They are expecting further increases in the percentage of revenue coming from the graphics product line. These are the products that contributed significantly to the revenues of the December quarter. The 256K x 16, particularly, will contribute fairly good revenues for the March quarter. In the quarter again, they have achieved cost reductions -- not only on the front end, but also fairly significant reductions in their assembly costs as well as test costs. They think the March quarter results will be in line with the market ASPs and they are hoping to be profitable based on these achievements in the December quarter.

DRAM. In the quarter they successfully implemented 16-meg DRAM, and are in the process of releasing the synchronous 0.25 micron based technology product into development. The DRAM area will be in line with the rest of the DRAM players in the world. By the middle of next year, they expect well over 50% of revenues will come from 16-meg. They will maintain some 4-meg, both in x4 and x16 configurations.

SRAM. On the SRAM side, both 1-meg and 4-meg SRAMs are on the leading edge at this point. What Alliance has done during 1996 is introduce quite a few products in 1-meg and 4-meg densities to address non-PC markets such as the networking and telecom markets, in particular. So far, they have seen phenomenal reception for those products and they are expecting fairly good expansion in SRAM revenue coming from new products.

GRAPHICS PRODUCTS. Alliance has successfully introduced a graphics accelerator product at Comdex. The product was received very well and they have some minor backlog on it.

PRODUCT DEVELOPMENT AND FOCUS GOING FORWARD. They are designing some other leading-edge products in SRAM, DRAM, and graphics based on 0.25 micron technology. Looking forward into the March quarter, their focus is going to be on the new products, higher performance products, and higher ASP/margin products in all 3 product lines. At the same time their goal is to maintain a fairly good mix of revenues from these 3 product lines for the quarter. Overall, they feel they achieved phenomenal results in developing new products. They think their customer base significantly broadened in the quarter and their presence in graphics, SRAMs, and DRAMs was good worldwide during 1996. In 1997, they want to introduce high performance products in each of the three product lines.

FLASH PRODUCT LINE. They will be introducing their flash product line also during 1997. There was a lawsuit filed by AMD regarding the flash products, alleging that Alliance is infringing on AMD patents. As far as Alliance is concerned, they are going to vigorously defend their case. In the third quarter, flash represented less than 1% of their revenues and they don't expect the legal action to have any material affect on the financial condition of the company or the ability to ship product in 1997.

* A Fool conference call synopsis represents an effort to highlight the salient points of a conference call and should not be taken as an authoritative accounting or transcription of the entire event. Note: Statements made by a company other than historical information may constitute forward-looking statements for which the company can claim protection under the Safe Harbor Act. Please consult the company's filings with the SEC for information on risk factors which might cause actual results to differ materially from the information contained in these forward-looking statements.