Edgar Filing: CYPRESS SEMICONDUCTOR CORP /DE/

Presentation To
Stockholders Regarding
2004 Proxy

SLIDE FRONT

	MARCH 22, 2004 MANNY HERNANDEZ

AGENDA

PROPOSED 1994 STOCK OPTION PLAN
(AS AMENDED)

BRIEF MARKET AND BUSINESS UPDATE

** Non-historical information are ‘Forward Looking Statements’ **

FOOTER

AGENDA

PROPOSED 1994 STOCK OPTION PLAN
(AS AMENDED)

BRIEF MARKET AND BUSINESS UPDATE

** Non-historical information are ‘Forward Looking Statements’ **

FOOTER

2004 Stockholders’ Meeting

RESOLUTIONS FOR THE MEETING

	•	ELECTION OF DIRECTORS (S. ALBRECHT, E. BENHAMOU, F. BIALEK, J. LEWIS, J. LONG, TJ RODGERS, A. SHUGART)

	•	1994 STOCK OPTION PLAN (AS AMENDED)

	•	RATIFICATION OF PRICEWATERHOUSECOOPERS AS INDEPENDENT AUDITORS FOR 2004.

FOOTER

1994 Stock Option Plan

BACKGROUND

1994 STOCK OPTION PLAN
	•	CREATED APRIL 1994, EXPIRING APR 22, 2004
	•	STOCKHOLDER-APPROVED
	•	GRANT OPTIONS TO EMPLOYEES, OFFICERS AND DIRECTORS
	•	4.5% EVERGREEN FEATURE
	•	APPROX. 5 MILLION SHARES AS OF MARCH 04

1999 STOCK OPTION PLAN
	•	CREATED IN 1999 PRIMARILY FOR ACQUISITIONS
	•	NON-STOCKHOLDER-APPROVED
	•	FOR NON-OFFICERS & NON-DIRECTORS ONLY
	•	CYPRESS ACQUIRED 14 COMPANIES IN 99-02
	•	APPROX. 23 MILLION SHARES AS OF MARCH 04

FOOTER

1994 Stock Option Plan

PROPOSAL - SUMMARY

	1994 STOCK OPTION PLAN – AS AMENDED
	•	EXTEND PLAN TO 2014
	•	GIVE UP 4.5% EVERGREEN FEATURE
	•	INCREASE 1994 PLAN BY 15 MILLION SHARES
	•	CANCEL 20 MILLION SHARES FROM THE 1999 STOCK PLAN
	•	NO RE-PRICING OR EXCHANGE PROGRAMS WITHOUT STOCKHOLDER APPROVAL
	•	ALL FUTURE FUNDING OF THE AMENDED PLAN SUBJECT TO STOCKHOLDER APPROVAL
	•	ALLOW FOR GRANT OF PERFORMANCE-BASED RESTRICTED STOCK

FOOTER

Burn Rate

Year-end Burn Rate History

BURN RATE IS IMPROVING WITH
<4% TARGET IN THE NEXT 3-5 YRS

	2001			2002			2003			Three-Year Average

Gross Burn Rate		17.4	%		7.9	%		8.8	%		11.4	%
Net Burn Rate		12.3	%		5.7	%		4.0	%		7.3	%

FOOTER

Overhang Percent

B+C

(B+C)/A

B/A

(B+C)/(A+B+
C)

Shares in Millions

Common
Shares
Outstanding

Options
Outstanding

Options
Available for
Grant

Options
Available Plus
Outstanding

Fully Diluted
Overhang

Issued
Overhang

ISS
Calculation

As of Dec 28, 2003

120.5

43.74

23.03

66.77

55.4

36.3

35.7

As of Mar 1, 2004

123.0

44.13

27.76

71.89

58.4

35.9

36.9

Adj for Convertible
& BuyBack

214.4

44.13

27.76

71.89

42.5

26.1

29.8

Adj for
acquisitions

214.4

40.23

27.76

67.99

31.7

18.8

24.1

ISSUED OVERHANG TARGET <20% IN NEXT 2-3 YEARS

FOOTER

CY 1-Yr Share Price Trend
Dec 2002 - 2003

CYPRESS HAS OUTPERFORMED
BROAD MARKET INDEX LAST YEAR
CHART

FOOTER

CY 5-Yr Share Price Trend
Dec 1998 - 2003

CYPRESS HAS OUTPERFORMED
BROAD MARKET INDEX FOR 5 YEARS
CHART

FOOTER

Benefits of 94 Plan Approval

THE 1994 AMENDED PLAN’S APPROVAL...

•	IS FUNDAMENTAL TO OUR COMPENSATION POLICY
•	IS CRUCIAL TO OUR ABILITY TO MOTIVATE EMPLOYEES
•	IS ESSENTIAL TO COMPETITIVE RECRUITING OF KEY TALENT AND RETENTION OF SKILLED WORKFORCE
•	ENCOURAGES AND REWARDS EMPLOYEE PERFORMANCE
•	HELPS ALIGN EMPLOYEE INTEREST WITH THOSE OF OUR STOCKHOLDERS
•	PROVIDES CONTINUITY OF OUR STOCK PROGRAMS INCLUDING GRANTS TO OFFICERS & DIRECTORS

FOOTER

AGENDA

PROPOSED 1994 STOCK OPTION PLAN
(AS AMENDED)

BRIEF MARKET AND BUSINESS UPDATE

** Non-historical information are ‘Forward Looking Statements’ **

FOOTER

Market View

CHART

LEADING INDICATORS ARE UP

CHART

INDUSTRY UTILIZATION AT 90+%

CHART

CUSTOMER INVENTORY STABLE

•	SEMICONDUCTOR INDUSTRY IS IN RECOVERY PHASE
•	INITIALLY DRIVEN BY PC AND CONSUMER
•	WIRELINE STARTING TO GROW
•	SIA FCST FY04 +25%

FOOTER

Pro Forma Financials

Q103

Q203

Q303

Q403

FY03

+3.7

+12.2

+6.6

+9.0

+8.0

SALES

181.0

203.1

216.6

236.0

836.8

BOOKINGS

189.1

212.1

229.3

264.6

GM%

43.5

47.6

48.6

51.2

48.0

+10.1%
vs Q402

R&D%

32.3

29.7

28.2

24.9

28.5

-10.1%
vs Q402

SG&A%

17.1

15.5

15.2

14.5

15.5

-3.7%
vs Q402

P_EPS

(0.099

)

0.026

0.080

0.159

0.188

vs -$0.12
in Q402

	Q103			Q203			Q303			Q403

EQUIV GAAP EPS:	-$	0.27		-$	0.10		$	0.12		$	0.15
GM:		43	%		48	%		48	%		57	%
R&D:		32	%		30	%		29	%		25	%
SGA:		17	%		16	%		15	%		14	%

Pro Forma Financials

Q103

Q203

Q303

Q403

Q104

Q1Rev

+3% Q-Q

+5.9% Q-Q

SALES

181.0

203.1

216.6

236.0

243.0

250.0

BOOKINGS

189.1

212.1

229.3

264.6

GM%

43.5

47.6

48.6

51.2

R&D%

32.3

29.7

28.2

24.9

SG&A%

17.1

15.5

15.2

14.5

P_EPS

(0.099

)

0.026

0.080

0.159

0.170

0.180

	Q103			Q203			Q303			Q403			Q104		Q1REV

EQUIV GAAP EPS:	-$	0.27		-$	0.10		$	0.12		$	0.15		$	0.10	$	0.10
GM:		43	%		48	%		48	%		57	%
R&D:		32	%		30	%		29	%		25	%
SGA:		17	%		16	%		15	%		14	%

Balance Sheet & Liquidity

Cypress Semiconductor Corporation

Condensed Consolidated Balance Sheet

(in thousands)	Dec. 28, 2003

Cash, cash equivalents and investments	$	379,867	SOFT CALL ON $600M CONVERT. 20 OUT OF 30 DAYS CY ABOVE $21.75. AIMING FOR FY04.
Accounts Receivable, net		113,568
Inventories		72,085
Property and equipment, net		442,887
Goodwill and other intangibles assets		375,483
Other assets		183,608
Total Assets	$	1,567,498	CALL-SPREAD MATURES JUL04. UP TO 12.4M SHARES RETIRED. (CURRENT VALUE $180M)

Accounts payable and accrued liabilities	$	155,693
Deferred income on sales to distributors		20,104
Convertible subordinated notes		668,652
Income tax liabilities		101,254
Other liabilities		52,607
Total Liabilities		998,310
Stockholders’ equity		569,188
Total Liabilities and stockholders’ equity	$	1,567,498

CYPRESS FOCUS

*DIVISIONS*

DATA COMM.	PERSONAL COMM.	MEMORY PRODUCTS	TIMING TECH.	*SEGMENTS*

PHYS FRAMER SEARCH ENG DP/FIFO CPLD	USB WIRELESS NEURON	SRAMS SYNC ASYNC MoBL PROM	COM CLOCK PC CLOCK ZDB CLOCK SKEW	WAN SEGMENT WIT/WIN SEGMENT COMP/CE SEGMENT SUBS SEGMENT

PRODUCTS VERTICALLY ALIGNED WITH DIVISIONS

COMPETENCIES HORIZONTALLY ALIGNED WITH MARKETS

SEGMENT GROWTH DRIVERS

WIRELESS	WIRELINE	COMPUTATION CONSUMER	SUBS

Q403: $68.3M Rev mix: 29% Q104: Up Modest	Q403: $81.6 Rev mix: 35% Q104: Growth	Q403: $76.6M Rev mix: 32% Q104: Seasonal Flat	Q403: $9.6M Rev mix: 4% Q104: UP

HANDSETS CAMERA PHONE HIGHER DENSITY 1T PSRAM LPSDRAM 2.5/3G BSTATIONS	INFRASTRUCTURE NSE DESIGNS SHARE GAINS: - TCAMS/NSEs - MULTI-PORT	PC REPLACEMENT USB 2.0 ADOPTION WIRELESS USB CONSUMER PRDS - DSC, GAMING STB, JDIMMs	PSoC DESIGNS MAGNETIC RAMS SOLAR CELLS

MARKET POSITION

PRODUCT	POSITION	COMPETITOR	STRATEGY


SRAMS	2	SAMSUNG	1T / MRAM

USB	1	PHILIPS	ARCHITECTURE

CLOCKS	2	ICST	PROGRAMMABLE

MULTI PORTS	2	IDT	DENSITY / TTM

CAMS	2	IDT	PORTFOLIO

CONCLUSION

OUTLOOK IS GOOD FOR 2004.

WE WILL GROW AND IMPROVE PROFITS IN Q104.

POTENTIAL FOR PROFIT LEVERAGE WITH TIGHT SUPPLY AND ASP IMPROVEMENT.

CYPRESS’S MARKET SEGMENTS ARE GROWING.

#1 OR #2 POSITION IMPROVING WITH SHARE GAIN.

OPPORTUNITY TO FURTHER STRENGTHEN OUR BALANCE SHEET WITH SOFTCALL & CALL SPREAD.

WE REQUEST YOUR FAVORABLE SUPPORT
OF OUR 1994 STOCK OPTION PLAN PROPOSAL

THANK YOU

Q&A

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