Affymetrix Reports 2008 Results

Revenue for the fourth quarter was $78.6 million, as compared to total revenue of $107.6 million in the fourth quarter of 2007.

For the fourth quarter of 2008, product revenue was $66.6 million, which consisted of consumable (array and reagent) revenue of $61.5 million and instrument revenue of $5.1 million. Service revenue was $8.5 million, and royalties and other revenue were $3.5 million. This compares to fourth quarter 2007 product revenue of $89.2 million, service revenue of $6.5 million, and royalties and other revenue of $11.9 million.

For the full year 2008, product revenue was $270.4 million, which consists of consumable revenue of $248.9 million and instrument revenue of $21.5 million. Service revenue was $32.1 million, and royalties and other revenue were $107.7 million, including an intellectual property payment of $90 million. This compares to full-year 2007 product revenue of $291.8 million, service revenue of $38.1 million, and royalties and other revenue of $41.4 million.

Affymetrix shipped 23 GeneChip systems in the fourth quarter of 2008, bringing its cumulative systems shipped to 1,813.

The company reported a net loss of about $318.7 million, or $4.65 per diluted share, in the fourth quarter of 2008 which included a pretax goodwill impairment charge of $239.1 million, or $3.49 per diluted share, and a pretax restructuring charge of $14.3 million, or $0.21 per diluted share. This compares to net income of $12.8 million, or $0.17 per diluted share, in the same period of 2007 which included a pretax restructuring charge of $2.4 million, or $0.03 per diluted share. Fiscal year 2008 net loss was $307.9 million, or $4.49 per diluted share, which included a pretax goodwill impairment charge of $239.1 million, or $3.49 per diluted share, and a pretax restructuring charge of $43.7 million, or $0.64 per diluted share; as compared to net income of $12.6 million, or $0.17 per diluted share, for fiscal year 2007 which included a pretax restructuring charge of $15.3 million, or $0.18 per diluted share.

For the fourth quarter of 2008, cost of product sales was $36.3 million compared to $32.8 million in the same period of 2007. Cost of services was $7.0 million compared to $5.1 million in the same period of 2007. Product gross margin was 45.5 percent, including the impact of impairment charges of $4.1 million and acquisition related charges of $0.7 million, as compared to 63.3 percent in the same period of 2007.

For the full year 2008, cost of product sales was $126.9 million as compared to $108.9 million in 2007. Cost of services was $25.1 million compared to $29.6 million in 2007. Product gross margin was 53.1 percent as compared to 62.7 percent in 2007.

For the fourth quarter of 2008, operating expenses were $313.5 million which included $239.1 million and $3.6 million of goodwill and other asset impairment charges, respectively, and restructuring charges of $14.3 million, as compared to operating expenses of $55.7 million in the same period of 2007 which included restructuring charges of $2.4 million.

For the full year 2008, operating expenses were $500.6 million which included goodwill impairment charges of $239.1 million and restructuring charges of $43.7 million, as compared to operating expenses of $226.5 million in 2007 which included restructuring charges of $15.3 million.

John Batty, chief financial officer of Affymetrix, stated: “During the fourth quarter, we took action to position Affymetrix for stronger performance going forward, which resulted in consolidation and restructuring charges. At the same time, the continued decline in our market capitalization and other changes in the business climate necessitated a $239.1 million goodwill impairment charge.”

Kevin King, chief executive officer of Affymetrix, said: “In 2008, we made steady progress on our corporate goals, including reengineering our technology platform, expanding into new markets, and creating greater operating leverage. We also completed three acquisitions that support all of these objectives, positioning Affymetrix to serve a broader range of our customers’ needs, especially in the growing markets downstream of our whole genome arrays.”