GigaMedia: Fourth Consecutive Quarter of Profit

GigaMedia: Fourth Consecutive Quarter of Profit

Q1 Net Profit of $1.0 Million

Highlights of 1Q05 Results
-- Consolidated revenues of US$25.6 million
-- Consolidated EBITDA* of US$2.5 million
-- Consolidated net income of US$1.0 million
-- Cash, cash equivalents and marketable securities-current of US$46.5
million

* EBITDA (earnings before interest, taxes, depreciation, amortization and
minority interests) is provided as a supplement to results provided in
accordance with U.S. generally accepted accounting principles
("GAAP"). See "Use of Non-GAAP Measures" for more details.

TAIPEI, Taiwan, July 20 /Xinhua-PRNewswire-FirstCall/ -- GigaMedia Limited ("GigaMedia" or the "Company") (NASDAQ:GIGM) announced today its fourth consecutive quarter of profitability, with first-quarter 2005 consolidated net income of $1.0 million, representing an improvement of $1.8 million from a consolidated net loss of $775 thousand in the same period of 2004.

All business units were profitable during the first quarter of 2005, with the Company's entertainment software business driving performance during the period.

"First quarter was a solid start to what is going to be an exciting year for the new GigaMedia," stated Chief Executive Officer Arthur Wang. "We are laying the foundation for strong growth in our online entertainment business, building-out our product offerings and improving our platform."

"The online entertainment sector is rich with opportunity, especially in the European Community where we are traditionally strong, as well as in Asia, our geographic home base," explained CEO Wang. "At the same time, we continue to implement our internal restructuring which resulted in profitability in each of our business units in the first quarter."

Consolidated Financial Results

Consolidated financial results for the first quarter of 2005 benefited from GigaMedia's acquisition in April 2004 of entertainment software developer Cambridge Entertainment Software ("CES", formerly called Grand Virtual). As a result of this acquisition, consolidated financial results for the first quarter of 2005 and 2004 may not be comparable.

GIGAMEDIA 1Q05 CONSOLIDATED FINANCIAL RESULTS

(unaudited
quarterly
figures, in US$ 1Q05 1Q04 Change 1Q05 4Q04 Change
thousands) (%) (%)

Revenues 25,576 27,255 -6 25,576 26,605 -4
Operating Income
(Loss) 310 (1,140) NA 310 3,166 -90
Net Income
(Loss) 1,022 (775) NA 1,022 1,209 -15
EBITDA(A) 2,545 630 304 2,545 2,899 -12
Cash, Cash
Equivalents and
Marketable
Securities-
Current 46,510 41,049 13 46,510 47,517 -2

(A)EBITDA (earnings before interest, taxes, depreciation, amortization and
minority interests) is provided as a supplement to results provided in
accordance with GAAP. (See, "Use of Non-GAAP Measures," for more
details.)

Consolidated revenues for the first quarter of 2005 were $25.6 million, a 6 percent decrease from consolidated revenues of $27.3 million for the corresponding period in 2004 and a 4 percent decrease compared to consolidated revenues of $26.6 million for the preceding quarter. The year-over-year decrease in consolidated revenues was largely due to declining contributions from GigaMedia's music distribution business, which more than offset strong contributions from the Company's entertainment software business and improved performance in the broadband ISP business. The sequential decrease in consolidated revenues was primarily due to FIN 46(R) adjustments made in the fourth quarter of 2004 with respect to UIM revenues (see, "Entertainment Software Business" and "About the Numbers in This Release").

Consolidated net income for the first quarter of 2005 was $1.0 million, a turnaround of $1.8 million from a consolidated net loss of $775 thousand for the same period in 2004 and a decrease of $187 thousand, or 15 percent, from consolidated net income of $1.2 million for the preceding quarter. Driving the year-over-year increase in consolidated net income were contributions from the Company's entertainment software business and inventory management and cost and expense control initiatives in GigaMedia's music distribution business. The sequential decline in consolidated net income was primarily due to certain items recorded during the fourth quarter of 2004, including a reversal of inventory provisioning costs in GigaMedia's music distribution business, and a reduction in amortization expenses as a result of the reclassification of certain intangible assets to goodwill related to GigaMedia's entertainment software business.

Consolidated EBITDA for the first quarter of 2005 was $2.5 million, an increase of $1.9 million compared to consolidated EBITDA of $630 thousand for the same period in 2004 and a decrease of 12 percent compared to the previous quarter.

Cash, cash equivalents and marketable securities-current at the end of the first quarter of 2005 totaled $46.5 million.

BUSINESS UNIT RESULTS
Entertainment Software Business

(unaudited, in 1Q05 1Q04 Change 1Q05 4Q04 Change
US$ thousands) (%) (%)

Revenues(A) 4,299 NA NA 4,299 6,838 -37
Operating Income
(Loss)(A) 893 NA NA 893 1,839 -51
Net Income (Loss)
Before Minority
Interests (A) 873 NA NA 873 2,061 -58
Net Income (Loss) 1,170 NA NA 1,170 1,897 -38

(A)Includes contributions from UIM as a result of the adoption of FIN
46(R). (See, "About the Numbers in This Release.")

The Company's entertainment software business unit delivered outstanding profitability as it continued to perform in healthy, growing markets. During the first quarter, the Company continued to invest in casino-based software and new poker software to achieve improved long-term performance and leadership in non-English-speaking markets. The entertainment software business launched four new casino-based games and over 50 game iterations thereof and added Hebrew language casino software product offerings during the period. For GigaMedia's poker product, the Company completed the development of multi-table tournament poker software, with formal product rollout achieved in April. This key multi-table feature has allowed licensees of the poker platform to promote seats to major land-based poker tournaments, including the recent European Poker Tour in Monaco and The World Series of Poker in Las Vegas. The Company also integrated several new payment methods into the single-table software platform. While buildup and expansion of the poker products is at an early stage, initial results indicate strong returns on this investment and growing momentum.

Quarter-over-quarter declines in revenues and operating income of the entertainment software business were due to the impact of FIN 46(R), under which GigaMedia consolidates the results of UIM. (See, "About the Numbers in This Release.") During the fourth quarter of 2004 the Company adopted FIN 46(R) and, accordingly, adjusted the year-end financial results of the Company's entertainment software business by incorporating the second and third quarter results of UIM in the year-end financial results of the Company's entertainment software business. Fourth quarter revenues for the entertainment software business excluding such adjustments were approximately $4.0 million; such revenues grew by 6 percent to $4.3 million in the first quarter of 2005.

Based on GigaMedia's revenue-sharing agreement with UIM, GigaMedia recognized software licensing and support services revenues of $2.8 million during the first quarter of 2005. This represented an increase of 8 percent from revenues of $2.6 million recorded during the fourth quarter of 2004, primarily due to revenue growth in the casino-based software vertical. Such revenues have been eliminated in consolidation.

Net income for the first quarter of 2005 for the entertainment software business was $1.2 million, a 38 percent decrease compared to $1.9 million recorded during the fourth quarter of 2004. The sequential variance in net income was largely attributable to a reduction of amortization expenses recorded during the fourth quarter of 2004 as a result of the reclassification of certain intangible assets to goodwill.

Broadband ISP Business

(unaudited, in 1Q05 1Q04 Change 1Q05 4Q04 Change
US$ thousands) (%) (%)

Revenues(A) 5,751 5,525 4 5,751 5,251 10
Operating Income
(Loss)(A) 342 (63) NA 342 285 20
Net Income
(Loss)(A) 558 202 176 558 (630) NA

(A)In quarterly and annual releases before the third quarter of 2004,
GigaMedia included corporate headquarters expenses and certain other
items in the broadband ISP business unit results. In the table above,
all such amounts have been excluded for the current and past periods.
All numbers are presented on a consistent basis.

In the first quarter, the Company's broadband ISP business returned to profitability and continued to make progress in growing GigaMedia's corporate broadband ISP business while retaining subscribers and tightly controlling costs in the consumer broadband ISP business. During the period, the Company's consumer broadband ISP business focused on subscriber retention and upgrade programs which feature flexible payment options and incentives for ADSL subscribers to migrate to higher specification broadband products. The number of subscribers in the Company's consumer broadband ISP business during the first quarter decreased slightly compared to the fourth quarter of 2004 to approximately 94,000, with blended average revenue per subscriber up slightly compared to the fourth quarter of 2004 at approximately $12.70 per month.

Consistent with management's efforts to control costs in the consumer broadband ISP business, on June 23, 2005, GigaMedia entered into an agreement with a third party to assign the Internet content portion of the Company's consumer broadband ISP business at a consideration of approximately US$670 thousand. In addition, under the terms of the agreement, for a period of ten years commencing from January 1, 2006, GigaMedia will be entitled to share a portion of the net revenue generated from the gigigaga.com.tw Web site being transferred.

The Company's corporate broadband ISP business continued to target growing bandwidth demand, leading to improved performance from the business unit during the first quarter. Revenues in the corporate broadband ISP business for the first quarter of 2005 were $1.6 million, representing 28 percent of total revenues in the Company's broadband ISP business and a 28 percent increase compared to revenues recorded in the corporate broadband ISP business during the previous quarter.

Net income was $558 thousand in the first quarter of 2005, versus a net loss of $630 thousand for the fourth quarter of 2004. The sequential increase in net income was driven by performance of the corporate broadband ISP business during the first quarter. The quarter-over-quarter variation in net income was also attributable to certain items recorded during the fourth quarter, including non-operating losses from an impairment of marketable securities.

Music Distribution Business

(unaudited, in 1Q05 1Q04 Change 1Q05 4Q04 Change
US$ thousands) (%) (%)

Revenues 15,547 21,749 -29 15,547 14,537 7
Operating Income
(Loss) (147) (324) -54 (147) 1,265 NA
Net Income
(Loss)
Before Minority
Interests (A) 49 (374) NA 49 1,339 -96
Net Income
(Loss) 29 (219) NA 29 784 -96

(A) Minority shareholders own a 41.42 percent interest in G-music.

The music distribution business continued to aggressively manage for profitability in the first quarter. The Company closed two underperforming stores during the period and began taking steps to lower fixed costs by converting several additional stores to a combined space format under which stores share space at select locations with popular entertainment and service businesses targeting similar clientele.

Revenues recorded during the first quarter of 2005 benefited from appreciation of the New Taiwan dollar versus the U.S. dollar and increased sales during the Chinese New Year period. However, overall market sales continue to decline. Net income during the same period of 2005 was $29 thousand, a decrease of 96 percent compared to net income of $784 thousand in the previous quarter and a turnaround of $248 thousand from a loss of $219 thousand in the same period of 2004. The quarter-over-quarter variation in net income was primarily due to certain items recorded during the fourth quarter, including a reversal of inventory provisioning costs.

Business Outlook

The following forward-looking statements reflect GigaMedia's expectations as of July 20, 2005. Given potential changes in economic conditions and consumer spending, fluctuations in Taiwan's recorded music market, the evolving nature of broadband and online entertainment software, and various other risk factors, including those discussed in the Company's 2004 Annual Report or 20-F filing with the U.S. Securities and Exchange Commission referenced below, actual results may differ materially.

Management expects the online entertainment market to remain strong in 2005, with attractive global growth opportunities in both online casino games and online poker software presenting excellent opportunities for the Company's entertainment software business. We expect growth from the Company's entertainment software business will offset the challenges we face; namely, strong competition in the broadband ISP market and a secular downtrend in the music distribution market. Based on improvements gained to date from internal restructuring and our long-term growth plans, we are highly confident in our ability to deliver continued improvement in the Company's 2005 financials and increasing shareholder value.

Use of Non-GAAP Measures

Management believes that EBITDA (earnings before interest, taxes, depreciation, amortization and minority interests) is a useful supplemental measure of performance because it excludes certain non-cash items such as depreciation and amortization. EBITDA is not a recognized earnings measure under GAAP and does not have a standardized meaning. Non-GAAP measures such as EBITDA should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for, or superior to, other financial measures prepared in accordance with GAAP. A reconciliation to the GAAP equivalent of the non-GAAP measure is provided on the attached unaudited financial statements.

About the Numbers in This Release

All figures referred to in the text, tables and attachments to this release are unaudited. The financial statements from which the financial results reported in this press release are derived have been prepared in accordance with U.S. GAAP, and are presented in U.S. dollars.

GigaMedia's segmental financial results are based on the Company's method of internal reporting and are not necessarily in conformity with accounting principles generally accepted in the U.S. Consolidated financial results of the Company for the first quarter of 2005 may differ from totals of the Company's segmental financial results for the same period due to (1) certain inter-company eliminations and (2) the impact of the Company's corporate headquarters and certain non-operating subsidiaries of GigaMedia on the Company's consolidated financial results. In quarterly and annual releases before the third quarter of 2004, GigaMedia included corporate headquarters expenses and certain other items in the broadband ISP business unit results. All such amounts have been excluded in this press release for the current and past periods. All numbers pertaining to the broadband ISP business are presented on a consistent basis.

During the fourth quarter of 2004, the Company adopted Financial Accounting Standards Board ("FASB") Interpretation No. 46, Consolidation of Variable Interest Entities -- an Interpretation of Accounting Research Bulletin No. 51 ("FIN 46"), as revised by the subsequent amendment, FIN 46(R). The provisions of FIN 46(R) require consolidation by the primary beneficiary of variable interest entities, as that term is defined in FIN 46(R). The Company has conducted a review of existing contracts for our variable interest parties and determined that it was a primary beneficiary of Ultra Internet Media ("UIM"), a licensee of GigaMedia's entertainment software developer CES. Accordingly, the Company has incorporated the results of UIM into the Company's consolidated financial statements, resulting in certain adjustments to GigaMedia's consolidated financial results and the financial results of the Company's entertainment software business recorded during the second and third quarters of 2004. All such adjustments were recorded during the fourth quarter of 2004 as part of the Company's year-end adjustments. As a result, financial results for the first quarter of 2005 and previous periods may not be comparable. All results referred to in this press release, unless otherwise indicated, reflect the Company's adoption of FIN 46(R).

Conference Call and Webcast

GigaMedia will hold a conference call at 8:30 p.m. Taipei/Hong Kong Time on July 20, 2005, which is 8:30 a.m. Eastern Daylight Time on June 20, 2005 in the U.S., to discuss the Company's fourth-quarter and full-year performance. Individual investors can listen to a webcast of the call at http://ir.giga.net.tw/ , through CCBN's individual investor center at www.fulldisclosure.com , or by visiting any of the investor sites in CCBN's Individual Investor Network. Institutional investors can access the call via CCBN's password-protected event management site, StreetEvents ( www.streetevents.com ). The webcast will be available for replay.

About GigaMedia

GigaMedia Limited (Singapore registration number: 199905474H) is a diversified provider of broadband and entertainment services, with headquarters in Taipei, Taiwan. The Company operates Taiwan's two largest music store chains, Rose Records and Tachung Records, through its subsidiary G-Music. The Company also operates a major Taiwanese broadband ISP, providing Internet access service and broadband content with multiple delivery technologies via its Web destination http://www.gigigaga.com/ . GigaMedia's subsidiary KBT provides broadband services to corporate subscribers in Taiwan. The Company also develops software for online entertainment services, including the global online gaming market. More information on GigaMedia can be obtained from http://ir.giga.net.tw/ .

The statements included above and elsewhere in this press release that are not historical in nature are "forward-looking statements" within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. GigaMedia cautions readers that forward-looking statements are based on the Company's current expectations and involve a number of risks and uncertainties. Actual results may differ materially from those contained in such forward-looking statements. Information as to certain factors that could cause actual results to vary can be found in GigaMedia's Annual Report on Form 20-F filed with the United States Securities and Exchange Commission in June 2005.

GIGAMEDIA LIMITED
CONSOLIDATED STATEMENT OF OPERATIONS

Three months ended
3/31/2005 12/31/2004 3/31/2004
unaudited unaudited unaudited
USD USD USD
Operating revenues

Access revenues 5,613,319 5,139,619 5,361,538
Sales/rental 15,039,497 14,259,213 21,325,007
Software licensing & online
entertainment revenues 4,299,116 6,817,436 0
Promotional and advertising revenues 385,243 304,811 482,932
Subscription revenues 53,458 55,524 66,807
Other revenues 185,700 28,060 18,253
Total operating revenues 25,576,333 26,604,663 27,254,537

Costs and expenses
Operating costs 4,636,859 4,319,699 3,463,852
Cost of sales/rental/installation 12,089,838 9,706,945 18,336,300
Product development & engineering
expenses 906,347 1,666,529 303,702
Selling and marketing expenses 5,021,897 6,912,153 3,813,142
General and administrative expenses 2,618,701 586,630 2,477,919
Bad debt expenses (7,720) 246,818 0
Total costs and expenses 25,265,922 23,438,774 28,394,915

Income (Loss) from operations 310,411 3,165,889 (1,140,378)

Non-operating income (expense)
Interest income 22,945 67,844 57,049
Foreign exchange gain (loss) - net (140,060) (389,478) (621,210)
Gain (loss) on sales of marketable
securities 385,803 512,919 708,760
Gain (loss) on disposal of property,
plant & eqpmt. 0 (59,599) (575)
Interest expense (2,340) (5,000) (72)
Other-than-temporary impairment on
marketable securities 0 (1,832,808) 0
Other non-operating income (expense) 201,914 333,248 63,602
Non-operating income (expense) 468,262 (1,372,874) 207,554

Income tax expense 33,405 (137,460) 0
Minority interest income (loss) (276,971) 721,261 (157,717)
Net income (loss) 1,022,239 1,209,214 (775,107)
Net income (loss) per common share 0.02 0.02 (0.02)
Average shares outstanding 50,215,107 50,154,000 50,154,000

Reconciliation of Net Income to EBITDA
Net income (loss) 1,022,239 1,209,214 (775,107)
Minority interest income (loss) (276,971) 721,261 (157,717)
Depreciation 1,185,120 1,180,140 1,093,156
Amortization 601,809 (11,325) 526,939
Interest (income) expense (20,605) (62,844) (56,977)
Tax 33,405 (137,460) 0
EBITDA 2,544,997 2,898,986 630,294

GIGAMEDIA LIMITED
CONSOLIDATED BALANCE SHEET

3/31/2005 12/31/2004 3/31/2004
unaudited audited unaudited
USD USD USD
Assets
Current assets
Cash and cash equivalents 8,542,246 13,232,637 12,422,287
Marketable securities - current 37,968,174 34,284,178 28,626,613
Notes and accounts receivable - net 6,146,353 5,838,483 5,421,321
Receivables from related parties 0 128,452 172,506
Inventories - net 10,880,450 10,488,252 6,163,754
Prepaid expenses 861,098 678,500 1,272,477
Restricted cash 1,507,601 1,506,467 1,348,788
Other current assets 2,391,713 1,569,195 1,670,495
Total current assets 68,297,635 67,726,163 57,098,241

Marketable securities - noncurrent 2,262,411 2,892,574 37,180,454
Property, plant & equipment - net 14,367,783 15,055,518 15,210,659
Goodwill 29,607,283 29,607,283 0
Intangible assets - net 8,168,596 8,372,144 6,138,570
Other assets 2,456,637 2,323,616 4,771,214
Total assets 125,160,345 125,977,299 120,399,138

Liabilities & shareholders' equity
Short-term loans 0 283,822 0
Notes and accounts payable 13,699,163 14,001,522 16,082,738
Payables to related parties 0 51,133 0
Accrued compensation 696,476 1,654,939 1,081,550
Accrued expenses 3,907,666 3,346,440 3,704,766
Other current liabilities 4,317,327 3,902,073 3,178,802
Total current liabilities 22,620,632 23,239,929 24,047,856
Other liabilities 2,597,645 2,499,869 1,979,445
Total liabilities 25,218,277 25,739,798 26,027,301

Minority interests 4,009,772 4,266,837 3,221,304

Shareholders' equity 95,932,296 95,970,664 91,150,533

Total liabilities & shareholders'
equity 125,160,346 125,977,300 120,399,138

For further information contact:

Brad Miller
Investor Relations Director
Tel: +886-2-3518-1107
Email: brad.miller@gigamedia.com.tw

Source: GigaMedia Limited

CONTACT: Brad Miller, Investor Relations Director of GigaMedia Limited,
+886-2-3518-1107, or brad.miller@gigamedia.com.tw

Web Site: http://www.streetevents.com/
http://www.fulldisclosure.com/
http://ir.giga.net.tw/

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