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IDT Reports Earnings for the Third Quarter of Fiscal Year 2005

Company reports $0.06 Non GAAP EPS, $0.03 GAAP EPS on Revenue of $95.7 Million; Announces Restructuring Activity

SANTA CLARA, Calif., January 26, 2005 — IDT™ (Integrated Device Technology, Inc.; Nasdaq: IDTI), a leading communications IC company, today announced its results for the quarter ended January 2, 2005, its third quarter of fiscal 2005. The Company also disclosed details of restructuring efforts designed to reduce manufacturing and operating costs.

Revenues for the third fiscal quarter were $95.7 million, a decrease of 1 percent compared to the second quarter of fiscal 2005 and an increase of 9.8 percent from the third quarter of fiscal 2004. On a non-GAAP basis, net income for the third fiscal quarter was $6.3 million, or $0.06 per diluted share, compared to net income of $9.5 million, or $0.09 per diluted share, in the second quarter of fiscal 2005 and net income of $4.0 million, or $0.04 per diluted share, for the same quarter one year ago.

Including certain costs, charges and gains in accordance with GAAP, the Company reported net income of $3.3 million, or $0.03 per diluted share, in the third quarter of fiscal 2005 compared to net income of $8.9 million, or $0.08 per diluted share, in the second quarter of fiscal 2005. On a GAAP basis, the Company reported net income of $2.3 million, or $0.02 per diluted share, for the third quarter of fiscal 2004. The second fiscal quarter of 2005 GAAP results include a $1.6 million gain on the sale of assets related to discontinued wafer operations in Salinas, Calif. Further information, including a detailed reconciliation of non-GAAP to GAAP results, is provided in the financial tables of this release. Also, as previously announced in October 2004, the IDT Board of Directors authorized the repurchase of up to $50 million of its Common Stock on the open market. Through the date of this release, the Company has repurchased shares totaling approximately $24 million dollars.

“As we anticipated, the December quarter was difficult,” said Greg Lang, president and CEO of IDT. “However, our investments in new markets, notably PC motherboard and DIMM timing solutions, have helped to mitigate the effects of customer inventory issues and the softness in the wireless infrastructure market. Given the environment, we are pleased with last quarter’s results and are implementing activities that will enable us to further strengthen our financial performance.”

Profitability Measures
In response to the current business environment, IDT began a restructuring program designed to reduce manufacturing and operating costs in order to improve profitability. These measures include the consolidation of the Company’s Northern California operations, including Salinas operations, into its new SanJose-based corporate headquarters, enabling an estimated $4 million annual operating-cost savings. In addition, IDT is centralizing and otherwise streamlining a number of manufacturing support, sales, IT and R&D positions. Overall, this reduction in force will result in the elimination of approximately 240 positions in North America, with roughly 50 percent implemented as of today, while the balance will be transitioned over the next few quarters.

In time, the combined effects of these measures are projected to save approximately $5 to $6 million per quarter through the Company’s non-GAAP P&L. Approximately 20 percent of these cost savings are in R&D, with the bulk of the savings split between cost-of-sales and SG&A. The Company projects one-time costs of approximately $17 million associated with this consolidation and restructuring, which will be implemented over the next twelve months.

“While the actions we are taking are quite painful, we need to ensure that our resources are dedicated to those areas that will best drive a healthy future for our company,” said Lang. “We remain optimistic about the communications infrastructure markets, our portfolio of leading-edge products, and our ability to produce strong financial results over the next year.”

Webcast and Conference Call Information
Investors can listen to a live or replay Webcast of the Company’s quarterly financial conference call at www.IDT.com. The live Webcast begins at 1:30 p.m. PST on Wednesday, January 26, 2005. The Webcast replay will be available after 5 p.m. PST on January 26 through February 17, 2005. A taped telephone replay of the conference call will be available on January 26, 2005 beginning at 6 p.m. PST by calling (800) 475-6701 or (320)365-3844 and will be accessible until 11:59 p.m. PST on February 2, 2005. The access code is 764800.

Investor Information
IDT stock is traded on the Nasdaq Stock Market® under the symbol “IDTI.” The Company is included in the S&P 1000, which is a combination of the S&P MidCap 400 and S&P SmallCap 600 Indices, and is also part of the S&P SuperComposite 1500, which combines the S&P 500, MidCap 400, and SmallCap 600. Additional information about IDT is accessible at www.IDT.com.

View Tables (PDF)

Q3FY05 Financial Presentation (PDF)