Lexar Media, Inc. Press Release 29/01/04

Fourth Quarter Revenues of $177 Million Increase 80% Sequentially and 171% Year-over-Year;
Fourth Quarter Earnings Total $0.21 per Diluted Share

FREMONT, Calif, January 29, 2004—Lexar Media, Inc. (Nasdaq: LEXR), a leading manufacturer and marketer of high-performance digital media and accessories, today reported record financial results for the fourth quarter and year ended December 31, 2003.

Total fourth quarter revenues of $177.5 million increased 80% sequentially from $98.7 million in the preceding quarter and 171% from $65.5 million in the same period last year. Product revenues of $172.8 million increased 83% from $94.3 million in the preceding quarter and 183% from $61.2 million in the same period last year. Gross margin for the quarter was 24%, compared to 27% in the preceding quarter and in the fourth quarter of last year. Net income was $18.9 million, or $0.21 per diluted share, as compared to $9.7 million, or $0.12 per diluted share, in the preceding quarter and $5.6 million, or $0.08 per diluted share, in the same period last year.

Revenues for the year ended December 31, 2003, were $412.3 million, a 137% increase from $174.0 million for the year ended December 31, 2002. Product revenues of $394.6 million for 2003 increased 152% from $156.7 million for 2002. Net income was $39.9 million, or $0.49 per diluted share in 2003, as compared to $4.0 million, or $0.06 per diluted share in 2002.

“2003 proved to be a phenomenal year for Lexar as we more than doubled our revenues on an annual basis and generated more revenue in the fourth quarter than for all of 2002 combined,” said Eric Stang, Lexar Media?s chairman, CEO and president. “During the year, we successfully grew our storefronts and expanded our product offerings beyond digital cameras into the rapidly growing USB flash drive market. Our ability to meet our customer requirements despite a general industry-wide flash shortage and unprecedented demand levels during the holiday period is a testament to the strength of our fabless business model and our valued partnership with key suppliers. We look forward to 2004 and beyond as we expect our core technology assets to become increasingly integral to the performance of feature rich digital devices.”

Corporate Highlights
Lexar Media recently:

Began sampling Samsung Electronics’ first 8Gb NAND flash memory device. The new high-density chips, combined with Lexar?s next-generation controller technology will enable Lexar to increase the performance and storage capacity of its award winning memory cards and USB flash drives.

Added Paris Sud Electronique as a distributor of its digital media products and accessories through a network of over 600 companies in France.

Commenced retail shipments in Japan of the Lexar Media miniSD? card, specifically designed for the mobile phone market, which is increasingly adding storage intensive applications to phones including digital cameras, digital video, MP3 players, PDAs, games and email.

Expanded its product line of JumpDrive USB flash drives with the addition of Traveler, Music, Sport and Elite versions for a wide variety of users and functionality; introduced JumpGear-MP3, a digital audio player that utilizes and increases the functionality of JumpDrive Sport as its storage medium; introduced a 2GB version of JumpDrive Pro; and, introduced the second generation JumpDrive Secure 2.0 offering enhanced security software with file encryption and USB 2.0.

Introduced ImageRescue 2.0, an enhanced version of its popular image recovery software now capable of recovering “lost” or deleted digital images from any memory card, regardless of format or manufacturer.

Settled its patent dispute with SimpleTech, Inc. whereby both parties agreed to a mutual dismissal of the lawsuit and SimpleTech has taken a royalty-bearing license under Lexar?s patents for past and future sales of Memory Stick products.

Began offering two new compact, portable, high-speed FireWire and USB 2.0 CompactFlash readers offering faster downloading of digital images with data transfer speeds up to 400Mb/s and 480Mb/s, respectively.

Financial Outlook for 2004
In commenting on the Company?s outlook, Mr. Stang continued, “For the first quarter of 2004, we are projecting revenues of at least $140 million and net income of approximately $0.10 per diluted share. Our guidance for the year calls for product revenue growth of 50% to 75% over 2003. We anticipate that product gross margins for 2004 will be in our target range of 20% to 24%, with margins improving in the second half of the year towards the higher-end of the target range as additional industry capacity comes on-line and flash prices are reduced. Operating expenses in 2004 are expected to increase in conjunction with anticipated growth in sales volume. In addition, we expect to increase our investment in research and development over 2003. Assuming a conservative outlook for licensing revenues, net income for the year is projected to be approximately $0.60 per diluted share.”