Waterloo, Ontario, January 31, 2007 - DALSA Corporation (TSX:DSA), an international high performance digital imaging and semiconductor company, today reported revenue of $43.3 million in the fourth quarter, 2006, and net income of $1.7 million or $0.09 per share, diluted. For the year ended December 31, 2006, total revenue was $186.3 million, with net income of $11.6 million or $0.62 per share, diluted. The following table summarizes the key results for fiscal 2006 and compares them to 2005:

 

  * percentage points

"We ended 2006 with record revenues and strong profits in our Digital Imaging Business and generated significant cash from operations, which has allowed us to further decrease our net debt and put us on an even stronger financial footing," commented Savvas Chamberlain, CEO of DALSA Corporation. "Despite some softness in revenues in the fourth quarter in our Semiconductor Business, I am pleased to see, for the first time, that our MEMS revenues were the largest contributor to overall revenues in our wafer processing facility. This is a significant milestone."

"Operationally, we are in a solid position to capitalize on opportunities in 2007. In Digital Imaging, for example, we have a strong suite of new products that is being supported by a fully integrated and international sales channel. We will be focusing on building business in fast growing markets for imaging products in Asia-Pacific as well as targeting attractive market segments in life sciences, photogrammetry, smart cameras, and security/surveillance, all of which are growing at more than 15% per year. In our Semiconductor Business, we are steadily moving our new MEMS customers into production and successfully diversifying our customer base, both in wafer processing and IC products. Furthermore, we see 2007 as a breakthrough year for Digital Cinema and are looking forward to further establishing our technology leadership position and ultimately gaining revenue traction for the Origin 4K camera."

In the fourth quarter, Digital Imaging revenues were $28.1 million, up 7.9% from the fourth quarter of 2005. The increase in sales was largely driven by an increase in sales into the semiconductor inspection market, specifically for flat panel display inspection. For the full year, sales of product into the FPD market increased by 27% over 2005. New products within Digital Imaging, including those targeting the food, printing and electronics inspection market, all launched in 2006, are part of management's strategy to expand growth opportunities beyond the FPD market. Standard product gross margins were 52.0%, down 5.4 percentage points from the fourth quarter of 2005, but within the business model range. Digital Imaging net income was $3.7 million, or approximately 13% of revenue, compared to $3.8 million in the fourth quarter last year. During the quarter, net income in Digital Imaging was reduced by $0.5 million due to an impairment loss on our investment in the common shares of Dipix Technology. The backlog for Digital Imaging decreased by $6.9 million compared to the third quarter of 2006. Management is monitoring product shipments closely and may see some softness in revenue early in 2007. However, Management expects to see growth for the full year of 2007 due to the strong products in the market and new products that are being launched.

Semiconductor Business revenues decreased by $0.5 million or 3.3% in the fourth quarter of 2006 compared to the same quarter in 2005. The decrease was mainly the result of delays in orders from customers in our foundry CMOS business and in our IC products business (which includes image sensors), who rescheduled deliveries into early 2007 to minimize their year end inventories. We also experienced some supply issues on a specific and limited range of materials in our semiconductor wafer processing facility. Revenue from MEMS devices grew by $0.3 million compared to the same quarter in 2005, and for the first time revenues from the MEMS end market were the largest contributors to total revenue for the semiconductor wafer processing facility. Gross margins increased by 11 percentage points during the fourth quarter compared to the same quarter last year, three percentage points of which are due to the recognition of prior years' tax credits for development work included in cost of sales in the semiconductor wafer processing facility. Net income increased by $1.2 million from a loss of $1.8 million in the fourth quarter of 2005 to a loss of $0.6 million in the current quarter. Lower revenue in the IC products units resulted in losses during the current quarter, although our wafer processing facility was profitable in the quarter. As evidenced by the backlog, which increased from the previous quarter by $6.7 million to $39.7 million, management expects quarterly revenue to rebound in the first quarter of 2007.

Digital Cinema Business revenues were $0.4 million, approximately the same level as the fourth quarter last year. In the quarter the division incurred a loss of $1.4 million, an increase of $0.4 million over the same period in 2005 and a reduction of $0.3 million compared to the previous quarter. Changes in management with the appointment of Rob Hummel as President, a revised operational focus in Los Angeles, and the expansion of camera testing with several production companies are establishing the infrastructure to respond to anticipated demand for the Origin camera.

Cash provided by operations was $7.6 million in the fourth quarter, an increase of $3.0 million over the third quarter of this year. In the three months ended December 31, 2006 our net debt [cash less long term debt] decreased by $3.3 million to $11.6 million. This is a decrease of $8.1 million from the position at December 31, 2005.
For further detail, please refer to the fourth quarter 2006 Financial Statements, accompanying notes, and Management's Discussion and Analysis at the DALSA website. The address is www.dalsa.com/public/corp/investor/2006/DSA_2006Q4_release.pdf.

Investor Conference Call
A conference call to discuss the Company's Fourth Quarter financial results will be held this afternoon at 5:00pm ET. The conference call, followed by the question and answer period, will be broadcast live and open to anyone interested in listening at http://events.onlinebroadcasting.com/dalsa/013107/index.php. The phone numbers for those who wish to participate in the question and answer period are as follows:

Live Conference Access Information:
Local Access: 416-695-6134
Toll-Free Access: 1-877-888-7019

Instant Replay Access information:
Local Access: 416-695-5275
Toll-Free Access: 1-888-509-0081
Passcode: 638921
Expiry Date: February 14, 2007

About DALSA Corporation
DALSA is an international leader in high performance digital imaging and semiconductors with more than 1000 employees world-wide. Established in 1980, the Company designs, develops, manufactures, and markets the digital imaging products and solutions, in addition to providing semiconductor products and services. DALSA's core competencies are in specialized integrated circuit and electronics technology, software, and highly engineered semiconductor wafer processing. Products and services include image sensor components (CCD and CMOS); electronic digital cameras; vision processors; image processing software; and semiconductor wafer foundry services for use in MEMS, high-voltage semiconductors, image sensors and mixed-signal CMOS chips. DALSA is listed on the Toronto Stock Exchange under the symbol "DSA" and has its corporate offices in Waterloo, Ontario, Canada.

For more information, please contact:
Patrick Myles
Director, Corporate Communications
DALSA Corporation
Tel: (519) 886-6001 Ext. 2177
Fax: (519) 886-3972
E-mail: [email protected]
Internet: www.dalsa.com

Some of the statements in this presentation, including those relating to the Company's strategies and other statements that are predictive in nature, that depend upon or refer to future events or conditions, or that include words such as "expects", "anticipates", "intends", "plans", "believes", "estimates", or similar expressions, are forward-looking statements within the meaning of securities law. Actual results may differ materially from those currently anticipated. Investors are cautioned that such forward-looking statements involve risks and uncertainties. Important factors that could cause actual results to differ materially from those expressed or implied by such forward looking statements are detailed from time to time in DALSA's periodic reports filed with the Ontario Securities Commission and other regulatory authorities. Investors should read review the Business Risks and Prospects sections of the DALSA 2005 annual Management's Discussion and Analysis ("MD&A") to understand the assumptions, risks and uncertainties inherent in forward looking information or statements. DALSA has no intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.