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[October 26, 2005]

Centillium Communications Announces Third Quarter 2005 Financial Results; Company Approaches Profitability; Narrows Loss to $0.02 per Share

FREMONT, Calif. --(Business Wire)-- Oct. 26, 2005 -- Centillium Communications, Inc. (Nasdaq:CTLM), a leading provider of broadband access solutions, today announced financial results for the third quarter ended Sept. 30, 2005.

Net revenues in the third quarter of 2005 were $20.0 million, compared with net revenues of $18.6 million in the second quarter of 2005. The gross margin in the third quarter of 2005 was 56.5 percent, compared with 48.7 percent in the prior quarter.


The net loss in the third quarter of 2005 was $822,000, or $0.02 per share, compared with a net loss of $3.7 million, or $0.10 per share, in the second quarter of 2005.

"During the third quarter, we increased our revenues, improved our gross margin and reduced our expenses compared with the second quarter. As a result, we narrowed our net loss significantly," said Faraj Aalaei, co-founder and CEO of Centillium. "In addition to this drive towards profitability, we continued to make progress in our geographic and product diversification. The third quarter revenues from our customers outside of Japan increased to 45% of total revenues and non-DSL revenues increased to 27% of total revenues.

"We announced during the third quarter that NETGEAR, Inc., a network equipment manufacturer, has chosen our newest Atlanta(TM) system-on-chip (SoC) solutions to deliver its next-generation consumer Voice-over-Internet-Protocol (VoIP) platform to the consumer and small business markets. Atlanta's high-performance routing and throughput delivers superior voice quality, while its versatile, configurable software facilitates cost-efficient, quick time-to market," said Aalaei.

A conference call to review the third quarter 2005 financial results will follow this release at 2:45 p.m. Pacific time/5:45 p.m. Eastern time. To listen to the call, please dial (210) 234-0002, pass code: Centillium. A replay will be made available approximately one hour after the conclusion of the call and will remain available for approximately one week. To access the replay, dial (402) 220-5214. The conference call will also be webcast over the Internet; visit the Investor Relations section of the Centillium Communications website at www.centillium.com to access the call from the website. This webcast will be recorded and available for replay on the Centillium website approximately two hours after the conclusion of the conference call for approximately two weeks.

About Centillium Communications

Centillium Communications, Inc. is a leading innovator of high performance, cost-effective semiconductor solutions that give consumers, enterprises and service providers the winning edge in broadband access. The company's complete, end-to-end system-on-chip solutions accelerate development time-to-market for "last mile" products with Digital Subscriber Line (DSL), Fiber-To-The-Premises (FTTP) and Voice-over-Internet Protocol (VoIP) technologies. Centillium products include digital and mixed-signal integrated circuits and related software for DSL and FTTP central office and customer premises equipment and VoIP solutions for carrier- and enterprise-class gateways and consumer telephony. Centillium is a global company with headquarters in Fremont, CA. Additional information is available at www.centillium.com.

Safe Harbor Statement under Private Securities Litigation Reform Act of 1995

This press release includes statements that are forward-looking statements within the meaning of U.S. federal securities laws. For example, this press release speaks to Centillium's ongoing focus on increasing revenues, improving gross margins and controlling expenses and the benefits, capabilities, significance and expected success of Centillium's recently announced products, solutions and relationships. Actual results may differ materially from those indicated by such forward-looking statements based on a variety of risks and uncertainties, including without limitation the risks and uncertainties relating to the rate and breadth of deployment of broadband access in general, especially DSL, FTTP and VoIP technologies, and Centillium's technology solutions in particular; the successful development and market acceptance of Centillium's new products and technology; Centillium's dependence on a few significant customers for a substantial portion of its revenue; Centillium's ability to continue and expand on its relationships with new customers; the timing, rescheduling or cancellation of significant customer orders and Centillium's ability, as well as the ability of its customers, to manage inventory; Centillium's ability to specify, develop or acquire, complete, introduce, market and transition to volume production new products and technologies in a cost-effective and timely manner; competitive pressures and other factors such as the qualification, availability and pricing of competing products and technologies and the resulting effects on sales and pricing of Centillium's products; the timing of customer-industry qualification and certification of Centillium's products and the risks of non-qualification or non-certification; Centillium's ability to timely and accurately predict market requirements and evolving industry standards and to identify opportunities in new markets; changes in Centillium's product or customer mix; the satisfactory completion of the audits of Centillium's financial statements and systems of internal control; intellectual property disputes and customer indemnification claims and other types of litigation risk; the effectiveness of Centillium's expense and product cost control and reduction efforts; and Centillium's ability to attract, retain and motivate qualified personnel, including executive officers and other key management and technical personnel. Centillium undertakes no obligation to update forward-looking statements for any reason. Information about potential factors that could affect Centillium's financial results is included in Centillium's Annual Report on Form 10-K and in other documents on file with the Securities and Exchange Commission.

Centillium Communications, Palladia, Entropia and the Centillium Logo are trademarks of Centillium Communications, Inc. in the United States and certain other countries. All rights reserved. -0- *T CENTILLIUM COMMUNICATIONS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, -------------------- --------------------- 2005 2004 2005 2004 --------- --------- --------- --------- (In thousands, except (In thousands, except per share data) per share data) Net revenues $ 19,993 $ 20,368 $ 55,836 $ 54,740 Cost of revenues 8,690 10,281 26,987 29,179 --------- --------- --------- --------- Gross profit 11,303 10,087 28,849 25,561 Operating expenses: Research and development 7,399 11,958 22,299 39,780 Selling, general and administrative 5,135 5,924 18,449 17,775 --------- --------- --------- --------- Total operating expenses 12,534 17,882 40,748 57,555 --------- --------- --------- --------- Operating loss (1,231) (7,795) (11,899) (31,994) Interest income, net 448 219 1,128 791 --------- --------- --------- --------- Loss before provision for income taxes (783) (7,576) (10,771) (31,203) Provision for income taxes 39 37 120 109 --------- --------- --------- --------- Net loss $ (822) $ (7,613) $ (10,891) $ (31,312) ========= ========= ========= ========= Basic and diluted net loss per share $ (0.02) $ (0.20) $ (0.28) $ (0.82) ========= ========= ========= ========= Shares used to compute basic and diluted net loss per share 39,427 38,340 39,105 38,099 ========= ========= ========= ========= CENTILLIUM COMMUNICATIONS, INC. CONSOLIDATED BALANCE SHEETS (Unaudited) September 30, December 31, 2005 2004 ------------- ------------- (In thousands, except share and per share data) ASSETS Current assets: Cash and cash equivalents $ 43,522 $ 31,996 Short-term investments 15,544 30,195 Accounts receivable - net of allowance for doubtful accounts of $167 at September 30, 2005 and $151 at December 31, 2004 3,981 5,348 Inventories 5,521 6,100 Prepaids and other current assets 2,165 1,225 ------------- ------------- Total current assets 70,733 74,864 Property and equipment, net 4,029 6,528 Other assets 852 553 ------------- ------------- Total assets $ 75,614 $ 81,945 ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 4,776 $ 5,599 Accrued payroll and related expenses 4,141 3,364 Accrued liabilities 19,087 16,786 ------------- ------------- Total current liabilities 28,004 25,749 ------------- ------------- Other long-term liabilities 1,599 864 Stockholders' equity: Common stock; $0.001 par value: Authorized shares: 100,000,000; Issued and outstanding shares: 39,716,086 at September 30, 2005, 38,810,001 at December 31, 2004 40 39 Additional paid-in capital 246,108 244,493 Accumulated deficit (200,046) (189,155) Deferred compensation (40) - Accumulated other comprehensive loss (51) (45) ------------- ------------- Total stockholders' equity 46,011 55,332 ------------- ------------- Total liabilities and stockholders' equity $ 75,614 $ 81,945 ============= ============= *T

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