Fourth Quarter and Full Year 2008 Highlights:

Fourth quarter revenues increased 67% year-over-year and 6% sequentially, reaching $9.6 million;

Gross margin for the quarter reached 63% on GAAP basis and 69.2% on non-GAAP basis;

Net income for the quarter of $1 million on GAAP basis and $2.6 million on non-GAAP basis;

Operating cash flow for the quarter was $2.6 million; year-end cash position reached $48.1 million.

Fourth Quarter 2008 Results:

Total revenues in the fourth quarter of 2008 were $9.6 million, an increase of 67% compared to $5.7 million in the fourth quarter of 2007, and an increase of 6% compared to $9.0 million in the third quarter of 2008.

Net income on a GAAP basis for the fourth quarter of 2008 was $1.0 million, or $0.04 per share (diluted), compared to a net loss of $0.6 million, or $0.03 per share, in the fourth quarter of 2007, and net income of $0.8 million, or $0.03 per share (diluted), in the third quarter of 2008.

Net income on a non-GAAP basis for the fourth quarter of 2008 was $2.6 million, or $0.10 per share (diluted), compared with non-GAAP net income of $0.4 million, or $0.02 per share (diluted), in the fourth quarter of 2007, and non-GAAP net income of $2.4 million, or $0.09 per share (diluted), in the third quarter of 2008.

Cash, cash equivalents and marketable securities as of December 31, 2008, totaled $48.1 million compared to $44.4 million as of September 30, 2008. Cash generated from operations during the quarter was $2.6 million, with additional $1.1 million resulting from unrealized gains in marketable securities.

Full Year 2008 Results:

Net income on a non-GAAP basis for the year 2008 was $6.8 million, or $0.27 per share (diluted), compared with non-GAAP net income of $0.4 million, or $0.02 per share (diluted), in 2007.

Eli Fruchter, chief executive officer of EZchip commented, “2008 was a milestone year for EZchip in which we continued to reinforce our leading position in the high-speed network processors market, with two of the world’s leading networking vendors incorporating EZchip processors in their strategic CESR platforms. We believe we offer the best and safest long term choices for network processors, especially in the current economic environment where customers need to lower R&D expensses and minimize risks by focusing on best of breed and financially sound suppliers. We are fully committed to continue offering technologically superior network processors that range from 1-Gigabit to 100-Gigabit with common architecture and software.”

“In the fourth quarter we continued to increase revenues, despite the challenging economic environment, and presented strong growth in our financial parameters. We continued to ramp up shipments of our NP-2 processor and shipped NP-3 in limited pre-production volume. In terms of our next generation products, we also experienced substantial progress, with the development of both our NP-4 and NPA family of processors. We continue to work closely with our key customers, adding advanced features, such as video processing that enhance the quality of video on the Internet, to ensure our chips become a primary component of our customers’ next generation products.”

“Looking ahead, 2009 commenced with both versions of our NP-3 processors moving into production and customers shipping NP-3-based boxes. We are entering 2009 with our two market-leading customers in production, yet early in their ramp. We believe this will be instrumental in expanding our business in 2009 and beyond in this challenging economic environment,” concluded Fruchter.