Top-Line Increases at AppliedMicro - Analyst Blog

AppliedMicro (AMCC) reported revenues of $53.7 million in the third quarter of fiscal 2010, up 9% sequentially and up 13% year over year.

Product revenues increased 10% sequentially. Processor revenues were $28.0 million, up sequentially. Transport revenues were $22.7 million, sequentially up 7%, and licensing revenues were $3 million.

On a geographical basis, sales to North America accounted for approximately 34% of total revenues. Europe contributed 17% of total sales while Asia contributed 49%. There was one subcontractor that represented more than 10% of total revenues – Hon Hai.

Gross margin came in at 60.2% compared to 58.6% in the September quarter, driven by improved overhead absorption and other cost-reduction activities undertaken by management. Operating margin came in at 1.6%.

Operating expenses came in at $31.5 million, up from $29.2 million incurred in the second quarter. The increase was primarily due to higher-than-anticipated costs related to upcoming product tapeouts, higher costs related to cost-reduction activities and higher sales and marketing expenses.

AppliedMicro earlier announced that it would reduce its workforce by 11% as part of its restructuring plan. Management expects to incur an employee severance charge of approximately $1.3 million – $1.7 million in 2010.

Management had also chalked out a restructuring plan to reduce costs and improve operational efficiency by integrating its global operations. This integration is expected to reduce operating expenses by taking advantage of a global cost structure. Management expects that the restructuring plan will reduce its ongoing net operating expenses by approximately $1.5 million annually.

Net income came in at $2.6 million or 4 cents per share, compared to a net income of $1.3 million or 2 cents in the previous quarter. This easily beat the Zacks Consensus Estimate of one cent per share.

AppliedMicro ended the quarter with cash, equivalents and investments of approximately $202 million on December 31, 2009, an increase of $4.3 million from the September quarter, due to higher cash generated from operations and a decrease in working capital. Capital expenditures for the quarter were approximately $1.3 million.

During the quarter, the company repurchased approximately 1.1 million shares. Share count for the March quarter is expected to be approximately 67.5 million. Earnings per share are projected around 5 cents – 6 cents.

Going forward, management expects that gross margin came in at 62.5%, plus or minus 0.5 point. Operating expenses are projected to come around $33 million, plus or minus $0.5 million, higher than the third quarter, due to payroll taxes.

Meanwhile, the company changed its name to AppliedMicro from Applied Micro Circuits Corporation. Management believes that the new name reflects the company’s drive for breakthrough energy efficiency and cost optimized semiconductor devices.

We believe the company is well positioned to enter a period of sustainable revenue growth as new products move in for production at key OEMs and industry supply chain challenges get ironed out with signs of economic recovery.

Headquartered in San Diego, California, AppliedMicro is a leading provider of high-bandwidth integrated circuits (ICs) for optical telecom networks.

Read the full analyst report on "AMCC"
Zacks Investment Research