AMCC

Applied Micro Circuits Corporation (AMCC)

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Applied Micro Circuits Corporation (AMCC)

F3Q 2013 Earnings Conference Call

January 30, 2013 17:00 ET

Executives

Bob Gargus - Senior Vice President and Chief Financial Officer

Dr. Paramesh Gopi - President and Chief Executive Officer

Analysts

Ambrish Srivastava - BMO

Rick Schafer - Oppenheimer

Sandy Harrison - Wunderlich

Hans Mosesmann - Raymond James

Christopher Longiaru - Sidoti & Company

Patrick Wang - Evercore

Vijay Rakesh - Sterne Agee

Krishna Shankar - ROTH Capital

Brian Thonn - Kingdom Ridge Capital

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the Third Quarter 2013 Applied Micro Circuits Corporation Earnings Conference Call. My name is Ayisha and I will be your operator for today. At this time, all participants are in listen-only mode. We will conduct a question-and-answer session towards the end of this conference. (Operator Instructions) As a reminder, this call is being recorded for replay purposes.

I would now like to turn the call over to your host for today Mr. Bob Gargus, Senior Vice President and Chief Financial Officer. Please proceed sir.

Bob Gargus - Senior Vice President and Chief Financial Officer

Good afternoon, everyone and thank you for joining today’s conference call. On the call with me is Dr. Paramesh Gopi, our President and CEO.

Before turning the call over to Paramesh, I want to remind you that forward-looking statements discussed on this call, including guidance we will provide on revenue, non-GAAP gross margins, non-GAAP operating expenses, and certain other financial targets are based on the limited information available to us today. That information is likely to change.

There are numerous risks and uncertainties that affect our business and may affect these forward-looking statements. These risks include items such as the completion and performance levels of 40-nanometer and 28-nanometer ARM 64-bit X-Gene server on a chip, the TAM and market acceptance of such products, the amount and timing of payments under the Veloce merger agreement, product development and introductions, design wins, manufacturing and supply availability, product demand and mix, the impact of personnel reductions and departures, employee relations, and the integration of new or moved operations, risk resulting from macroeconomic conditions and markets, and other risks as set forth in our SEC filings, including our Form 10-K for the year ended March 31, 2012.

Our actual results may differ materially from these forward-looking statements. Applied Micro assumes no obligation to update forward-looking statements made on this call. I want to point out that Applied Micro has several analysts to cover our stock and this creates a range of variability relative to the Street financial models. When we say Street estimates, we mean the consensus of the major analyst models and not necessarily the guidance that was given by the company.

With that, I am going to turn the call over to Paramesh. Paramesh?

Dr. Paramesh Gopi - President and Chief Executive Officer

Thanks Bob. Let’s start with an overview of our third quarter ending December 31, 2012. Before I get into the details by individual product lines, let me first talk to the status of our X-Gene ARM 64-bit product.

First of all, we are extremely pleased to share with you the progress of our X-Gene ARM 64-bit product development. In December, we taped out our first generation 40-nanometer product and the chip is now in our labs. Preliminary lab test indicate that the X-Gene ARM 64-bit processor core is running at 2.4 gigahertz and industry first for any ARM processor. We believe this makes X-Gene the world’s first and only ARM 64-bit based silicon platform with this level of performance in a standard bulk CMOS process.

I would also like to emphasize that the X-Gene core is designed to have a full setup enterprise security and management features that are a basic requirement for servers. To contextualize, we believe the current highest performing 32-bit ARM processors run between 1.5 gigahertz and 1.8 gigahertz at 40-nanometer and lack important enterprise class features. We also taped out our X-Gene 28-nanometer test chip in January at PSMC. This isn’t keeping with our plan to provide a product roadmap showing current and next generation products, which is a requirement for competitiveness in the server market. While awaiting results of the actual 40-nanometer silicon, correlated simulation have cost us to believe that the X-Gene performance will far exceed our earlier expectations. This enhanced performance of our X-Gene platform will allow Applied Micro to actively drive the adoption of the ARM architecture in the larger enterprise Cloud server market in a much more meaningful fashion.

Interest for the X-Gene product continues to exceed our expectations. The ARM 64-bit platform continues to garner additional partners and support for the evolution of the ecosystem continues at a very rapid rate. Currently, we have several prospective customers eagerly awaiting samples. On January 16th, Applied Micro’s ARM 64-bit based micro server design was showcased by Frank Frankovsky, Chairman of the Open Comupte Foundation and Vice president of Hardware Design and Supply Chain at Facebook, during his keynote at the Open Compute Summit. Ours is the first ARM 64-bit based reference design released for Open Compute Project common slot architecture specification, a specification that can accommodate all SOC architecture types that was also announced at the Summit.

Further at Open Compute Dell Vice President and Senior Fellow, Jimmy Pike showcased Dell’s Iron server concept with X-Gene as well as demonstrated an X-Gene based ARM server managed by the Dell DCS software suite illustrating real commitment from a resourcing and software ecosystem perspective towards the ARM 64-bit cloud server market and more importantly towards X-Gene.

Read the rest of this transcript for free on seekingalpha.com