AMCC

Applied Micro Circuits Corporation (AMCC)

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Applied Micro Circuits Corporation (AMCC)

F4Q10 (Qtr End 03/31/10) Earnings Call Transcript

April 29, 2009 5:00 pm ET

Executives

Robert Gargus – SVP & CFO

Paramesh Gopi – SVP & COO

Analysts

Dan Morris – Oppenheimer & Co.

Sandy Harrison – Signal Hill Group

Allan Mishan – Brigantine Advisors

Christian Schwab – Craig-Hallum Capital Group

Chris Zepf – Kingdom Ridge Capital

Sanjay Devgan – Morgan Stanley

Presentation

Operator

Good day, ladies and gentlemen. Welcome to the Q4 2010 Applied Micro Circuits Corporation earnings conference call. My name is Keith, and I will be your operator for today. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session. (Operator instructions)

As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to our host for today, Mr. Robert Gargus, Senior Vice President and Chief Financial Officer. Please proceed, sir.

Robert Gargus

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

Before turning the call over to Paramesh, I want to remind you that the forward-looking statements discussed on this call, including guidance we will provide on revenues, non-GAAP gross margin, 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, including product demand and mix, product development and introductions, design wins, manufacturing and supply availability, the impact of workforce reductions, and the integration of new or moved operations, risk relating 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, 2009.

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. We also expect to file a Form 10-K for the year ended March 31, 2010 around May 11, 2010.

During the first quarter of fiscal year 2010 we completed the sale of our 3ware storage adapter business and for GAAP purposes we have disclosed the results of this business as discontinued operations. For the purposes of this call, we will talk to the results of our continuing operations, excluding storage unless otherwise mentioned.

The net results for storage are disclosed as a single line for discontinued operations. I want to point out that Applied Micro several analysts to cover the 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’m going to turn the call over to Paramesh. Paramesh?

Paramesh Gopi

Thanks, Bob, and good afternoon, everyone. During the March quarter, we saw our total revenues increase sequentially by approximately 7%, and product revenues, excluding our licensing revenues, increase sequentially by a little over 6%. Our opening backlog for the June quarter, meaning orders for delivery in the June quarter increased sequentially by approximately 17%. We are entering the June quarter with approximately 98% of our revenue guidance already in backlog at the start of the quarter.

Total book-to-bill was approximately 1.3x and reflects robust bookings for both the June and September quarters. In fact, we have over 40% of the September quarter visible already. I'm extremely pleased to note that we have surpassed our guidance and have executed phenomenally on all parts of our business, growth and profitability, Opex control, asset management and pioneering new technology for the building of breakthrough products.

Let me now turn to some of the details of the business the starting with transport. I would like to do something slightly different here this time. I want to review our business in the context of changes in the end market factors during the past 12 months, and then relate this to our performance in terms of customer platforms and products. End market factors, torrid bandwidth growth worldwide fuelled by mobile data access and video has resulted in the beginning of an upgrade cycle for wire line equipment and carrier points of presence, central offices and the core.

Smart phone growth and penetration continues unabated, growing approximately 30% last year and in turn creating an upsurge in subscription to data plans for carriers. Over 65% of the world's top mobile carriers have acknowledged that data traffic has surpassed voice traffic on their networks by factors in excess of 50%. In addition, triple play carriers have generated significant revenues from video traffic that is service level agreement based. This revenue has quadrupled in the past 18 months worldwide, due to the increase in the number of video on demand services and IP TV-based networks.

As a result, the triple play carriers have been forced to start upgrading their equipment at points of presence, metro edge, and core. While Capex spending on new equipment has been basically flat, the carriers have consistently focused on upgrading their existing TDM infrastructure to ensure that they can continue to grow their subscriber base, and consequently grow their top line in a profitable fashion.

The net result of this causal change is that the world’s top 10 service providers have started the move to OTN based core and metro networks. Verizon, Comcast, Cox, Swisscon, Telefonica, Telecom Italia, China Telecom, and NTT are transitioning to be upgraded OTN packet based optical and wire line networks.

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