AMCC

Applied Micro Circuits Corporation (AMCC)

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Applied Micro Circuits Corporation (AMCC)

Q4 2008 Earnings Call Transcript

May 1, 2008 5:00 pm ET

Executives

Bob Gargus – SVP and CFO

Kambiz Hooshmand – President and CEO

Analysts

James Schneider – Goldman Sachs

Sandy Harrison – Signal Hill

Christian Schwab – Craig-Hallum Capital

Sanjay Devgan – Morgan Stanley

Presentation

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Applied Micro Circuits Q4 2008 earnings call. As a reminder, today's call is being recorded. Now, for opening remarks and introductions, I would like to turn the call over to Bob Gargus, Chief Financial Officer. Please go ahead sir.

Bob Gargus

Good afternoon everyone and thank you for joining today's conference call. On the call today with me is Kambiz Hooshmand, our President and CEO. Before turning the call over to Kambiz, I want to make -- I want to remind you that the forward-looking statements discussed on this call, including guidance that we will provide on revenue, 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, the impact of workforce reductions and the integration of new or moved operations, risks relating to macroeconomic conditions, markets, and other risks that are set forth in our SEC filings, including our Form 10-K for the year ended March 31, 2007. Our actual results may differ materially from these forward-looking statements, and AMCC assumes no obligation to update forward-looking statements made on this call.

I want to point out that AMCC has several analysts that 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 analysts' models and not necessarily the guidance that was given by the company.

With that, I'm going to turn the call over to Kambiz. Kambiz?

Kambiz Hooshmand

Thanks, Bob, and good afternoon everyone. Before I turn the call back to Bob to discuss the numbers, I'm going to give you a qualitative view of our business in general and the three product areas specifically. Later in the call, I'll provide revenue guidance for the June quarter.

During the January earnings call, we pointed out that we entered the March quarter with a record backlog. We guided for revenues to be up 6% to 10% sequentially and in fact we delivered 8%. Our order patterns were strong and have remained so in April. We are entering the June quarter with an even stronger backlog position. During the January call, we pointed out that the macro conditions and uncertainties were there and continued, and provided a more conservative guidance. Recently, we have seen some of our peers begin to be more bullish, and that is certainly an encouraging sign.

In fact, our product cycles, business fundamentals and general business conditions continue to improve pretty nicely. However, given the uncertain environment, we think it is still prudent to remain conservative in our guidance. Back in January, we also emphasized that we would remain focused on managing our expenses and improving our profitability. We delivered on our expense goals and our non-GAAP pretax profitability improved by almost 3 points as a percent of revenue. We're clearly making progress in this area.

In each of process, transport and store, we have very favorable product cycles. Our strong design win traction continues, as I will discuss later. Before I go into each of the process, transport and store sections in more detail, let me pause here to announce an important personnel change. We announced earlier today the appointment of Russ Johnson as Senior Vice President and General Manager of our Storage business unit, succeeding Barbara Murphy. Russ has a proven track record of major accomplishments in the storage world and will be a tremendous asset to our company. I'm very pleased to welcome him as of the newest member of AMCC's senior management team.

As you might be aware, Barbara will be relocating overseas with her family, but will continue to provide key strategic input on a consulting basis. I want to thank Barbara for her leadership during the past three years. We'll miss her, but thankfully we will continue to have her guidance from afar.

Let me now go into each of the product sections, starting with transport. I'll start with the transport business and remind you that Bob will give the specific revenue numbers shortly. Our transport business grew 11% sequentially in the March quarter. This is our second consecutive quarter of double-digit sequential growth. The momentum in this business continues and order activity remains solid across our top customers. We believe there is an important shift from legacy SONET based networks to OTN networks optimized for carrying Ethernet data.

Consistent with this view, at the end of January, AMCC announced Pemaquid. Pemaquid is a fully integrated 10 gig Framer/Mapper/PHY for transporting 10 gigabit Ethernet or 10 gigabit Fibre Channel over OTN. Pemaquid is the first product in our MEtrON, which stands for Metro Ethernet Optical Networks, product family and is ideal for carrier, Ethernet, switch, router and DWDM systems.

Higher speed networks of tomorrow require more sophisticated noise cancellation technologies. Our Strong FEC, Forward Error Correction, technology is the best in the world, as recognized by many carriers. Pemaquid is a great example of AMCC capitalizing on its Strong FEC industry-leading high-speed PHY IP acquired from Quake, and AMCC's strong position in Metro networks.

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