Applied Micro Circuits Corporation (AMCC)

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Applied Micro Circuits Corporation

F1Q09 Earnings Call

July 30, 2008 5:00 pm ET


Robert G. Gargus – Senior Vice President & Chief Financial Officer

Kambiz Y. Hooshmand – President & Chief Executive Officer


James Schneider, Ph.D. – Goldman Sachs

Allan Mishan – Oppenheimer & Co.

Sandy Harrison – Signal Hill Group LLC

Christian Schwab – Craig-Hallum Capital

Sanjay Devgan – Morgan Stanley

[Brian San – Bainbridge Capital]



Welcome to the Applied Micro Circuits first quarter 2009 earnings results conference. (Operator Instructions) Now, for opening remarks and introductions I would like to turn the conference over to Bob Gargus, Chief Financial Officer.

Robert G. Gargus

On the call today with me is Kambiz Hooshmand, our President and CEO. Before turning the call over to Kambiz, 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 10K for the year ended March 31, 2008.

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 Y. Hooshmand

Shortly, I’ll give you our vision and perspective of the business fundamentals and then Bob will discuss the financials in detail. Today, I am pleased to share with you two strategically important additions to our senior leadership team. We announced the appointment of Dr. Paramesh Gopi as our Senior Vice President and Chief Operating Officer. Paramesh joins us from Marvell Technology where he was Vice President and General Manager of the embedded and emerging business unit. While at Marvell he built a multi $100 million revenue stream in consumer, wireless and embedded applications. He was also primarily responsible for Marvell’s vertical market strategy. At AMCC Paramesh will focus on market strategy, product strategy, product development and business development. I will focus on company stakeholders including investors, customers and employees. My top priorities will be company vision, corporate strategy and AMCC’s worldwide growth and positioning.

I’m also pleased to announce the appointment of Hector Berardi as Vice President of Operations. Hector comes to AMCC with over 20 years of experience in manufacturing, operations and quality in the technology sector. He holds a Bachelor of Science in Electrical Engineering and an MBA from Santa Clara University.

During the May earnings call we pointed out that we entered the June quarter with a record backlog. We guided for revenues to be up 2% to 4% sequentially. I am pleased to announced that we delivered 3.5% sequential revenue growth. As we announced recently AMCC has received an award from Corporate Legal Exchange for intellectual property management practice. This award validates our truly ‘Best In Class’ IP management process that we embarked upon about one and a half years ago. This program is intended to proactively manage valuable IP creation, enabling AMCC to generate leading edge products while at the same time enabling us to monetize our IP.

Building on this program, as we recently announced, we evaluated our existing patents and were successful in selling some non-core patents for a total of $33 million spread over the next three years. Even more importantly we expect this new ‘Best In Class’ IP program to begin to generate new revenue streams in the next two to three years. Therefore I emphasize that we expect IP revenues to be a permanent addition to our revenue portfolio.

Now let me crystallize our vision for you. Internet bandwidth continues to grow at a torrid pace, 50% to 150% annually. As this trend continues for the next several years the internet data center and the carrier central office will go through a massive upgrade cycle. 10 gig Ethernet followed by 100 gig will be the collapsed infrastructure over which all services will be transported. Packet processing will be required at every node in the network from the home to the office to the internet’s core and storage at [paths] to the internet will grow 10 fold each year.

This means 10 gig Ethernet physical technologies, especially SFP+ will grow rapidly. 10 gig Ethernet moves in the wide area network and OTN replaces older voice centric technologies like SONET. Packet processing and traffic management will be required at every node. Serial storage, specifically SATA and SAS, replace older and more expensive parallel technologies in the internet data center. And finally energy costs, power dissipation and cooling considerations become a huge factor in the architecture of the next generation internet data center. AMCC is a proven technology and market leader in each of these categories. I will point out multiple examples of this throughout our prepared market remarks today. So I emphasize that AMCC will grow as these trends take hold.

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