Applied Micro Circuits Corporation Reports Third Quarter Fiscal 2007 Financial Results

Santa Clara, California, UNITED STATES




 Revenues of $76.6 million, up 17.5% from the third quarter last year
 Q3 GAAP net loss of $4.2 million and $(0.01) per share
 Q3 non-GAAP net income of $9.0 million and $0.03 per share 
 Revenues from storage products grew 12% sequentially

SUNNYVALE, Calif., Jan. 30, 2007 (PRIME NEWSWIRE) -- Applied Micro Circuits Corporation (Nasdaq:AMCC) today reported its financial results for the three and nine months ended December 31, 2006.

Net revenues for the third quarter of fiscal 2007 were $76.6 million compared to the $76.4 million reported in the second quarter of fiscal 2007 and $65.2 million reported in the third quarter of fiscal 2006.

The net loss on a generally accepted accounting principles (GAAP) basis for the third quarter of fiscal 2007 was $4.2 million or $(0.01) per share, compared with a net loss of $13.9 million or $(0.05) per share for the second quarter of fiscal 2007 and net income of $584,000 or $0.00 per share for the third quarter of fiscal 2006.

The non-GAAP net income for the third quarter of fiscal 2007 was $9.0 million or $0.03 per diluted share, compared to the non-GAAP net income of $10.4 million or $0.04 per diluted share in the second quarter of fiscal 2007 and the non-GAAP net income of $4.8 million or $0.02 per diluted share in the third quarter of fiscal 2006.

Net revenue for the nine months ended December 31, 2006 was $222.7 million and increased 14.3% from the $194.9 million reported for the nine months ended December 31, 2005.

The GAAP net loss for the nine months ended December 31, 2006 was $18.9 million or $(0.07) per share, compared to the GAAP net loss of $10.0 million or $(0.03) per share for the nine months ended December 31, 2005. The non-GAAP net income for the nine months ended December 31, 2006 was $27.5 million or $0.10 per share, a 133% increase compared with the non-GAAP net income of $11.8 million or $0.04 per share for the nine months ended December 31, 2005.

"The communications market weakened throughout this quarter due to inventory corrections and industry consolidations. Revenues were disappointing but we managed on-going expenses well. Storage revenues showed strong sequential growth since we executed our initiatives to enhance our product portfolio and channel partners," said Kambiz Hoosmand, president and chief executive officer.

AMCC reports its financial results in accordance GAAP and also provides additional financial data that have not been prepared in accordance with GAAP. The non-GAAP results and other financial measures reported by the Company exclude certain items that are required by GAAP, such as restructuring charges, amortization and impairments of purchased intangibles and goodwill, acquired in-process research and development charges, stock-based compensation charges, litigation settlement costs, realized gains on strategic equity investments, payroll tax on certain stock option exercises and expenses related to stock option investigation. Expenses related to the stock option investigation consist primarily of fees paid to professional service firms in connection with the Company's internal investigation of historical stock option grant practices and the resulting restatement of the Company's financial statements, the investigations by the Securities and Exchange Commission and the U.S. Attorney's office arising from the internal investigation and the defense of derivative lawsuits arising from the Company's internal investigation. Income taxes are adjusted to an estimated non-GAAP effective tax rate. These non-GAAP measures are not a substitute for GAAP measures and may not be consistent with the presentation used by other companies. The Company uses the non-GAAP financial measures to evaluate and manage its operations. The Company is providing this information to allow investors to perform additional financial analysis and because it is consistent with the financial models and estimates published by analysts who follow the Company. The attached schedule reconciles non-GAAP results and other financial measures reported by the Company with the most directly comparable GAAP financial measures.

For More Information

AMCC management will be holding a conference call today, January 30, 2007, at 2:00 p.m. Pacific Time/5:00 p.m. Eastern Time to discuss the Company's financial results for the third quarter of fiscal 2007 and to provide guidance for the fourth quarter of fiscal 2007. You may access the conference call via any of the following:



  Teleconference:          913-981-5584
  Conference ID:           9540488
  Web Broadcast:           http://www.amcc.com
  Replay:                  719-457-0820
                           (Available for 7 days following the call)

AMCC Overview

AMCC is a global leader in network and embedded PowerPC(r) processing, optical transport and storage solutions. Our products enable the development of converged IP-based networks offering high-speed secure data, high-definition video and high-quality voice for carrier, metropolitan, access and enterprise applications. AMCC provides networking equipment vendors with industry-leading network and communications processing, Ethernet, SONET and switch fabric solutions. AMCC is also the leading vendor of high-port count SATA RAID controllers enabling low-cost, high-performance, high-capacity storage. AMCC's corporate headquarters are located in Sunnyvale, California. Sales and engineering offices are located throughout the world. For further information regarding AMCC, please visit our web site at http://www.amcc.com.

AMCC is a registered trademark of Applied Micro Circuits Corporation. The PowerPC name and logo are registered trademarks of IBM Corporation and used under license there from. All other trademarks are the property of their respective owners.



                  APPLIED MICRO CIRCUITS CORPORATION
                 CONDENSED CONSOLIDATED BALANCE SHEETS
                           ($ in thousands)

                                               -----------------------
                                                 Dec 31,     March 31,
                                                  2006         2006
                                               -----------------------
              ASSETS                           (unaudited)
 Current assets:
  Cash, cash equivalents and
   short-term investments                        $261,040     $335,665
  Accounts receivable, net                         35,741       26,324
  Inventories                                      37,273       24,941
  Other current assets                             16,351       12,618
                                                 --------     --------
   Total current assets                           350,405      399,548
 Property and equipment, net                       32,010       36,127
 Goodwill and purchased intangibles               422,009      381,066
 Other assets                                      12,099        8,685
                                                 --------     --------
   Total assets                                  $816,523     $825,426
                                                 ========     ========

         LIABILITIES AND
       STOCKHOLDERS' EQUITY
 Current liabilities:
  Accounts payable                               $ 24,960     $ 24,656
  Other current liabilities                        35,070       37,962
                                                 --------     --------
   Total current liabilities                       60,030       62,618
 Stockholders' equity                             756,493      762,808
                                                 --------     --------
   Total liabilities and stockholders' equity    $816,523     $825,426
                                                 ========     ========

                       APPLIED MICRO CIRCUITS CORPORATION
             GAAP CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                (unaudited)
                    (in thousands, except per share data)

                          Three months ended        Nine months ended
                     ----------------------------  ------------------
                      Dec 31,   Sept 30,  Dec 31,   Dec 31,   Dec 31,
                       2006      2006      2005      2006      2005
                     ----------------------------  ------------------

 Net revenues        $ 76,642  $ 76,364  $ 65,243  $222,685  $194,851
 Cost of revenues      37,799    35,536    30,017   104,863    91,943
                     --------  --------  --------  --------  --------
 Gross profit          38,843    40,828    35,226   117,822   102,908
 Operating expenses:
  Research and 
   development         24,550    24,853    23,429    72,242    70,934
  Selling, general 
   and
   administrative      20,056    17,312    15,022    54,368    46,484
  Amortization of 
   purchased
   intangibles          1,350     1,188     1,107     3,645     3,481
  Acquired in-process
   research and 
   development             --    13,300        --    13,300        --
  Restructuring 
   charges                 67     1,419     1,339     2,733     4,898
  Litigation 
   settlement, net         --        --        --        --        --
                     --------  --------  --------  --------  --------
   Total operating 
    expenses           46,023    58,072    40,897   146,288   125,797
                     --------  --------  --------  --------  --------
 Operating loss        (7,180)  (17,244)   (5,671)  (28,466)  (22,889)
 Interest and other 
  income, net           3,121     3,429     4,940     9,915    11,881
                     --------  --------  --------  --------  --------
 Loss before income 
  taxes                (4,059)  (13,815)     (731)  (18,551)  (11,008)
 Income tax expense 
  (benefit)               113        74    (1,315)      327      (964)
                     --------  --------  --------  --------  --------
 Net income (loss)   $ (4,172) $(13,889) $    584  $(18,878) $(10,044)
                     ========  ========  ========  ========  ========
 Basic and diluted 
  income (loss) per 
  share:

  Income (loss) per 
   share             $  (0.01) $  (0.05) $   0.00  $  (0.07) $  (0.03)
                     ========  ========  ========  ========  ========
  Shares used in 
   calculating
   basic and 
   diluted income
   (loss) per share   281,799   281,762   299,049*  284,913   302,974
                     ========  ========  ========  ========  ========

 * Represents diluted shares.  Basic shares used for calculating net 
   income per share were 297,119.



                  APPLIED MICRO CIRCUITS CORPORATION
           RECONCILIATION OF GAAP NET LOSS TO NON-GAAP NET INCOME
                              (unaudited)
                             (in thousands)

                         Three months ended       Nine months ended
                   ----------------------------  ------------------
                    Dec 31,   Sept 30,  Dec 31,   Dec 31,   Dec 31,
                     2006      2006      2005      2006      2005
                   ----------------------------  ------------------

 GAAP net income
  (loss)           $ (4,172) $(13,889) $    584  $(18,878) $(10,044)
 Adjustments:
  Stock-based
   compensation
   charges            2,723     2,677     1,458     7,911     4,443
  Amortization of
   purchased
   intangibles        7,877     5,941     4,732    18,551    17,500
  Restructuring
   charges               67     1,419     1,339     2,733     4,898
  Realized gain
   on sale of
   strategic
   equity
   investment            --        --      (672)       --      (672)
  Acquired
   in-process
   research and
   development           --    13,300        --    13,300        --
  Payroll taxes
   on certain
   stock option
   exercises             --        --         1         1         1
  Expenses
   related to
   stock option
   investigation      2,705     1,150        --     4,405        --
  Income tax
   adjustments         (217)     (212)   (2,663)     (523)   (4,299)
                   --------  --------  --------  --------  --------
 Total GAAP to
  Non-GAAP
  adjustments        13,155    24,275     4,195    46,378    21,871
                   --------  --------  --------  --------  --------
 Non-GAAP net
  income           $  8,983  $ 10,386  $  4,779  $ 27,500  $ 11,827
                   ========  ========  ========  ========  ========
 Diluted income
  per share        $   0.03  $   0.04  $   0.02  $   0.10  $   0.04
                   ========  ========  ========  ========  ========
 Shares used in
  calculating
  diluted
  income per
  share             283,060   282,586   299,049   285,924   304,521
                   ========  ========  ========  ========  ========

 Income (loss)
  per share:
  GAAP income (loss)
   per share       $  (0.01) $  (0.05) $   0.00  $  (0.07) $  (0.03)
  GAAP to non-GAAP
   adjustments         0.04      0.09      0.02      0.17      0.07
                   --------  --------  --------  --------  --------
  Non-GAAP income
   per share       $   0.03  $   0.04  $   0.02  $   0.10  $   0.04
                   ========  ========  ========  ========  ========

 Reconciliation of 
  shares used in 
  calculating the 
  non-GAAP income per
  share:

  Shares used in
   calculating
   the basic
   and diluted
   income(loss)
   per share        281,799   281,762   299,049*  284,913   302,974
  Adjustment for
   dilutive

   securities         1,261       824        --     1,011     1,547
                   --------  --------  --------  --------  --------
  Non-GAAP shares
   used in the
   EPS
   calculation      283,060   282,586   299,049   285,924   304,521
                   ========  ========  ========  ========  ========

 * Represents diluted shares.  Basic shares used for calculating net 
   income per share were 297,119.



                   APPLIED MICRO CIRCUITS CORPORATION
              SCHEDULE OF SELECTED GAAP TO NON-GAAP ADJUSTMENTS
                              (unaudited)
                             (in thousands)

 The following schedule reconciles selected line items from the
 GAAP basis statements of operations to the non-GAAP statements of
 operations:

                         Three months ended         Nine months ended
                    ----------------------------   ------------------
                     Dec 31,   Sept 30,  Dec 31,    Dec 31,   Dec 31,
                      2006      2006      2005       2006      2005
                    ----------------------------   ------------------
 GROSS PROFIT:
 GAAP gross profit  $ 38,843  $ 40,828  $ 35,226   $117,822  $102,908
  Amortization of
   purchased
   intangibles         6,527     4,753     3,625     14,906    14,019
  Stock-based
   compensation
   expense               148       157        21        439        68
                    --------  --------  --------   --------  --------
 Non-GAAP gross
  profit            $ 45,518  $ 45,738  $ 38,872   $133,167  $116,995
                    ========  ========  ========   ========  ========
 OPERATING
  EXPENSES:
 GAAP operating
  expenses          $ 46,023  $ 58,072  $ 40,897   $146,288  $125,797
  Amortization of
   purchased
   intangibles         1,350     1,188     1,107      3,645     3,481
  Impairment of
   purchased
   intangibles            --        --        --         --        --
  Acquired
   in-process
   research
   and development        --    13,300        --     13,300        --
  Stock-based
   compensation
   expense             2,575     2,520     1,437      7,472     4,375
  Restructuring
   charges                67     1,419     1,339      2,733     4,898
  Payroll taxes on
   certain stock
   option exercises       --        --         1          1         1
  Expenses related
   to stock option
   investigation       2,705     1,150        --      4,405        --
                    --------  --------  --------   --------  --------
 Non-GAAP operating
  expenses          $ 39,326  $ 38,495  $ 37,013   $114,732  $113,042
                    ========  ========  ========   ========  ========
 INTEREST AND OTHER
  INCOME, NET
  GAAP interest and
   other income,
   net              $  3,121  $  3,429  $  4,940   $  9,915  $ 11,881
   Realized gain on
    sale of
    strategic
    equity
    investments           --        --      (672)        --      (672)
                    --------  --------  --------   --------  --------
  Non-GAAP interest
   and other
   income, net      $  3,121  $  3,429  $  4,268   $  9,915  $ 11,209
                    ========  ========  ========   ========  ========
 INCOME TAX EXPENSE
  (BENEFIT):
 GAAP income tax
  expense (benefit) $    113  $     74  $ (1,315)  $    327  $   (964)
  Income tax
   adjustments           217       212     2,663        523     4,299
                    --------  --------  --------   --------  --------
 Non-GAAP income
  tax expense
  (benefit)         $    330  $    286  $  1,348   $    850  $  3,335
                    ========  ========  ========   ========  ========
 RESEARCH AND
  DEVELOPMENT
 GAAP research and
  development       $ 24,550  $ 24,853  $ 23,429   $ 72,242  $ 70,934
  Stock-based
   compensation
   expense               882     1,028       654      2,979     2,024
  Payroll taxes on
   certain stock
   option exercises       --        --         1         --         1
                    --------  --------  --------   --------  --------
 Non-GAAP research
  and development   $ 23,668  $ 23,825  $ 22,774   $ 69,263  $ 68,909
                    ========  ========  ========   ========  ========
 SELLING, GENERAL
  AND
  ADMINISTRATIVE
 GAAP selling,
  general and
  administrative    $ 20,056  $ 17,312  $ 15,022   $ 54,368  $ 46,484
  Stock-based
   compensation
   expense             1,693     1,492       783      4,493     2,351
  Payroll taxes on
   certain stock
   option
   exercises              --        --        --          1        --
  Expenses related
   to stock option
   investigation       2,705     1,150        --      4,405        --
                    --------  --------  --------   --------  --------
 Non-GAAP selling,
  general and
  administrative    $ 15,658  $ 14,670  $ 14,239   $ 45,469  $ 44,133
                    ========  ========  ========   ========  ========


        

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