Applied Micro Still in Red - Analyst Blog

By Zacks | February 04, 2013 AAA

Applied Micro Circuits Corporation (AMCC) reported a GAAP net loss of $71.6 million or $1.08 per share in the third quarter of fiscal 2013 (ended Dec 31, 2012), compared with a net loss of $7.1 million or 12 cents in the year-ago quarter. Non-GAAP net loss for the quarter amounted to $6.9 million or 10 cents per share versus a net loss of $1.1 million or 2 cents per share in the year-earlier quarter.

Net sales came in at $51.7 million, declining 8.3% from the year-earlier quarter. The year-over-year decrease was primarily due to the continued challenging macroeconomic environment. However, a substantial progress in Applied Micro's product range during the reported quarter partially alleviated the company's concerns.

High operating expenses, driven by a nearly three-fold and increase in research development expenditure, led to a significantly high operating loss of $73.2 million in the quarter compared with an operating loss of $7.8 million in the prior-year period. However, this reaped some benefits for Applied Micro through the successful introduction of new products in its portfolio.  

The company taped out 40nm ARM 64-Bit X-Gene server on a chip, the highly correlated simulation results of which exceeded its original expectations. Applied Micro expects the networking performance of the chip to enable it to further penetrate into Enterprise class solutions. Subsequent to the quarter-end, the company also taped out a test chip for its upcoming 28nm product, the results of which are awaited.

Applied Micro ended the quarter with cash and cash equivalents and short-term investments of $84.2 million versus $113.8 million at fiscal 2012 end.

Outlook

Applied Micro shows determination as it looks ahead following an acutely disappointing performance in the reported quarter brought about largely by a clouded economic scenario. The company expects to report break-even results on a non-GAAP basis in the fourth quarter of fiscal 2013.

However, the company needs to be wary of other progressive rivals in the industry such as Advanced Semiconductor Engineering Inc. (ASX), Atmel Corporation (ATML), and Cabot Microelectronics Corporation (CCMP), each carrying a Zacks Rank #1 (Strong Buy). Applied Micro currently has a Zacks Rank # 3 (Hold).

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