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Applied Micro Circuits Corporation (AMCC - Analyst Report) swung to profit on a non-GAAP year-over-year basis in the third quarter of fiscal 2014. Excluding non-recurring items, non-GAAP net income for the quarter was $1.6 million or 2 cents per share versus a net loss of $6.9 million or loss of 10 cents per share in the year-earlier quarter. Non-GAAP earnings were in line with the Zacks Consensus Estimate.

On a GAAP basis, Applied Micro reported a net loss of $7.3 million or loss of 10 cents per share in the quarter ended Dec 31, 2013 compared with a net loss of $71.6 million or loss of $1.08 per share in the year-ago quarter.

Quarter Details

Net revenues for the third quarter of fiscal 2014 were $54.8 million versus $51.7 million in the year-ago quarter. Net sales for the reported quarter were in line with Applied Micro’s guidance although it marginally missed the Zacks Consensus Estimate of $55.0 million.

Revenues from the computing business grossed $28.8 million, while connectivity business generated $26.0 million in the quarter. Geographically, sales to North America accounted for approximately 47% of total revenue, followed by Asia (36%) and Europe (17%).

Operating expenses for the reported quarter decreased to $40.9 million from $101.9 million in the year-ago quarter, primarily due to a significant decline in research and development (R&D) expenses. Selling, general and administrative expenses were $10.9 million versus $12.7 in the year-ago quarter. R&D expenses were $29.9 million in third quarter fiscal 2014 versus $82.7 million in the prior-year period.

Applied Micro ended the quarter with cash, cash equivalents and short-term investments of $74.3 million versus $76.0 million as of Sep 30, 2013. Net cash used in operating activities was $33.4 million for the nine months ended Dec 31, 2013, versus $30.9 million in the year-ago period.

Exiting the quarter, Applied Micro entered into a formal arrangement with an undisclosed company to sell its corporate headquarters building and land in Sunnyvale, Calif. The cash transaction worth approximately $40 million is expected to close in mid-March. The strategic move is aimed at monetizing an underutilized asset and increasing the liquidity of the company.   

Outlook

Applied Micro expects to continue its healthy revenue momentum with new product introductions in the coming quarters.

The company expects embedded computer products to continue to generate solid revenue growth in the next 18 to 24 months as it transitions to X-Gene based embedded products.

For fourth quarter fiscal 2014, total revenue is expected in the range of $50 million to $54 million.  Non-GAAP operating expenses are expected within $31.0 million and $32.0 million in the next quarter.

Applied Metro currently has a Zacks Rank #5 (Strong Sell). Other stocks that look promising and are worth considering in the industry include Himax Technologies, Inc. (HIMX - Snapshot Report), SemiLEDs Corporation (LEDS) and Vishay Intertechnology Inc. (VSH - Snapshot Report), each carrying a Zacks Rank #2 (Buy).

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