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Applied Micro Circuits Corporation (AMCC - Analyst Report) posted a net loss of $21.6 million or 33 cents per share in the second quarter of fiscal 2013, compared to a net loss of $23.4 million or 37 cents per share in the first quarter and a net loss of $1.1 million or 2 cents in the year-ago quarter or 2 cents.

Excluding one-time adjustments, net loss came in at 28 cents per share, a penny narrower than the Zacks Consensus Estimate. 
 
Revenues
 
Net sales came in at $46.3 million, declining 29% year over year but up 12.0% sequentially and toward the high end of management’s expectations. Processor product revenues came in at $23.8 million, up 6% sequentially.  
 
On a geographic basis, Sales to North America accounted for 37% of total revenue. Sales to Europe accounted for 21% of total sales while Asia contributed 42%.
 
Wintec, a global logistical support vendor, accounted for approximately 20% of total revenue. Avnet (AVT - Analyst Report) accounted for 28% and Flextronics contributed 12%. 
 
Margins 
 
Gross margin came in at 55.6%, flat with the previous quarter but down from 57.3% in the year-ago quarter as increase in gross margin from the higher revenue was offset by additional expenditures related to 64-bit ARM server on a chip platform development. 
 
Operating loss for the quarter came in at $22.7 million versus an operating loss of $24.9 million in the prior quarter and an operating loss of $2.1 in the year-ago quarter.
 
Selling, general and administrative expenses in the quarter were $12.5 million, up 51.3% year over year. Research and development expenses amounted to $34.3 million, surging 16.1% from the year-ago quarter.
 
Balance Sheet and Cash Flows
 
Applied Micro ended the quarter with cash and cash equivalents and short-term investments of $89.7 million, down $96.1 million at the end of the previous quarter. Inventories were $18.4 million versus $22.6 million at the end of the previous quarter. 
 
In the second quarter of fiscal 2013, net cash used for operating activities was around $7.7 million compared to $20.5 million in the previous quarter. 
 
Outlook
 
Applied Micro shows determination as it looks ahead after posting disappointing performance in the last few quarters owing to the clouded fiscal scenario in the economy. The company still expects that the revenue will surge in the second half of the fiscal 2013.
 
The company anticipates total revenue to improve 8% -12% sequentially in the third quarter of fiscal 2013. Gross margin is likely to be approximately 57%, plus or minus half a point while operating expenses are projected at 38%. Moreover, Applied Micro expects that interest income will be $0.6 million and tax rate will be 3% in the third fiscal quarter of 2013.
 
Meanwhile, Applied Micro is hopeful to achieve quarterly revenues of $55 million to $60 million in the March quarter. 
 
Peers
 
Headquartered in Sunnyvale, California, Applied Micro is a leading provider of high-bandwidth low power integrated circuits (ICs), which are essential for the processing, transporting and storing of information. However, the company continues to fight it out with the likes of Broadcom Corp. (BRCM - Analyst Report), Intel Corp. (INTC - Analyst Report) and LSI Corp. (LSI - Analyst Report) in the semiconductor industry. 
 
Our Recommendation
 
Applied Micro currently has a Zacks #3 Rank, which implies a short-term (1-3 months) Hold rating on the stock.  We maintain a Neutral recommendation in the long run.

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