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Friday, August 04, 2006

Can Applied Micro Survive Success?

Stocks: (AMCC)

Shares of Applied Micro Circuits have be languishing around a 52-week low. The stock has been down to $2.09 recently, less than half of its 52-week high of $4.30. The stock trades a ton, averaging 6.5 million shares a day, but all those investors seem to have lost confidence in the maker of processors and semiconductors.

Until today. Revenue at the company rose 4.4% from last year to$69.7 million. The company will not report out full results for the quarter due to its stock options dating issues. This, in turn could lead to a Nasdaq delisting, at least temporarily. But, the company's cash position increased $400,000 from the immediately previous quarter to $336.1 million at June 30, 2006. Advanced Micro indicated the the current quarter would be 5% to 8% above the quarter just reported, according to Reuters.

Additional good news was that one of the two U.S. Attorney office looking into Applied Micro's option practices has decided to discontinue their investigation. While this is not anything definitive, it is certainly better than the investigation continuing.

On top of all this, Applied Micro said that it would acquire Quake Technologies, a fabless semi manufacturer for $69 million.

All of this news, taken as a whole, would be an indication from the company and its management that Applied Micro is putting its options problem behind it fairly quickly. Most companies in deep distress would not make the move of buying another company. The risk involved would simply be too great. In addition, Quake would not sell if they did not believe that Applied Micro has a bight future.

Revenue has more than doubled over the last three fiscal years (ending March 31, 2005). Recent quarter-over-previous-quarter numbers have flattened out some, but the company reduce its operating loss to $5.7 million in the March 2006 quarter. The company's cash position is obviously very high, and Applied Micro has no debt.

With a market cap of $738 million, and cash before the Quake deal at $336 million, the company trades for well under a ration of 2x market cap less cash to annual sales.

If the company's next quarter is in line with projections and the options issue continues to improve getting back to $4 is not out of the question.

Douglas A. McIntyre can be reached at He does not own securities in companies that he writes about.

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