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Vitesse Reports Q1

CAMARILLO, Calif. — Vitesse Semiconductor Corporation (Pink Sheets: VTSS), a leading provider of advanced IC solutions for Carrier and Enterprise networks, today reported its financial results for the first quarter of fiscal year 2011 (quarter ended December 31, 2010) and reported on material subsequent events.

Financial Highlights

• Net revenues of $37.7 million, compared with $41.7 million a year ago
• Product revenues of $37.6 million, compared with $41.6 million a year ago
• Core product revenue was 94.5% of the quarter’s product revenue, up from 89.7% for the same period in 2010
• Product margins increased 7.7% to 61.8% from 54.1% compared to a year ago
• Senior Term Loan reduced by $8.0 million; restructured terms of note lowering interest payments by $1.9 million per year

CEO Commentary

“Our first quarter revenues declined primarily due to ongoing weakness in Asia,” said Chris Gardner, CEO of Vitesse. “We continue to improve the fundamentals of our business model. For the first time, product margins were above the target range and we strengthened the balance sheet by paying off all short-term debt. We currently have no debt maturities until 2014.

“Looking ahead to the remainder of 2011, we will continue to focus on building market traction for the 30 new products introduced in 2010. We anticipate a successful new product cycle beginning towards the end of this year and having these products account for 25% of product revenues by the end of 2012.”

First Quarter 2011 Financial Results Summary

Net revenues for the first quarter of fiscal year 2011 were $37.7 million, a decrease of 9.4% compared with $41.7 million reported for the first quarter of fiscal year 2010 and a decrease of 12.0% compared with $42.9 million in the fourth quarter of fiscal year 2010.

Product revenues were $37.6 million, a 9.6% decrease from $41.6 million in the same quarter in fiscal year 2010, and a 12.2% decrease from $42.8 million reported for the fourth quarter of fiscal year 2010.

Revenues from licensing intellectual property were $151,000 in the quarter, compared to $40,000 in the first quarter of fiscal year 2010, and $67,000 in the fourth quarter of fiscal year 2010.

Carrier networking product revenues were $18.2 million, or 48.3% of product revenues, compared with $19.2 million, or 46.1%, in the year-earlier quarter. Enterprise networking product revenues were $17.3 million, or 46.1% of product revenues, compared with $18.1 million, or 43.5%, a year ago. When Carrier and Enterprise networking product revenues are combined, Vitesse's core products represent 94.5% of the quarter's product revenue. Non-core product revenues were $2.1 million, or 5.5% of product revenues, compared with $4.3 million, or 10.3%, a year ago.

Cost of revenues decreased $4.8 million to $14.3 million in the first quarter of fiscal year 2011, compared with $19.1 million in the same quarter in fiscal year 2010. Product margins increased to 61.8% in the first quarter of fiscal year 2011, from 54.1% in the first quarter of fiscal year 2010. Product margins are product revenues less cost of revenues.

R&D expenses were $14.4 million for the first quarter of fiscal year 2011, compared with $12.0 million a year ago, an increase of $2.4 million, or 20.8%. Selling, general and administrative expenses decreased to $10.5 million, or 27.7% of net revenues, for the first quarter of fiscal year 2011 compared with $10.5 million, or 25.3% of net revenues, in the first quarter of fiscal year 2010.

Loss from operations was $1.7 million in the first quarter of fiscal year 2011, compared with a loss of $0.3 million in the first quarter of fiscal year 2010.

Non-GAAP loss from operations was $823,000 in the first quarter of fiscal year 2011 compared with a non-GAAP income from operations of $744,000 in the first quarter of fiscal year 2010.

The Company’s net loss for the first quarter of fiscal year 2011 was $7.7 million, or $0.32 per share, compared with a net loss of $33.9 million, or $1.95 per share, in the first quarter of fiscal year 2010. The first quarter net loss included a $3.5 million non-cash loss on an embedded derivative.

Non-GAAP net loss was $3.4 million in the first quarter of fiscal year 2011 compared with non-GAAP net loss of $10.2 million for the first quarter of fiscal year 2010. On a per share basis, basic and fully-diluted non-GAAP net loss was $0.14 per share in the fourth quarter of fiscal year 2011 compared with non-GAAP net loss per share of $0.59 in the same quarter of the prior fiscal year.

{complink 5981|Vitesse Semiconductor Corp.}

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