Financial News

• Net revenue of $562 million; down 2 percent sequentially and down 3 percent from Q2 last year
• GAAP gross margin of 48.4 percent; Non-GAAP gross margin of 51.2 percent
• GAAP diluted EPS of $0.45; Non-GAAP diluted EPS of $0.61

SAN JOSE, Calif., and SINGAPORE, May 29, 2013 (GLOBE NEWSWIRE) -- Avago Technologies Limited (Nasdaq:AVGO), a leading supplier of analog interface components for communications, industrial, and consumer applications, today reported financial results for the second quarter of its fiscal year 2013, ended May 5, 2013, and provided guidance for the third quarter of its fiscal year 2013.

Second Quarter Fiscal Year 2013 GAAP Results

Net revenue was $562 million, a decrease of 2 percent compared with the previous quarter and a decrease of 3 percent from the same quarter last year.

Gross margin was $272 million, or 48.4 percent of net revenue. This compares with gross margin of $276 million, or 47.9 percent of net revenue last quarter, and gross margin of $278 million, or 48.2 percent of net revenue in the same quarter last year.

Operating expenses were $154 million. This compares with $152 million in the prior quarter and $141 million for the same quarter the previous year.

Income from operations was $118 million. This compares with $124 million in the prior quarter and with $137 million in the same quarter last year.

Second quarter net income was $113 million, or $0.45 per diluted share. This compares with net income of $125 million, or $0.50 per diluted share for the prior quarter, and net income of $134 million, or $0.54 per diluted share in the same quarter last year.

The Company's cash balance at the end of the second quarter was $1,219 million, compared to $1,151 million at the end of the prior quarter.

The Company generated $191 million in cash from operations in the second quarter and spent $47 million on capital expenditures. On April 4, 2013 the Company paid a quarterly cash dividend of 19 cents ($0.19) per ordinary share, totaling approximately $47 million. The company also closed an acquisition during the second fiscal quarter for an aggregate acquisition cost of approximately $37 million in cash.

In April 2013, Avago announced the acquisition of CyOptics, Inc. for total consideration of approximately $400 million. The Company expects to close this transaction in its third fiscal quarter of 2013, subject to the satisfaction of customary closing conditions, including the receipt of regulatory approvals in the United States.

Second Quarter Fiscal Year 2013 Non-GAAP Results

Gross margin was $288 million, or 51.2 percent of net revenue. This compares with gross margin of $292 million, or 50.7 percent of net revenue last quarter, and gross margin of $295 million, or 51.1 percent of net revenue in the same quarter last year.

Income from operations was $158 million. This compares with $162 million in the prior quarter and $171 million in the same quarter the previous year.

Net income was $153 million, or $0.61 per diluted share. This compares with net income of $163 million, or $0.65 per diluted share last quarter, and net income of $168 million, or $0.66 per diluted share in the same quarter last year.

"During the second fiscal quarter, revenues came in at the upper end of our guidance helped by improved resales at our distributors in our industrial business," said Hock Tan, President and CEO of Avago Technologies Limited. "Looking to the third quarter, we see broad-based improvement across all three of our end markets. We believe that the initial ramp of a product transition at a large smartphone OEM, a recovery in enterprise networking spending, as well as a continued, gradual uptick in industrial end market demand, could drive a sequential growth up to high single digits on a percentage basis."

Other Quarterly Data

Third Quarter Fiscal Year 2013 Business Outlook

Based on current business trends and conditions, the outlook for the third quarter of fiscal year 2013, ending August 4, 2013, is expected to be as follows: 

Reconciling items include $14 million of amortization of intangible assets, $3 million of share-based compensation expense, and $1 million of restructuring charges at the Gross Margin line, and $5 million of amortization of intangible assets, $17 million of share-based compensation and $1 million of restructuring charges at the Operating Expenses line.

Capital expenditures for the third quarter are expected to be approximately $67 million. For the third quarter depreciation is expected to be $24 million and amortization is expected to be $19 million.

The guidance provided above is only an estimate of what the Company believes is realizable as of the date of this release. The guidance excludes any impact from share repurchases or mergers and acquisitions activity that may occur during the quarter, including the acquisition of CyOptics, Inc. Actual results will vary from the guidance and the variations may be material. The Company undertakes no intent or obligation to publicly update or revise any of these projections, whether as a result of new information, future events or otherwise, except as required by law.

Financial Results Conference Call

Avago Technologies Limited will host a conference call to review its financial results for the second quarter fiscal year 2013, and to provide guidance for the third quarter of fiscal year 2013, today at 2:00 p.m. Pacific Time. Those wishing to access the call should dial (866) 515-2914; International +1 (617) 399-5128. The passcode is 71944742. A replay of the call will be available through May 30, 2013. To access the replay dial (888) 286-8010; International +1 (617) 801-6888 and reference the passcode: 78819462. A webcast of the conference call will also be available in the "Investors" section of Avago's website at www.avagotech.com. 

Non-GAAP Financial Measures

In addition to GAAP reporting, Avago provides investors with net income, income from operations, gross margin, operating expenses and other data, on a non-GAAP basis. This non-GAAP information excludes amortization of intangible assets, share-based compensation expense restructuring charges and acquisition-related costs. Management does not believe that the excluded items are reflective of the Company's underlying performance. The exclusion of these and other similar items from Avago's non-GAAP presentation should not be interpreted as implying that these items are non-recurring, infrequent or unusual. Avago believes this non-GAAP financial information provides additional insight into the Company's on-going performance and has therefore chosen to provide this information to investors for a more consistent basis of comparison and to help them evaluate the results of the Company's on-going operations and enable more meaningful period to period comparisons. These non-GAAP measures are provided in addition to, and not as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. A reconciliation between GAAP and non-GAAP financial data is included in the supplemental financial data attached to this press release.

About Avago Technologies Limited

Avago Technologies Limited is a leading designer, developer and global supplier of a broad range of analog semiconductor devices with a focus on III-V based products. Our product portfolio is extensive and includes thousands of products in three primary target markets: wireless communications, wired infrastructure and industrial & other.

Cautionary Note Regarding Forward-Looking Statements

This announcement contains forward-looking statements which address our expected future business and financial performance. These forward-looking statements are based on current expectations, estimates, forecasts and projections of future Company or industry performance, based on management's judgment, beliefs, current trends and market conditions, and involve risks and uncertainties that may cause actual results to differ materially from those contained in the forward-looking statements. Accordingly, we caution you not to place undue reliance on these statements. For Avago, particular uncertainties that could materially affect future results include global economic conditions and concerns; cyclicality in the semiconductor industry or in our target markets; quarterly and annual fluctuations in operating results; loss of our significant customers; increased dependence on the volatile, wireless handset market; our competitive performance and ability to continue achieving design wins with our customers; our ability to achieve the growth prospects and synergies expected from acquisitions we may make, including our planned acquisition of CyOptics, Inc.; delays, challenges and expenses associated with integrating acquired companies with our existing businesses; our dependence on contract manufacturing and outsourced supply chain and our ability to improve our cost structure through our manufacturing outsourcing program; prolonged disruptions of our or our contract manufacturers' manufacturing facilities or other significant operations; our dependence on outsourced service providers for certain key business services and their ability to execute to our requirements; our ability to maintain gross margin; our ability to maintain tax concessions in certain jurisdictions; our ability to protect our intellectual property and any associated increases in litigation expenses; dependence on and risks associated with distributors of our products; any expenses associated with resolving customer product and warranty and indemnification claims; and other events and trends on a national, regional and global scale, including those of a political, economic, business, competitive and regulatory nature. Our Quarterly Report on Form 10-Q filed on March 14, 2013 and other filings with the Securities and Exchange Commission, or "SEC" (which you may obtain for free at the SEC's website at http://www.sec.gov) discuss some of the important risk factors that may affect our business, results of operations and financial condition. We undertake no intent or obligation to publicly update or revise any of these forward looking statements, whether as a result of new information, future events or otherwise, except as required by law.

CONTACT:
Avago Technologies Ltd.
Thomas Krause
VP Corporate Development
408-435-7400
investor.relations@avagotech.com