Avago Technologies Limited Announces Fourth Quarter and Fiscal Year 2009 Financial Results

Avago Technologies Limited (Nasdaq: AVGO), a leading supplier of analog interface components for communications, industrial and consumer applications, today reported financial results for its fourth quarter and fiscal year 2009, ended November 1, 2009, and provided guidance for the first quarter of fiscal year 2010.

Fourth Quarter Fiscal 2009 GAAP Results

Net revenue was $428 million, an increase of 18 percent compared with the previous quarter, and down 4 percent from the same quarter last year.

Gross margin was $178 million, or 41.6 percent of net revenue. Fourth quarter gross margin compares with gross margin of $141 million, or 38.8 percent of net revenue last quarter, and gross margin of $168 million, or 37.6 percent of net revenue in the same quarter last year.

Fourth quarter net loss was $21 million, or ($0.09) per diluted share. Included in the GAAP results was a $54 million advisory agreement termination fee paid to the Company’s sponsors in connection with its initial public offering. The fourth quarter net loss compares with net income of $2 million, or $0.01 per diluted share last quarter, and net income of $18 million, or $0.08 per diluted share in the same quarter last year.

Cash balances at the end of the quarter increased by $218 million from the end of the prior quarter to $472 million. The changes in cash include net proceeds of $296 million raised from the Company’s initial public offering, $46 million of cash generated from operations, and $112 million used for the Company’s debt tender offer completed in October 2009.

Fourth Quarter Fiscal 2009 Non-GAAP Results

Gross margin was $192 million, or 44.9 percent of net revenue. This compares with gross margin of $158 million, or 43.5 percent of net revenue last quarter, and gross margin of $184 million, or 41.2 percent of net revenue in the same quarter last year.

Net income was $72 million, or $0.29 per diluted share. This compares with net income of $40 million, or $0.18 per diluted share last quarter, and net income of $52 million, or $0.24 per diluted share in the same quarter last year.

Adjusted EBITDA, as defined in the indentures governing the Company’s outstanding debt securities, was $111 million, compared with $87 million in the last quarter and $88 million in the same quarter last year.

"Our business staged a significant recovery in the second half of fiscal 2009. Leading our recovery were strong fourth quarter results, which were driven by sequential growth in the industrial and enterprise networking markets,” said Hock Tan, president and CEO of Avago Technologies Limited. "Also, during the quarter we completed the successful initial public offering of Avago and subsequent repurchase of a significant portion of our outstanding indebtedness.”

Fiscal Year 2009 Financial Results

Net revenue declined 13 percent from fiscal 2008 to $1.48 billion. GAAP gross margin was $560 million, or 37.7 percent of net revenue versus $655 million, or 38.6 percent of net revenue last year. GAAP net loss was $44 million, or ($0.20) per diluted share. This compares with GAAP net income of $83 million, or $0.38 per diluted share in fiscal 2008.

Non-GAAP gross margin was $629 million, or 42.4 percent of net revenue compared with $718 million, or 42.3 percent of net revenue in fiscal year 2008. Non-GAAP net income of $147 million, or $0.66 per diluted share, compares with $179 million, or $0.81 per diluted share last fiscal year. Adjusted EBITDA was $319 million compared with $351 million in fiscal year 2008.

Recent Business Events

• Completed redemption of remaining $318,496,000 of the 10 1/8% Senior Notes due 2013 and the remaining $45,681,000 of the Senior Floating Rate Notes due 2013 on December 1, 2009.

First Quarter 2010 Business Outlook

Based on current business trends, the outlook for the first fiscal quarter of 2010, ending January 31, 2010, is expected to be as follows:

*The Interest and Other outlook reflects the reduction of interest payments resulting from the recent tender offer and redemption of debt. The GAAP forecast includes a $24 million loss on the extinguishment of debt resulting from the recent redemption of debt.

Capital expenditures are expected to be in the range of $13 million to $18 million. Depreciation and amortization are expected to be approximately $20 million and $19 million, respectively. Share-based compensation is expected to be approximately $5 million.

We undertake 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.

Avago will participate in the Barclays Global Technology Conference in San Francisco on December 8, 2009. In addition, the Company will participate in Morgan Stanley’s Technology Conference in San Francisco, scheduled for March 1-4, 2010.

Financial Results Conference Call

Avago Technologies Limited will host a conference call to review its financial results for the fourth quarter and fiscal year 2009, and to provide guidance for the first quarter of fiscal year 2010, today at 2:00 p.m. Pacific Time. Those wishing to access the call should dial (800) 659-2037; International (617) 614-2713. The passcode is 94058803. A replay of the call will be available through December 10, 2009. To access the replay dial (888) 286-8010; International (617) 801-6888 and reference the passcode: 42312021. A webcast of the conference call will be available in the Investors section of the Company's website at www.avagotech.com.

Non-GAAP Financial Measures

In addition to GAAP reporting, Avago reports net income or loss, as well as gross margin and operating expenses, on a non-GAAP basis. This non-GAAP earnings information excludes amortization of acquisition-related intangibles, share-based compensation expense, asset impairment charges, restructuring charges, acquired in-process research and development, debt extinguishment (gains) losses, advisory agreement termination fee, selling shareholder expenses, and the results of discontinued operations. In addition, Avago also discloses Adjusted EBITDA as measured by the indentures governing our outstanding debt securities. Avago believes this non-GAAP earnings 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 emphasize the results of on-going operations. These historical non-GAAP measures are in addition to, and not a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. A reconciliation between GAAP and non-GAAP net income (loss) and a derivation of Adjusted EBITDA in accordance with our note indentures are included in the financial tables attached to this press release.

About Avago Technologies Limited

Avago Technologies Limited is a leading supplier of analog interface components for communications, industrial and consumer applications.

Safe Harbor Statement

This announcement and supporting materials may contain 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 which could adversely or positively affect future results include cyclicality in the semiconductor industry or in our end markets; the recent financial crisis and its impact on our business, results of operations, and financial condition; fluctuations in interest rates; our ability to generate cash sufficient to service our debt and to fund our research and development, capital expenditures and other business needs; our increased dependence on outsourced service providers for certain key business services and their ability to execute to our requirements; our dependence on contract manufacturing and outsourced supply chain; quarterly and annual fluctuations in operating results; loss of our significant customers; our ability to maintain tax concessions in certain jurisdictions; our ability to protect our intellectual property; our competitive performance and ability to continue achieving design wins with our customers; any expenses associated with resolving customer product and warranty claims; our ability to achieve the growth prospects and synergies expected from our acquisitions; delays and challenges associated with integrating acquired companies with our existing businesses; our ability to improve our cost structure through our manufacturing outsourcing program; and other events and trends on a national, regional and global scale, including those of a political, economic, business, competitive and regulatory nature. Our Registration Statement on Form S-1 filed with the Securities and Exchange Commission (the "SEC”), our quarterly report on Form 10-Q filed with the SEC on September 3, 2009, our Current Reports on Form 8-K and other Avago filings with the 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.