Atheros Announces Financial Results for Q4 2006

Revenue up 10%; Seventh Consecutive Quarter of Growth

Santa Clara, Calif. – Jan. 29, 2007 – Atheros Communications, Inc. (NASDAQ: ATHR), a leading developer of advanced wireless solutions, today announced record financial results for the fourth quarter of 2006 and the year ended Dec. 31, 2006.

Revenue in the fourth quarter was $87.8 million, up 10 percent from the $79.6 million reported in the third quarter of 2006 and up 65 percent from the $53.1 million reported in the fourth quarter of 2005.

In accordance with U.S. generally accepted accounting principles (GAAP), the company recorded a fourth quarter net loss of $953,000 or a loss of $0.02 per diluted share.  In the fourth quarter, the GAAP net loss included $11.4 million in estimated acquisition related expenses.  This compares with GAAP net income of $6.3 million or $0.11 per diluted share in the third quarter of 2006 and $13.1 million or $0.24 per share in the fourth quarter of 2005.  Total cash and investments were $185.9 million at Dec. 31, 2006.

Atheros reports operating income, net income and basic and diluted net income per share in accordance with GAAP and additionally on a non-GAAP basis.  Non-GAAP net income excludes, where applicable, the effect of stock-based compensation, the tax benefit due to the partial release of deferred tax asset valuation allowance, amortization of acquired intangible assets and acquisition related charges.   A reconciliation of GAAP to non-GAAP condensed consolidated statements of operations is presented in the financial statements portion of this release.

Non-GAAP gross margins in the fourth quarter were 47.6 percent, slightly above the company’s guided range of 46.5 to 47.5 percent, compared with 48.0 percent in the third quarter of 2006 and 46.7 percent in the fourth quarter of 2005. Non-GAAP operating income increased to 15.3 percent of revenue from the 14.5 percent reported in the third quarter of 2006.

Non-GAAP net income in the fourth quarter was $12.7 million or $0.22 per diluted share, compared with non-GAAP net income of $10.5 million or $0.19 per diluted share in the third quarter of 2006 and $5.9 million or $0.11 per diluted share in the fourth quarter of 2005.

For the year ended Dec. 31, 2006, revenue was $301.7 million, up 64 percent from the $183.5 million reported in 2005. Net income in accordance with GAAP for 2006 was $18.9 million or $0.34 per diluted share. 2006 GAAP net income included $12.3 million in estimated acquisition related expenses.  For the prior year, GAAP net income was $16.7 million or earnings of $0.31 per diluted share. Non-GAAP net income for 2006 was $40.7 million or $0.73 per diluted share, compared with non-GAAP net income of $11.0 million or $0.21 per diluted share in 2005.

 “This marks Atheros’ seventh consecutive quarter of revenue growth and the sixth consecutive quarter that we achieved record non-GAAP operating income and earnings,” said Craig Barratt, president and CEO. “During 2006, the strength of our wireless LAN business plus the initial revenue contribution from our diversification efforts enabled us to record a 64 percent increase in yearly revenue while increasing non-GAAP net income by 270 percent. We reported record revenue and non-GAAP earnings in each quarter of 2006.

“Earlier today, we announced the first of Atheros’ Bluetooth® family of solutions, which is the industry’s first Bluetooth® 2.1 + Enhanced Data Rate (EDR)-ready solution targeted for the PC market,” Dr. Barratt said.  “Our single-chip solution, the AR3011, is the smallest and lowest-cost Bluetooth® design to date and is intended to drive adoption of Bluetooth® technology into laptops and desktops, where Atheros has technical expertise and strong customer relationships.

“In the fourth quarter, we again saw tremendous revenue growth from our XSPAN® family of 802.11n products, which accounted for a record amount of our revenue. Earlier this month at the Consumer Electronics Show, we showcased an XSPAN-powered access point that supported eight data streams simultaneously, including two high definition TVs.  Atheros’ superior solutions, coupled with an extremely strong customer base, are the foundation for our success in this growing market.  We continue to expect 11n to be the number one growth driver for the company in 2007,” he said.

Recent Atheros Press Release Highlights:

• Jan. 29 - Atheros Announces Industry’s First Bluetooth® 2.1 + EDR Solution to Deliver Enhanced Wireless Connectivity in PCs

• Jan. 9 - Atheros XSPAN Draft 802.11n Technology Achieves Strong Worldwide Momentum With Leading Wireless LAN Customers

• Jan. 8 - Atheros JumpStarts New Wi-Fi Protected Set-up for Personal Wireless LANs

• Jan. 3 - Atheros Introduces Highest-Performance XSPAN Dual-Concurrent Wireless Router Solution

• Jan. 3 - Atheros Launches Market-Leading Wireless Network Processor for Ultimate 802.11n Networking

• Dec. 19 - Atheros XSPAN Featured in Ultraportable Draft 802.11n Notebooks for Small Business

• Dec. 18 - Atheros Completes Acquisition of Attansic Technology Company

• Dec. 11 - Atheros Receives Two Leadership Awards From Fabless Semiconductor Association

• Dec. 5 - Atheros Launches the World's Most-Integrated, Single-Chip 802.11g Solution for PCI Express

• Nov. 27 - Atheros Announces Willy Shih as New Board Member

• Nov. 6 - Atheros XSPAN Technology Featured in Industry's First Embedded Draft 1.0 802.11n Enterprise-Class Notebooks

• Nov. 1 - Atheros' WLAN Software Brings High-Performance, Low-Power and Enhanced-Security Features to Microsoft Windows Embedded CE 6.0

Conference Call

Atheros will broadcast its fourth quarter 2006 financial results conference call today, Monday, Jan. 29, 2007, at 2 p.m. Pacific time (5 p.m. Eastern time).

To listen to the call, please dial (212) 547-0138 approximately 10 minutes prior to the start time.  The pass code is Atheros.  A taped replay will be available approximately one hour after the conclusion of the call and will remain available for one week. To access the replay, dial (203)369-3352.

The Atheros financial results conference call will be available via a live webcast on the investor relations section of the Atheros website at www.atheros.com.  Please access the website approximately 15 minutes prior to the start of the call to download and install any necessary audio software.  An archived webcast replay of the call will be available on the web site for one year.

About Atheros Communications, Inc.

Atheros Communications is a leading developer of semiconductor system solutions for wireless communications products. Atheros combines its wireless systems expertise with high-performance radio frequency (RF), mixed signal and digital semiconductor design skills to provide highly integrated chipsets that are manufacturable on low-cost, standard complementary metal-oxide semiconductor (CMOS) processes. Atheros technology is being used by a broad base of leading customers, including personal computer, networking equipment and handset manufacturers. For more information, please visit www.atheros.com or send email to info@atheros.com.

NOTE:  Atheros, the Atheros logo and XSPAN are trademarks of Atheros Communications, Inc.

Note on Forward-Looking Statements

Except for the historical information contained herein, the matters set forth in this press release, including the anticipated continued success of our products on the market; Atheros’ diversification plans and expansion into new markets; the anticipated adoption of Bluetooth® technology into laptops and desktops; and the anticipated growth of Atheros’ XSPAN business, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially, including, but not limited to, the impacts of competition, technological advances and pricing pressures; general economic conditions; difficulties in the development of new products and technologies; manufacturing difficulties; whether Atheros is successful in marketing its products; and other risks detailed in Atheros’ Annual Report on Form 10-K for the year ended December 31, 2005 and its Quarterly Report on Form 10-Q for the quarter ended September 30, 2006, as filed with the Securities and Exchange Commission, and in other reports filed with the SEC by Atheros from time to time. These forward-looking statements speak only as of the date hereof.  Atheros disclaims any obligation to update these forward-looking statements. 

– Summary Financial Data PDF Link –

For analyst inquires contact: Jack Lazar, Chief Financial Officer for Atheros Communications, Inc., +1-408-773-5200; or Deborah Stapleton of Stapleton Communications, Inc., +1-650-470-0200, for Atheros

For Atheros press contact: Dakota Lee,  408-720-5597, dakota@atheros.com, or Greg Wood, A&R Edelman for Atheros , 650-762-2838, gwood@ar-edelman.com  

View All 2007 Press Releases