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FILED PURSUANT TO RULE 424(b)(3)
REGISTRATION NO. 333-76185
Prospectus
APPLIED MICRO CIRCUITS CORPORATION
2,908,587 shares of Common Stock
The common stock offered by this prospectus involve a high degree of risk.
You should carefully consider the "Risk Factors" beginning on page 3 in
determining whether to purchase the common stock.
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The selling stockholders identified on page 20 of this prospectus are
offering these shares of common stock. For additional information on the
methods of sale, you should refer to the section entitled "Plan of Distribution"
on page 18. We will not receive any portion of the proceeds from the sale of
these shares.
Applied Micro Circuits Corporation's common stock is quoted on the Nasdaq
National Market under the symbol "AMCC".
On April 9, 1999, the last sale price of the common stock on the Nasdaq
National Market was $43.625 per share.
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Underwriting
Price to Discounts and Proceeds to
Public Commissions Selling Stockholders
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Per Share............................ See Text Above See Text Above See Text Above
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the securities or passed on the
adequacy of accuracy of the disclosures in this prospectus. Any representation
to the contrary is a criminal offense.
The information in the prospectus is not complete and may be changed. The
selling stockholders may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell these securities and it is not soliciting an
offer to buy these securities in any state where the offer or sale is not
permitted.
The date of this prospectus is April 15, 1999
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TABLE OF CONTENTS
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THE COMPANY............................................................. 3
RISK FACTORS............................................................ 3
USE OF PROCEEDS......................................................... 18
ISSUANCE OF COMMON STOCK TO SELLING STOCKHOLDERS........................ 18
PLAN OF DISTRIBUTION.................................................... 18
SELLING STOCKHOLDERS.................................................... 20
LEGAL MATTERS........................................................... 22
EXPERTS................................................................. 22
WHERE YOU CAN FIND MORE INFORMATION..................................... 22
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We have not authorized any dealer, salesperson or other person to give
any information or represent anything not contained in this prospectus. You
should not rely on any unauthorized information. This prospectus does not offer
to sell or seek offers to buy any shares in any jurisdiction in which it is
unlawful. The information in this prospectus is current as of the date on the
cover.
THE COMPANY
Applied Micro Circuits Corporation designs, develops, manufactures and
markets high-performance, high-bandwidth silicon solutions for the world's
communications infrastructure. We utilize a combination of high-frequency
mixed-signal design expertise, system-level knowledge and multiple silicon
process technologies to offer IC products for the telecommunications markets
that address the SONET/SDH and ATM transmission standards and for the data
communications markets that address the Gigabit Ethernet, ATM and Fibre Channel
transmission standards. We also leverage our technology to provide solutions
for the ATE, high-speed computing and military markets. Our customers include
3Com, Alcatel, Cisco Systems, Compaq, Hughes Electronics, Nortel, Sun
Microsystems and Teradyne. We have developed multiple generations of many of our
products. In the telecommunications market, we provide ATM and SONET/SDH
physical layer transceivers, overhead processors, physical media devices and
clock recovery and synthesis units for the OC-3, OC-12 and OC-48 standards, and
are currently developing OC-192 chips. In the data communications market, we
provide physical layer transceivers for serial backplane, Gigabit Ethernet and
Fibre Channel applications. In the high-speed computing market, we provide PCI
controllers and high-frequency clock drivers and clock generators. In addition,
we also provide high-performance, low-power application-specific integrated
circuit products for the ATE and military markets.
Applied Micro Circuits Corporation was originally incorporated in
California on April 9, 1979 and reincorporated in Delaware in April 1987. The
company commenced operating in April 1979.
Our principal executive offices are located at 6290 Sequence Drive, San
Diego, CA 92121, and our telephone number is (619) 450-9333. As used in this
prospectus, "we," "us," "our" and "AMCC" refer to Applied Micro Circuits
Corporation, a Delaware corporation and its wholly owned subsidiaries..
RISK FACTORS
An investment in the common stock offered by this prospectus involves a
high degree of risk. Prospective purchasers of the common stock offered by this
prospectus should carefully consider the following risk factors in addition to
the other information appearing in or incorporated by reference into this
prospectus. This prospectus includes forward-looking statements based upon
current expectations that involve risks and uncertainties that could cause
actual results to differ materially from historical results or our predictions.
We use words such as "anticipate," "believe," "expect," "future" and "intend"
and similar expressions to identify forward-looking statements. You should not
place undue reliance on these forward-looking statements, which apply only as of
the date of this prospectus.
Our operating results may fluctuate because of many factors, many of which are
beyond our control.
If our operating results are below the expectations of public market
analysts or investors, then the market price of our common stock could be
materially and adversely affected.
Some of the factors that affect our quarterly and annual results, but which
are difficult to control or predict are:
. the rescheduling or cancellation of orders by customers;
. fluctuations in the timing and amount of customer requests for product
shipments;
. fluctuations in manufacturing output, yields and inventory levels;
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. changes in the mix of products that our customers buy;
. our ability to introduce new products and technologies on a timely
basis;
. the announcement or introduction of products and technologies by our
competitors;
. the availability of external foundry capacity, purchased parts and raw
materials;
. competitive pressures on selling prices;
. the amounts and timing of costs associated with warranties and product
returns;
. the amounts and timing of investments in research and development;
. market acceptance of our products and of our customers' products;
. the timing of depreciation and other expenses that we expect to incur in
connection with our proposed new wafer fabrication facility;
. costs associated with compliance with applicable environmental
regulations or remediation;
. costs associated with future litigation, if any, including without
limitation, litigation or settlements relating to the use or ownership
of intellectual property;
. general semiconductor industry conditions; and
. general economic conditions, including, but not limited to, economic
conditions in Asia.
Our expense levels are relatively fixed and are based, in part, on our
expectations of future revenues. We are continuing to increase our operating
expenses for personnel and new product development. However, we have a limited
ability to reduce expenses quickly in response to any revenue shortfalls.
Consequently, our business, financial condition and operating results would be
adversely affected if we do not achieve increased revenues. We can have revenue
shortfalls for a variety of reasons, including:
. significant pricing pressures that occur because of declines in average
selling prices over the life of a product;
. sudden shortages of raw materials or production capacity constraints
that lead producers to allocate available supplies or capacity to
customers with resources greater than us and, in turn, interrupt our
ability to meet our production obligations;
. fabrication or test capacity constraints for internally manufactured
devices which interrupt our ability to meet our production obligations;
and
. the rescheduling or cancellation of customer orders.
In addition, our business is characterized by short-term orders and
shipment schedules, and customer orders typically can be canceled or rescheduled
without significant penalty to the customer. Due to the absence of substantial
noncancellable backlog, we typically plan our production and inventory levels
based on internal forecasts of customer demand, which are highly unpredictable
and can fluctuate substantially. In addition, from time to time, in response to
anticipated long lead times to obtain inventory and materials from our outside
foundries, we may order materials in advance of anticipated customer demand,
which might result in excess inventory levels or unanticipated inventory write-
downs if expected orders fail to materialize, or other factors render the
customer's products less marketable. Furthermore, we currently anticipate that
an increasing portion of our revenues in future periods will be derived from
sales of application-specific standard products ("ASSPs"), as compared to
application-specific integrated circuits ("ASICs"). Customer orders for ASSPs
typically have shorter lead times than orders for ASICs, which may make it
increasingly difficult for us to predict revenues and inventory levels and
adjust production appropriately in future periods. If we are unable to plan
inventory and production levels effectively, our financial condition and
operating results could be materially adversely affected.
One example of the volatility of our results is that we experienced revenue
fluctuations and incurred net losses in fiscal 1995 and 1996. These revenue
fluctuations and net losses were caused by the termination of a relationship
with a strategic foundry partner, decreased orders from two major customers,
charges associated with a reduction in the company's workforce and charges for
excess inventory. Accordingly, we believe that period-to-period comparisons of
operating results should not be relied upon as an indication of future
performance. In addition, the results of any quarterly period are not indicative
of results to be expected for a full fiscal year.
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Our operating results depend substantially on our manufacturing yields, which
may not meet expectations.
AMCC Fabrication
We manufacture most of our semiconductors at our San Diego facility. Our
yields can decline whenever a substantial percentage of wafers must be rejected
or a significant number of die on each wafer are nonfunctional. Such declines
can be caused by many factors over which we have little or no control, including
minute levels of contaminants in the manufacturing environment, design issues,
defects in masks used to print circuits on a wafer and difficulties in the
fabrication process. Unfortunately, the ongoing expansion of the manufacturing
capacity of our existing wafer fabrication facility could increase the risk of
contaminants in the facility. In addition, many of these problems are difficult
to diagnose, time consuming and expensive to remedy and can result in shipment
delays.
Because the majority of our costs of manufacturing are relatively fixed,
maintenance of the number of shippable die per wafer is critical to our results
of operations. Yield decreases can result in substantially higher unit costs and
may result in reduced gross profit and net income. In the past we experienced
yield problems in connection with the manufacture of our products. For example,
in the second quarter of fiscal 1997 we experienced a decrease in internal
yields primarily due to increasing volume production of a single product at less
than normal production yields in support of a customer's delivery requirements.
This decrease in internal yields adversely impacted our gross margin for the
quarter by approximately $600,000. We estimate yields per wafer in order to
estimate the value of inventory. If yields are materially different than
projected, work-in-process inventory may need to be revalued. We have in the
past and may in the future from time to time take inventory write-downs as a
result of decreases in manufacturing yields. We may suffer periodic yield
problems in connection with new or existing products or in connection with the
commencement of production in our proposed new manufacturing facility or the
transfer of our operations to this facility.
Fabrication by Third Parties
Semiconductor manufacturing yields are a function both of product design
and process technology. When our products are manufactured by an outside
foundry, the process technology is typically proprietary to the manufacturer.
Since low yields may result from either design or process technology failures,
yield problems may not be effectively determined or resolved until an actual
product exists that can be analyzed and tested to identify process sensitivities
relating to the design rules that are used. As a result, yield problems may not
be identified until well into the production process, and resolution of yield
problems may require cooperation between ourselves and our manufacturer. In some
cases this risk could be compounded by the offshore location of certain of our
manufacturers, increasing the effort and time required to identify, communicate
and resolve manufacturing yield problems.
If we develop relationships with additional outside foundries, yields could
be adversely affected due to difficulties associated with adapting our
technology and product design to the proprietary process technology and design
rules of the new foundries. Because of our limited access to wafer fabrication
capacity from outside foundries for certain products, any decrease in
manufacturing yields of such products could result in an increase in our per
unit costs for such products and force us to allocate available product supply
among customers, which could potentially adversely impacting customer
relationships as well as revenues and gross margin. Our outside foundries may
not achieve or maintain acceptable manufacturing yields in the future.
Furthermore, we also face the risk of product recalls resulting from design or
manufacturing defects which are not discovered during the manufacturing and
testing process.
Our business strategy is based on increasing dependence on telecommunications
and data communications markets.
An important part of our strategy is to continue our focus on the
telecommunications market and to leverage our technology and expertise to
penetrate further the data communications market for high-speed ICs. If we are
unable to penetrate these markets further, our short and long term business will
suffer. In the short term, we
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may experience reduced revenues. In the long term, our revenues could stop
growing and may decline. We anticipate that sales to our other traditional
markets will grow more slowly or not at all and, in some instances, as in the
case of military markets, may decrease over time.
The telecommunications and data communications markets are characterized
by:
. extreme price competition;
. rapid technological change;
. industry standards that are continually evolving; and
. in many cases, short product life cycles.
These markets frequently undergo transitions in which products rapidly
incorporate new features and performance standards on an industry-wide basis.
If our products are unable to support the new features or performance levels
required by OEMs in these markets, we would be likely to lose business from an
existing or potential customer and, moreover, would not have the opportunity to
compete for new design wins until the next product transition occurs. If we fail
to develop products with required features or performance standards for the
telecommunications or data communications markets, or if we experience a delay
as short as a few months in bringing a new product to market, or if our
telecommunications or data communications customers fail to achieve market
acceptance of their products, our revenues could be significantly reduced for a
substantial period.
A significant portion of our revenues in recent periods has been, and is
expected to continue to be, derived from sales of products based on the
Synchronous Optical Network, or SONET, and Synchronous Digital Hierarchy, or
SDH, transmission standards and the Asynchronous Transfer Mode, or ATM,
transmission standard. If the communications market evolves to new standards, we
may not be able to successfully design and manufacture new products that address
the needs of our customers or gain substantial market acceptance. Although we
have developed products for the Gigabit Ethernet and Fibre Channel
communications standards, volume sales of these products are modest, and we may
not be successful in addressing the market opportunities for products based on
these standards.
Our business could be adversely affected if we do not adequately address the
risks associated with our recent acquisition of Cimaron Communications
Corporation.
On March 17, 1999, we completed the acquisition of Cimaron Communications
Corporation. This transaction is accompanied by a number of risks, including:
. the difficulty of assimilating the operations and personnel of Cimaron;
. the potential disruption of AMCC's and Cimaron's ongoing business and
distraction of management;
. possible unanticipated expenses related to technology integration;
. the potential impairment of relationships with employees and customers
as a result of any integration of new management personnel; and
. potential unknown liabilities associated with acquired businesses.
We may not be successful in addressing these risks or any other problems
encountered in connection with the Cimaron acquisition.
In addition, the market price of our common stock could decline as a
result of the merger if:
. the integration of AMCC and Cimaron is unsuccessful;
. the combined company does not achieve the perceived benefits of the
merger as rapidly or to the extent anticipated by financial analysts;
. the effect of the merger on the combined company financial results is
not consistent with the expectations of financial analysts; or
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. the management of Cimaron employees who are geographically distant from
our headquarters, but engaged in developing technology and products that
are vital for our future revenues.
We intend to account for the merger under the pooling of interests
accounting and financial reporting rules. To qualify the merger as a pooling of
interests for accounting purposes, AMCC and Cimaron and their respective
affiliates must meet the criteria for pooling of interests accounting
established in opinions published by the Accounting Principles Board and
interpreted by the Financial Accounting Standards Board and the Commission.
These opinions are complex, and the interpretation of them is subject to change.
Consummation of the merger was conditioned, among other things, upon the receipt
by us of a letter from our independent accountants that, subject to customary
qualifications, they concur with management's conclusion that no conditions
exist that would preclude AMCC and Cimaron from being parties to a business
combination that would be accounted for as a pooling of interests. However, the
availability of pooling of interests accounting treatment for the merger depends
in part, upon circumstances and events occurring after the effective time. For
example, there must be no significant changes in the business of the combined
company, including significant dispositions of assets, for a period of two years
following the effective time. Further, our affiliates and Cimaron's affiliates
must not sell, or otherwise reduce their risk with respect to, any shares of
either AMCC and Cimaron capital stock, except for a deminimus number as defined
by certain Commission rules and regulations, during the period beginning 30 days
before the effective time and continuing until the day that we publicly announce
financial results covering at least 30 days of combined operations of AMCC and
Cimaron after the merger. We expect that such combined financial results will
be published in late April 1999. If our affiliates or Cimaron's affiliates sell
their shares of AMCC common stock prior to that time despite a contractual
obligation not to do so, the merger may not qualify for accounting as a pooling
of interests for financial reporting purposes. The failure of the merger to
qualify for pooling of interests accounting treatment for financial reporting
purposes for any reason would materially and adversely affect our reported
earnings and likely, the price of our common stock.
Our business strategy is also based on increasing dependence on application-
specific standard products.
We have under development a number of ASSPs for the telecommunications and
data communications markets, from which we expect to derive an increasing
portion our future revenues. However, we have a limited operating history in
selling ASSPs, particularly to customers in the telecommunications and data
communications markets. In addition, our relationships with certain customers in
these markets have only been established recently. Our future success in selling
ASSPs, and in particular, selling ASSPs to customers in the telecommunications
and data communications markets, will depend in large part on whether our ASSPs
are developed on a timely basis and whether such products achieve market
acceptance among new and existing customers, and on the timing of the
commencement of volume production of products in corporating our ASSPs, if at
all. We have in the past encountered difficulties in introducing new products in
accordance with customers' delivery schedules and initial expectations. We may
encounter similar difficulties in the future, and we may not be able to develop
and introduce ASSPs in a timely manner so as to meet customer demands.
We currently depend on the automated test equipment market, and that market has
recently experienced declines in demand.
We have historically derived significant revenues from product sales to
customers in the Automated Test Equipment, or ATE, market and currently
anticipate that we will continue to derive significant revenues from sales to
customers in this market in the near term. During the past year, customers in
the ATE market have experienced decreased demand due primarily to slower growth
in the semiconductor industry and economic turmoil in Asia. Accordingly, our net
revenues in the ATE market has declined for three consecutive quarters as of
December 31, 1998, and we believe that our revenue from the ATE market may
decline further.
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We depend on the high-speed computing market, but we believe that the average
selling prices of our IC products for the high-speed computing market will
decline in future periods and that our gross margin on sales of such products
may also decline in future periods.
The market for high-speed computing IC products is subject to extreme price
competition, and we may not be able to reduce the costs of manufacturing high-
speed computing IC products in response to declining average selling prices.
Even if we successfully utilize new processes or technologies to reduce the
manufacturing costs of our high-speed computing products in a timely manner, our
customers in the high-speed computing market may not purchase these products.
Furthermore, we expect that certain competitors may seek to develop and
introduce products that integrate the functions performed by our high-speed
computing IC products on a single chip. In addition, one or more of our
customers may choose to utilize discrete components to perform the functions
served by our high-speed computing IC products or may use their own design and
fabrication facilities to create a similar product. In either case, the need for
high-speed computing customers to purchase our IC products could be eliminated.
Our markets are subject to rapid technological change, so our success depends
heavily on our ability to develop and introduce new products
The markets for our products are characterized by:
. rapidly changing technologies;
. evolving and competing industry standards;
. short product life cycles;
. changing customer needs;
. emerging competition;
. frequent new product introductions and enhancements;
. increased integration with other functions; and
. rapid product obsolescence.
To develop new products for these markets, we must develop, gain access to
and use leading technologies in a cost-effective and timely manner and continue
to develop technical and design expertise. In addition, we must have our
products designed into our customers' future products and maintain close working
relationships with key customers in order to develop new products, particularly
ASSPs, that meet customers' changing needs. We also must respond to changing
industry standards, trends towards increased integration and other technological
changes on a timely and cost-effective basis. Furthermore, if we fail to achieve
design wins with key customers our business will be significantly hurt because
once a customer has designed a supplier's product into its system, the customer
typically is extremely reluctant to change its supply source due to significant
costs associated with qualifying a new supplier.
Products for telecommunications and data communications applications, as
well as for high-speed computing applications, are based on industry standards
that are continually evolving. Our ability to compete in the future will depend
on our ability to identify and ensure compliance with these evolving industry
standards. The emergence of new industry standards could render our products
incompatible with products developed by major systems manufacturers. As a
result, we could be required to invest significant time and effort and to incur
significant expense to redesign our products to ensure compliance with relevant
standards. If our products are not in compliance with prevailing industry
standards for a significant period of time, we could miss opportunities to
achieve crucial design wins. We may not be successful in developing or using new
technologies or in developing new products or product enhancements that achieve
market acceptance. Our pursuit of necessary technological advances may require
substantial time and expense.
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The markets in which we compete are highly competitive and subject to rapid
technological change, price erosion and heightened international competition.
The telecommunications, data communications, ATE and high-speed computing
industries are intensely competitive. We believe that the principal factors of
competition in our markets are price, product performance, product quality and
time-to-market. Our ability to compete successfully in our markets depends on a
number of factors, including:
. success in designing and subcontracting the manufacture of new products
that implement new technologies;
. product quality;
. reliability;
. price;
. the efficiency of production;
. design wins for our IC products;
. expansion of production of our products for particular systems
manufacturers;
. end-user acceptance of the systems manufacturers' products;
. market acceptance of competitors' products; and
. general economic conditions.
In addition, our competitors may offer enhancements to existing products or
offer new products based on new technologies, industry standards or customer
requirements that are available to customers on a more timely basis than
comparable products from us or that have the potential to replace or provide
lower-cost alternatives to our products. The introduction of enhancements or new
products by our competitors could render our existing and future products
obsolete or unmarketable. In addition, we expect that certain of our
competitors and other semiconductor companies may seek to develop and introduce
products that integrate the functions performed by our IC products on a single
chip, thus eliminating the need for our products.
In the communications markets, we compete primarily against Giga, Hewlett-
Packard, Lucent, Maxim, Philips, Sony, Texas Instruments, Rockwell
International, TriQuint and Vitesse. Some of these companies use gallium
arsenide ("GaAs") process technologies for certain products. In certain
circumstances, most notably with respect to ASICs supplied to Nortel, our
customers or potential customers have internal IC manufacturing capabilities.
In the ATE market, our products compete primarily against GaAs based products
offered by Vitesse and silicon ECL and BiCMOS products offered principally by
semiconductor manufacturers such as Analog Devices, Lucent Technologies and
Maxim. In the high-speed computing market, we compete primarily against
Chrontel, Cypress, ICS, PLX and Tundra. Many of these companies and potential
new competitors have significantly greater financial, technical, manufacturing
and marketing resources than we do.
If we are not successful in expanding the capacity of our existing fabrication
facility and in constructing our new facility on time and within budget, we may
face serious capacity constraints.
We currently manufacture a majority of our IC products at our four-inch
wafer fabrication facility located in San Diego, California. We believe that we
will be able to satisfy our production needs from this fabrication facility
through 2001, although this date may vary depending on, among other things, our
rate of growth. However, if we cannot expand the capacity of this facility on a
timely basis, we could experience significant capacity constraints that could
render us unable to meet customer demand or force us to spend more to make
wafers to meet demand. We will be required to hire, train and manage additional
production personnel in order to increase production capacity as scheduled.
Based on our current forecasts of future need for manufacturing capacity,
we have tentative plans for the construction of a new six-inch wafer fabrication
facility, initially to complement, and potentially to replace, our existing
facility in San Diego. We are also exploring other alternatives for the
expansion of our manufacturing
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capacity, including purchasing a wafer fabrication facility or entering into
strategic relationships to obtain additional capacity. In July 1998 we acquired
the right to purchase, in the form of a ground lease, a parcel of land as a site
for our new wafer fabrication facility. This parcel of land is located
approximately one quarter mile from our headquarters in San Diego, California.
The Company has made payments of $1.0 million related to this ground lease
through December 31, 1998. In December 1998, the Company exercised this right to
acquire the land and will be required to make additional payments of
approximately $3.7 million. We currently plan to acquire the site to which we
have rights by mid-1999, to initiate construction of the new facility during
2000 and to complete the physical plant during 2001. Following the completion of
the physical plant, we must install equipment and perform necessary testing
prior to commencing commercial production at the facility, a process which we
anticipate will take at least nine months. Accordingly, we believe the new
facility will not commence commercial production prior to late 2001. We estimate
that the cost of the new wafer fabrication facility will be at least $80.0
million, of which at least $35.0 million relates to the purchase of land and
construction of the building and at least $45.0 million relates to capital
equipment purchases necessary to establish the initial manufacturing capacity of
the facility. We intend to fund approximately $24.0 million of the total cost of
the new facility with a portion of the proceeds from our initial and secondary
public offering, which are now invested in short-term investments. The balance
of the cost of this facility is expected to be funded through a combination of
available cash, cash equivalents and short-term investments, cash from
operations and additional debt, lease or equity financing. We may not be able to
obtain the additional financing necessary to fund the construction and
completion of the new manufacturing facility. In addition, the rights to acquire
the site for our proposed new manufacturing facility are subject to certain
conditions, and, as a result, we may experience delays in acquiring the site or,
if the site becomes unavailable, in finding a new site for the potential wafer
fabrication facility. Our existing wafer fabrication facility is, and its
proposed new wafer fabrication facility is expected to be, located in California
and these facilities may be subject to natural disasters such as earthquakes or
floods. In addition, the depreciation and other expenses that we will incur in
connection with the expansion of our existing manufacturing facility and in
connection with our proposed new wafer fabrication facility may adversely affect
our gross margin in any future fiscal period.
The construction of the new wafer fabrication facility entails significant
risks, including:
. shortages of materials and skilled labor;
. unforeseen environmental or engineering problems;
. work stoppages;
. weather interferences; and
. unanticipated cost increases.
Any one of these risks could have a material adverse effect on the
building, equipping and production start-up of the new facility. In addition,
unexpected changes or concessions required by local, state or federal regulatory
agencies with respect to necessary licenses, land use permits, site approvals
and building permits could involve significant additional costs and delay the
scheduled opening of the facility and could reduce our anticipated revenues.
Also, the timing of commencement of operation of the new facility will depend
upon the availability, timely delivery and successful installation and testing
of the necessary process equipment. As a result of the foregoing and other
factors, the new facility may not be completed and in volume production within
its current budget or within the period currently scheduled. Furthermore, we
may be unable to achieve adequate manufacturing yields in the proposed new
fabrication facility in a timely manner, and our revenues may not increase
commensurate with the anticipated increase in manufacturing capacity associated
with the new facility. In addition, in the future, we may be required for
competitive reasons to make capital investments in the existing wafer
fabrication facility or to accelerate the timing of the construction of our new
wafer fabrication facility in order to expedite the manufacture of products
based on more advanced manufacturing processes.
The successful operation of our proposed new wafer fabrication facility, if
completed, as well as our overall production operations, will also be subject to
numerous risks. We have no prior experience with the operation of the equipment
or the processes involved in producing finished six-inch wafers, which differ
significantly from those involved in the production of four-inch wafers. We will
be required to hire, train and manage production personnel in order to
effectively operate the new facility. We do not have sufficient excess
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production capacity at our existing San Diego facility to fully offset any
failure of the proposed new wafer fabrication facility to meet planned
production goals. We may transfer current San Diego manufacturing operations
into the proposed new wafer fabrication facility subsequent to its completion.
Should this transfer occur, we may experience delays in completing product
testing and documentation required by customers to qualify or requalify our
products from this facility. We will also have to effectively coordinate and
manage two manufacturing facilities to successfully meet overall production
goals. We have no experience in coordinating and managing production facilities
that are located at different sites or in the transfer of manufacturing
operations from one facility to another. As a result of these and other factors,
our failure to successfully operate the proposed new wafer fabrication facility,
to successfully coordinate and manage the two sites or to transfer our
manufacturing operations could adversely affect our overall production.
The markets for our products are characterized by rapid changes in manufacturing
process technologies; therefore, to provide competitive products to our target
markets, we must develop or otherwise gain access to improved process
technologies.
Our future success will depend, in large part, upon our ability to continue
to improve existing process technologies, to develop new process technologies
including silicon germanium, or SiGe, processes, and to adapt our process
technologies to emerging industry standards. In the future, we may be required
to transition one or more of our products to process technologies with smaller
geometries, other materials or higher speeds in order to reduce costs and/or
improve product performance. We may not be able to improve our process
technologies and develop or otherwise gain access to new process technologies,
including, but not limited to SiGe process technologies, in a timely or
affordable manner. In addition, products based on these technologies may not
achieve market acceptance.
Our dependence on third-party manufacturing and supply relationships increases
the risk that we will not have an adequate supply of products to meet demand or
that our cost of goods will be higher than expected.
We rely on outside foundries for the manufacture of certain products,
including all of our products designed on CMOS processes and all products that
we anticipate will be designed on silicon germanium processes. We generally do
not have long-term wafer supply agreements with our outside foundries that
guarantee wafer or product quantities, prices or delivery lead times. Instead,
our products that are manufactured by outside foundries are manufactured on a
purchase order basis. We expect that, for the foreseeable future, certain
products will be manufactured by a single outside foundry. Because establishing
relationships with new outside foundries takes several months, there is no
readily available alternative source of supply for these products. A
manufacturing disruption experienced by one or more of our outside foundries
would impact the production of certain of our products for a substantial period
of time. Furthermore, the transition to the next generation of manufacturing
technologies at one or more of our outside foundries could be unsuccessful or
delayed.
There are additional risks associated with our dependence upon third-party
manufacturers for certain products. These include, but are not limited to:
. reduced control over delivery schedules and quality;
. risks of inadequate manufacturing yields and excessive costs;
. the potential lack of adequate capacity during periods of excess demand;
. limited warranties on wafers or products supplied to us;
. potential increases in prices; and
. potential misappropriation of our intellectual property.
With respect to certain of our products, we depend upon external foundries
to produce wafers and, in some cases, finished products of acceptable quality,
to deliver those wafers and products to us on a timely basis and to allocate to
us a portion of their manufacturing capacity sufficient to meet our needs. On
occasion, we have experienced difficulties with our suppliers failing to produce
goods of sufficient quality or quantity or failing to meet delivery deadlines.
Our wafer and product requirements typically represent a very small portion of
the total production of these external foundries. As a result, we are subject to
the risk that a producer will cease production
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on an older or lower-volume process that is used to produce our parts.
Additionally, we cannot be certain our external foundries will continue to
devote resources to the production of our products or continue to advance the
process design technologies on which the manufacturing of our products are
based.
Certain of our products are assembled and packaged by third-party
subcontractors. We do not have long-term agreements with any of these
subcontractors. Assembly and packaging is conducted on a purchase order basis.
As a result, we cannot directly control product delivery schedules. This could
lead to product shortages or quality assurance problems that could increase the
costs of manufacturing, assembly or packaging of our products. In addition, we
may, from time to time, be required to accept price increases for assembly or
packaging services. Due to the amount of time normally required to qualify
assembly and packaging subcontractors, product shipments could be delayed
significantly if we are required to find alternative subcontractors. In the
future, we may contract with third parties for the testing of our products. Any
problems associated with the delivery, quality or cost of the assembly, testing
or packaging of our products could have a material adverse effect on our
business.
Due to an industry transition to six-inch and eight-inch wafer fabrication
facilities, there is a limited number of suppliers of the four-inch wafers that
we use to build products in our existing manufacturing facility, and we rely on
a single supplier for these wafers. Although we believe that we will have
sufficient access to four-inch wafers to support production in our existing
fabrication facility for the foreseeable future, we cannot be certain that our
current supplier will continue to supply us with four-inch wafers on a long-term
basis. Additionally, the availability of manufacturing equipment needed for a
four-inch process is limited, and certain new equipment required for more
advanced processes may not be available for a four-inch process.
Our customers are concentrated, so the loss of one or more key customers could
significantly reduce our revenues and profits.
Historically, a relatively small number of customers has accounted for a
significant portion of our revenues in any particular period. For example, our
five largest customers accounted for approximately 44%, 46%, 56% and 62% of our
revenues in fiscal 1997, fiscal 1998, the first nine months of fiscal 1999 and
the quarter ended December 31, 1998, respectively, and sales to Nortel accounted
for approximately 20%, 21%, 18% and 20% of our revenues in each of these
periods. However, we have no long-term volume purchase commitments from any of
our major customers. We anticipate that sales of products to relatively few
customers will continue to account for a significant portion of our revenues. A
reduction, delay or cancellation of orders from one or more significant
customers or the loss of one or more key customers could significantly reduce
our revenues and profits. We cannot assure you that our current customers will
continue to place orders with us, that orders by existing customers will
continue at current or historical levels or that we will be able to obtain
orders from new customers.
Our strategy is based on growth, and periods of rapid growth and expansion have
placed, and could continue to place, a significant strain on our limited
personnel and other resources.
To manage expanded operations effectively, we will be required to continue
to improve our operational, financial and management systems and to successfully
hire, train, motivate and manage our employees. In addition, the integration of
past and future potential acquisitions, the construction and operation of our
planned wafer fabrication facility, the initial integration of the proposed new
wafer fabrication facility with our current facility and the subsequent
potential transfer of our manufacturing operations to the proposed new wafer
fabrication facility will require significant management, technical and
administrative resources. We cannot be certain that we will be able to manage
our growth or effectively integrate our planned wafer fabrication facility into
our current operations.
Our future success depends in part on the continued service of our key design
engineering, sales, marketing and executive personnel and our ability to
identify, hire and retain additional personnel.
There is intense competition for qualified personnel in the semiconductor
industry, in particular design engineers, and we may not be able to continue to
attract and train engineers or other qualified personnel necessary for the
development of our business or to replace engineers or other qualified personnel
who may leave our employ in the future. Our anticipated growth is expected to
place increased demands on our resources and will likely
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require the addition of new management personnel and the development of
additional expertise by existing management personnel. Although we have entered
into an "at-will" employment agreement with David M. Rickey, the President and
Chief Executive Officer, we have not entered into fixed term employment
agreements with any of our executive officers except for one-year employment
agreements with Ram Sudireddy, Vice President, Cimaron, and Gary Martin, Vice
President and Chief Technical Officer, Cimaron. In addition, we have not
obtained key-person life insurance on any of our executive officers or key
employees. Loss of the services of, or failure to recruit, key design engineers
or other technical and management personnel could be significantly detrimental
to our product and process development programs.
We anticipate that we will need to raise additional capital in the future, and
we cannot be certain that additional debt, lease or equity financing will be
available on commercially reasonable terms or at all.
We require substantial working capital to fund our business, particularly
to finance inventories and accounts receivable and for capital expenditures. We
believe that our available cash, cash equivalents and short-term investments and
cash generated from operations, will be sufficient to meet our capital
requirements through the next 12 months, although we could be required, or could
elect, to seek to raise additional financing during this period. Our future
capital requirements will depend on many factors, including:
. the costs associated with the expansion of manufacturing operations;
. the rate of revenue growth;
. the timing and extent of spending to support research and development
programs and expansion of sales and marketing;
. the timing of introductions of new products and enhancements to existing
products; and
. market acceptance of our products.
Additionally, we may elect to acquire other businesses, which would entail
the issuance of stock and the payment of cash. We may elect to raise additional
cash to finance such transactions. We expect that we will need to raise
additional debt or equity financing in the future, primarily for purposes of
financing the acquisition of property for our proposed new wafer fabrication
facility, the construction of the proposed new wafer fabrication facility and
the purchase of equipment for the proposed new wafer fabrication facility.
We may not be able to protect our intellectual property adequately.
We rely in part on patents to protect our intellectual property. There can
be no assurance that our pending patent applications or any future applications
will be approved, or that any issued patents will provide us with competitive
advantages or will not be challenged by third parties, or that if challenged,
will be found to be valid or enforceable, or that the patents of others will not
have an adverse effect on our ability to do business. Furthermore, others may
independently develop similar products or processes, duplicate our products or
processes or design around any patents that may be issued to us.
To protect our intellectual property, we also rely on the combination of
mask work protection under the Federal Semiconductor Chip Protection Act of
1984, trademarks, copyrights, trade secret laws, employee and third-party
nondisclosure agreements and licensing arrangements. Despite these efforts, we
cannot be certain that others will not independently develop substantially
equivalent intellectual property or otherwise gain access to our trade secrets
or intellectual property, or disclose such intellectual property or trade
secrets, or that we can meaningfully protect our intellectual property.
Our business, operating results and financial condition could be materially
adversely affected by litigation involving patents and proprietary rights.
As a general matter, the semiconductor industry is characterized by
substantial litigation regarding patent and other intellectual property rights.
We have, in the past and may, in the future be notified that we may be
infringing the intellectual property rights of third parties. We have certain
indemnification obligations to customers
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with respect to the infringement of third-party intellectual property rights by
our products. We cannot be certain that infringement claims by third parties or
claims for indemnification by customers or end users of our products resulting
from infringement claims will not be asserted in the future or that such
assertions, if proven to be true, will not materially adversely affect our
business. On July 31, 1998, the Lemelson Medical, Education & Research
Foundation Limited Partnership filed a lawsuit in the U.S. District Court for
the District of Arizona against 26 companies, including us, engaged in the
manufacture and/or sale of IC products. The complaint alleges infringement by
the defendants of certain U.S. patents held by the Lemelson Partnership relating
to certain semiconductor manufacturing processes. On November 25, 1998, we were
served a summons pursuant to this lawsuit. The complaint seeks, among other
things, injunctive relief and unspecified treble damages. Previously, the
Lemelson Partnership has offered us a license under the Lemelson patents. We are
monitoring this matter and, although the ultimate outcome of this matter is not
currently determinable, we believe, based in part on the licensing terms
previously offered by the Lemelson Partnership, that the resolution of this
matter will not have a material adverse effect on our financial position or
liquidity; however, there can be no assurance that the ultimate resolution of
this matter will not have a material adverse effect on our results of operations
for any quarter. Furthermore, there can be no assurance that we would prevail in
any such litigation.
Any litigation relating to the intellectual property rights of third
parties, including the Lemelson Patents, whether or not determined in our favor
or settled by us, would at a minimum be costly and could divert the efforts and
attention of our management and technical personnel. In the event of any
adverse ruling in any such litigation, we could be required to pay substantial
damages, cease the manufacturing, use and sale of infringing products,
discontinue the use of certain processes or obtain a license under the
intellectual property rights of the third party claiming infringement. A
license might not be available on reasonable terms or at all.
Our operating results are subject to fluctuations because we rely substantially
on foreign customers.
International sales (including sales to Canada) accounted for 40%, 42% and
40% of revenues in fiscal 1997, fiscal 1998 and the first nine months of fiscal
1999, respectively. International sales may increase in future periods and may
account for an increasing portion of our revenues. As a result, an increasing
portion of our revenues may be subject to certain risks, including:
. changes in regulatory requirements;
. tariffs and other barriers;
. timing and availability of export licenses;
. political and economic instability;
. difficulties in accounts receivable collections;
. natural disasters;
. difficulties in staffing and managing foreign subsidiary and branch
operations;
. difficulties in managing distributors;
. difficulties in obtaining governmental approvals for communications and
other products;
. foreign currency exchange fluctuations;
. the burden of complying with a wide variety of complex foreign laws and
treaties; and
. potentially adverse tax consequences.
Although less than eight percent of our revenues were attributable to sales
in Asia during the nine months ended December 31, 1998, the recent economic
instability in certain Asian countries could adversely affect our business,
financial condition and operating results, particularly to the extent that this
instability impacts the sales of products manufactured by our customers. We are
also subject to the risks associated with the imposition of legislation and
regulations relating to the import or export of high technology products. We
cannot predict whether quotas, duties, taxes or other charges or restrictions
upon the importation or exportation of our products will be implemented by the
United States or other countries. Because sales of our products have been
denominated to date primarily in United States dollars, increases in the value
of the United States dollar could increase the price of our products so that
they become relatively more expensive to customers in the local currency of a
particular country,
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<PAGE>
leading to a reduction in sales and profitability in that country. Future
international activity may result in increased foreign currency denominated
sales. Gains and losses on the conversion to United States dollars of accounts
receivable, accounts payable and other monetary assets and liabilities arising
from international operations may contribute to fluctuations in our results of
operations. Some of our customer purchase orders and agreements are governed by
foreign laws, which may differ significantly from United States laws. Therefore,
we may be limited in our ability to enforce our rights under such agreements and
to collect damages, if awarded.
We could incur substantial fines or litigation costs associated with our
storage, use and disposal of hazardous materials.
We are subject to a variety of federal, state and local governmental
regulations related to the use, storage, discharge and disposal of toxic,
volatile or otherwise hazardous chemicals used in our manufacturing process. Any
failure to comply with present or future regulations could result in the
imposition of fines, the suspension of production or a cessation of operations.
In addition, these regulations could restrict our ability to expand our
facilities at the present location or construct or operate our planned wafer
fabrication facility or could require us to acquire costly equipment or incur
other significant expenses to comply with environmental regulations or clean up
prior discharges. Since 1993 we have been named as a potentially responsible
party, or PRP, along with a large number of other companies that used Omega
Chemical Corporation in Whittier, California to handle and dispose of certain
hazardous waste material. We are a member of a large group of PRPs that has
agreed to fund certain remediation efforts at the Omega site, which efforts are
ongoing. To date, our payment obligations with respect to these funding efforts
have not been material, and we believe that our future obligations to fund these
efforts will not have a material adverse effect on our business, financial
condition or operating results. Although we believe that we are currently in
material compliance with applicable environmental laws and regulations, we
cannot assure you that we are or will be in material compliance with these laws
or regulations or that our future obligations to fund any remediation efforts,
including those at the Omega site, will not have a material adverse effect on
our business.
Our ability to manufacture sufficient wafers to meet demand could be severely
hampered by a shortage of water.
We use significant amounts of water throughout our manufacturing process.
Previous droughts in California have resulted in restrictions being placed on
water use by manufacturers and residents in California. In the event of future
drought, reductions in water use may be mandated generally, and it is unclear
how such reductions will be allocated among California's different users. We
cannot be certain that near term reductions in water allocations to
manufacturers will not occur.
Our stock price is volatile.
The market price of our common stock has fluctuated significantly to date.
In addition, the market price of the common stock could be subject to
significant fluctuations due to general market conditions and in response to
quarter-to-quarter variations in:
. our anticipated or actual operating results;
. announcements or introductions of new products;
. technological innovations or setbacks by us or our competitors;
. conditions in the semiconductor, telecommunications, data
communications, ATE, high-speed computing or military markets;
. the commencement of litigation;
. changes in estimates of the Company's performance by securities
analysts;
. announcements of merger or acquisition transactions; and
. other events or factors.
In addition, the stock market in recent years has experienced extreme price
and volume fluctuations that have affected the market prices of many high
technology companies, particularly semiconductor companies, and
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<PAGE>
that have often been unrelated or disproportionate to the operating performance
of companies. These fluctuations, as well as general economic and market
conditions, may affect adversely the market price of our common stock.
If we are not adequately prepared for the transition to Year 2000, our business,
operating results and financial condition could suffer.
As a semiconductor manufacturer with our own wafer fabrication facility, we
are dependent on computer systems and manufacturing equipment with embedded
hardware or software to conduct our business. We have developed and are
currently executing a plan designed to make our computer systems, applications,
computer and manufacturing equipment and facilities Year 2000 ready. The plan
covers five stages including:
(i) inventory;
(ii) assessment;
(iii) remediation;
(iv) testing; and
(v) contingency planning.
The inventory and assessment stages were completed in March 1999. We will
primarily utilize internal resources to reprogram, or replace where necessary,
and test the software for Year 2000 modifications. The remediation, testing and
contingency planning stages are targeted to be completed in November 1999.
We have initiated communications with our critical external suppliers to
determine the extent to which we may be vulnerable to their failure to resolve
their own Year 2000 issues. Where practicable, we will assess and attempt to
mitigate our risks with respect to the failure of these entities to be Year 2000
ready. The effect, if any, on our results of operations from the failure of such
parties to be Year 2000 ready, is not reasonably estimable.
As of December 31, 1998, we have incurred and expensed approximately
$200,000 related to the Year 2000 project and expect to incur an additional
$700,000 on completing the Year 2000 project. Approximately one-half the costs
associated with the Year 2000 project will be internal resources that have been
reallocated from other projects, with the balance of costs reflecting
incremental spending for equipment and software upgrades. The costs of the Year
2000 Project will be funded through operating cash flows, with the cost of
internal resources expensed as incurred and the cost of equipment and software
upgrades capitalized or expensed in accordance with our policy on property and
equipment.
The costs of the project and the date on which we plan to complete the Year
2000 modifications are based on management's best estimates, which were derived
utilizing numerous assumptions of future events, including the continued
availability of certain resources, third party modification plans and other
factors. However, there can be no guarantee that these estimates will be
achieved, and actual results could differ materially from those plans. Among the
factors that might cause such material differences are:
. the availability and cost of personnel trained in this area;
. the ability to locate and correct all relevant computer codes; and
. the ability to identify and correct equipment with embedded hardware or
software and similar uncertainties.
The anti-takeover provisions of our certificate of incorporation and of the
Delaware General Corporation Law may delay, defer or prevent a change of
control.
Our board of directors has the authority to issue up to 2,000,000 shares of
preferred stock and to determine the price, rights, preferences and privileges
and restrictions, including voting rights, of those shares without any further
vote or action by our stockholders. The rights of the holders of common stock
will be subject to, and may be adversely affected by, the rights of the holders
of any shares of preferred stock that may be issued in the future. The issuance
of preferred stock may delay, defer or prevent a change in control of AMCC, as
the terms of the preferred
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<PAGE>
stock that might be issued could potentially prohibit our consummation of any
merger, reorganization, sale of substantially all of our assets, liquidation or
other extraordinary corporate transaction without the approval of the holders of
the outstanding shares of preferred stock. In addition, the issuance of
preferred stock could have a dilutive effect on stockholders of AMCC. Section
203 of the Delaware General Corporation Law, to which we are subject, restricts
certain business combinations with any "interested stockholder" as defined by
this statute. The statute may also delay, alter or prevent a change of control.
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<PAGE>
USE OF PROCEEDS
The proceeds from the sale of the common stock offered by this prospectus
are solely for the account of the selling shareholders. We will not receive any
proceeds from the sale of these shares.
ISSUANCE OF COMMON STOCK TO SELLING STOCKHOLDERS
On March 17, 1999, we issued 2,908,587 shares of our common stock to the
shareholders of Cimaron Communications Corporation pursuant to a merger
agreement. Under the terms of the merger agreement, Cimaron Communications
Corporation became our wholly-owned subsidiary.
PLAN OF DISTRIBUTION
Shares of common stock offered by this prospectus may be offered and sold
from time to time by the selling stockholders. The selling stockholders will
act independently of us in making decisions with respect to the timing, manner
and size of each sale. Such sales may be made on the Nasdaq National Market or
otherwise, at prices and under terms then prevailing or at prices related to the
then current market price or in negotiated transactions, including pursuant to
one or more of the following methods:
. purchases by a broker-dealer as principal and resale by such broker-
dealer for its own account pursuant to this prospectus;
. ordinary brokerage transactions and transactions in which the broker
solicits purchasers;
. block trades in which the broker-dealer so engaged will attempt to sell
the shares as agent but may position and resell a portion of the block
as principal to facilitate the transaction; and
. in privately negotiated transactions.
In connection with distributions of the shares or otherwise, the selling
stockholders may enter into hedging transactions with broker-dealers or other
financial institutions. In connection with such transactions, broker-dealers or
other financial institutions may engage in short sales of the common stock in
the course of hedging the positions they assume with selling stockholders. The
selling stockholders may also sell the common stock short and redeliver the
shares to close out such short positions. The selling stockholders may also
enter into option or other transactions with broker-dealers or other financial
institutions which require the delivery to such broker-dealer or other financial
institution of shares offered by this prospectus, which shares such broker-
dealer or other financial institution may resell pursuant to this prospectus (as
supplemented or amended to reflect such transaction). The selling stockholders
may also pledge shares to a broker-dealer or other financial institution, and,
upon a default, such broker-dealer or other financial institution, may effect
sales of the pledged shares pursuant to this prospectus (as supplemented or
amended to reflect such transaction). The selling stockholders and any
underwriters, dealers or agents who participate in the distribution of the
shares may be deemed to be "underwriters" under the Securities Act of 1933. Any
discount, commission or concession received by such persons might be deemed to
be an underwriting discount or commission under the Securities Act. We have
agreed to indemnify the selling stockholders against certain liabilities arising
under the Securities Act.
Certain of the selling stockholders may distribute their shares from time
to time to their limited and/or general partners, who may sell shares pursuant
to this prospectus. In addition, each selling stockholder may also transfer
shares owned by him or her by gift and, upon the transfer, the donee would have
the same rights of sale as the selling stockholder under this prospectus.
The selling stockholders may pay selling commissions or brokerage fees with
respect to the sale of the common stock offered by this prospectus. Each
selling stockholder will also pay all applicable transfer taxes incurred in
connection with the sale of shares.
We have advised the selling stockholders that the anti-manipulation rules
under the Securities Exchange Act of 1934 may apply to sales of the shares
offered by this prospectus in the market, and to their own activities
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and those of their affiliates. The selling stockholders have advised us that
during the time they are engaged in attempting to sell the shares offered by
this prospectus, they will:
. not engage in any stabilization activity in connection with any of our
securities;
. provide copies of this prospectus to each person to whom shares may be
offered, and to each broker-dealer, if any, through whom shares are offered;
. not bid for or purchase any of our securities or any rights to acquire
our securities, or attempt to induce any person to purchase any of our
securities or rights to acquire our securities other than as permitted under the
Exchange Act;
. not effect any sale or distribution of the shares offered hereby until
after the prospectus has been appropriately amended or supplemented, if
required; and
. effect all sales, distributions or gifts of shares in accordance with
this plan of distribution.
We have agreed to maintain the effectiveness of this registration statement
until March 17, 2000. No sales may be made pursuant to this prospectus after
the expiration date unless we amend or supplement this prospectus to indicate
that we have agreed to extend the period of effectiveness. The selling
stockholders may sell all, some or none of the shares offered by this
prospectus.
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SELLING STOCKHOLDERS
The following table sets forth certain information as of March 31, 1999
with respect to the selling stockholders. The following table assumes that the
selling stockholders sell all of the shares offered by this prospectus. We are
unable to determine the exact number of shares that actually will be sold.
The number and percentage of shares beneficially owned is based on a total
of 26,612,069 shares outstanding at March 31, 1999 determined in accordance with
Rule 13d-3 of the Exchange Act. The information is not necessarily indicative
of beneficial ownership for any other purpose. Under Rule 13d-3, beneficial
ownership includes any shares as to which an individual has sole or shared
voting power or investment power, and also includes shares which an individual
has the right to acquire within 60 days of March 31, 1999 through the exercise
of any stock option or other right. Unless otherwise indicated in the
footnotes, each person has sole voting and investment power (or shares such
powers with his or her spouse) with respect to the shares shown as beneficially
owned.
<TABLE>
<CAPTION>
Shares Beneficially Owned Shares Beneficially
Prior Shares Offered by Owned After
Selling Stockholder to the Offering this Prospectus(1) the Offering
- ------------------ --------------------------------- ----------------- -------------------------
Number Percent Number Percent
------ ------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Matrix Partners(2) 795,200 2.99% 795,200 0 *
Greylock IX, Limited Partnership 789,236 2.97 789,236 0 *
Ramakrishna Sudireddy 321,936 1.21 321,936 0 *
Gary Martin 278,817 1.05 278,817 0 *
Gururaj Deshpande 115,934 * 115,934 0 *
Charles Waite 73,845 * 73,845 0 *
Shahrukh Merchant 68,788 * 68,788 0 *
Christos Skalkos 65,604 * 65,604 0 *
Steve Boulanger 62,097 * 62,097 0 *
John LoMedico 62,097 * 62,097 0 *
John Langevin 32,802 * 32,802 0 *
Other former Cimaron stockholders as a 243,224 * 242,230 994 *
group(3)
</TABLE>
______________________________
(1) Of the total shares of common stock listed as owned by the selling
stockholders, a total of 290,858 shares are held in an escrow account to
secure indemnification obligations of the selling stockholders to us. It
is expected that these shares (less any shares that may be distributed from
the escrow account to us in satisfaction of indemnification claims) will be
released from escrow and distributed to the selling stockholders no later
than June 30, 1999. The number of shares indicated as owned by each
selling stockholder includes those shares (representing 10% of the number
of shares listed as beneficially owned by each selling stockholder) which
such selling stockholder is entitled to receive upon distribution of these
shares from the escrow account.
(2) Includes 715,680 shares owned by Matrix Partners V, LP and 79,520 shares
owned by Matrix V Entrepreneurs Fund, LP.
(3) Includes 994 shares issuable upon exercise of options that will have vested
as of May 29, 1999.
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Except as described below, none of the selling stockholders in the above
table has had any material relationship, other than as an employee or
consultant, with us or any of our predecessors or affiliates within the last
three years:
. Prior to the merger of Cimaron Communications Corporation with AMCC,
pursuant to which Cimaron became our wholly owned subsdiary, the following
selling stockholders had the following material relationships with Cimaron:
. Ramakrishna Sudireddy, President and Chief Executive Officer,
Director;
. Gary Martin, Vice President and Chief Technical Officer, Director;
. Charles Waite, Vice President of Operations;
. Steve Boulanger, Vice President and Chief Financial Officer;
. John LoMedico, Vice President of Sales and Marketing;
. Gururaj Deshpande, Director;
. Greylock IX Limited Partnership owned more than 10% of the
outstanding stock of Cimaron and David Aronoff, a general partner of
Greylock was a director of Cimaron; and
. Matrix Partners V, L.P. and Matrix V Entrepreneurs Fund, L.P., owned
more than 10% of the outstanding stock of Cimaron and Timothy
Barrows, a general partner of both Matrix partnerships, was a
director of Cimaron.
. Following the merger, Mr. Sudireddy became the Vice President, Cimaron and
Mr. Martin became the Vice President and Chief Technical Officer, Cimaron.
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LEGAL MATTERS
The validity of the issuance of the common stock offered by this prospectus
will be passed upon by Venture Law Group, A Professional Corporation, Menlo
Park, California, counsel to Applied Micro Circuits Corporation.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements and schedule included in our Annual Report on Form 10-K for
the year ended March 31, 1998, as set forth in their report, which is
incorporated by reference in this prospectus and elsewhere in the registration
statement. Our financial statement and schedule are incorporated by reference in
reliance on Ernst & Young LLP's report, given on their authority as experts in
accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
This prospectus is part of a registration statement on Form S-3 that we
filed with the Securities and Exchange Commission. Certain information in the
registration statement has been omitted from this prospectus in accordance with
the rules of the SEC. We file proxy statements and annual, quarterly and
special reports and other information with the SEC. You can inspect and copy
the registration statement as well as the reports, proxy statements and other
information we have filed with the SEC at the public reference room maintained
by the SEC at 450 Fifth Street, N.W., Washington, D.C., and at the SEC Regional
Offices located at Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511 and 7 World Trade Center, Suite 1300, New York, New
York 10048. You can call the SEC at 1-800-732-0330 for further information
about the public reference rooms. We are also required to file electronic
versions of these documents with the SEC, which may be accessed from the SEC's
World Wide Web site at http://www.sec.gov. Reports, proxy and information
statements and other information concerning Applied Micro Circuits Corporation
may be inspected at The Nasdaq Stock Market at 1735 K Street, N.W., Washington,
D.C. 20006.
The SEC requires us to "incorporate by reference" certain of our publicly-
filed documents into this prospectus, which means that information included in
those documents is considered part of this prospectus. Information that we file
with the SEC after the effective date of this prospectus will automatically
update and supersede this information. We incorporate by reference the
documents listed below and any future filings made with the SEC under Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act, until the selling stockholders
have sold all the shares, or until we terminate the effectiveness of this
registration statement.
The following documents filed with the SEC are incorporated by reference in
this prospectus:
1. Our Annual Report on Form 10-K for the year ended March 31, 1998, (File
No 0-23193), as amended by Form 10-K/A.
2. Our definitive Proxy Statement dated June 15, 1998, filed in connection
with our 1998 Annual Meeting of Stockholders.
3. Our Quarterly Reports on Form 10-Q, as amended, for the quarters ended
December 31, 1998, September 30, 1998, and June 30, 1998, (File No. 0-23193).
4. Our Current Reports on Form 8-K, filed with the SEC on April 18, 1999
(File No. 0-23193).
5. The description of our common stock in our Registration Statement on
Form 8-A filed with the SEC on October 10, 1997, (File No. 0-23193), including
any amendments or reports filed for the purpose of updating such description.
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6. All of the filings pursuant to the Exchange Act after the date of
filing the original Registration Statement and prior to the effectiveness of the
Registration Statement.
We will furnish without charge to you, on written or oral request, a copy
of any or all of the documents incorporated by reference, other than exhibits to
those documents. You should direct any requests for documents to Joel Holliday,
6290 Sequence Drive, San Diego, CA 92121, telephone: (619) 450-9333.
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