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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 2000
or
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ...... to ......
Commission file number 0-19654
VITESSE SEMICONDUCTOR CORPORATION
(Exact name of registrant as specified in its charter)
Delaware No. 77-0138960
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
741 Calle Plano, Camarillo, CA 93012
(Address of principal executive offices)
Registrant's telephone number, including area code: (805) 388-3700
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.01 Par Value
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [_]
The aggregate market value of the voting stock held by non-affiliates of the
registrant, based upon the closing sale price of the Common Stock on September
30, 2000 as reported on the Nasdaq National Market, was approximately
$15,886,782,358. Shares of Common Stock held by each officer and director and
by each person who owns 5% or more of the outstanding Common Stock have been
excluded in that such persons may be deemed to be affiliates. This
determination of affiliate status is not necessarily a conclusive determination
for other purposes.
As of November 30, 2000, the registrant had outstanding 180,530,388 shares of
Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
Annual Report to Security Holders for fiscal year ended September 30, 2000
(incorporated into Parts II and IV hereof).
Definitive Proxy Statement relating to the Company's Annual Meeting of
Stockholders to be held on January 23, 2001 (incorporated into Part III hereof).
Registration Statement on Form S-1 effective December 10, 1991 (incorporated
into Part IV hereof).
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PART I
Item 1. Business
Certain statements in this Annual Report on Form 10-K, including certain
statements contained in "Business Strategy" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations," constitute
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933, as amended (the "Securities Act"), and Section 21E of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). Such forward-
looking statements involve known and unknown risks, uncertainties and other
factors which may cause the actual results, performance or achievements of
Vitesse Semiconductor Corporation ("the Company") to be materially different
from any future results, performance or achievements expressed or implied by
such forward-looking statements. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Factors Affecting Future
Operating Results" for certain factors that could cause actual results to differ
materially from these forward-looking statements.
The Company is a leading supplier of high-performance integrated circuits
("ICs") principally targeted at systems manufacturers in the communications
markets. Over the past few years the proliferation of the Internet and the
explosive growth in volume of data being sent over local and wide area networks
has placed a tremendous strain on the networking infrastructure. The demand for
increased bandwidth has resulted in a need for both faster as well as more
expansive networks. Additionally, there has been a growing trend towards the
outsourcing of IC design and manufacture by systems companies to suppliers such
as Vitesse. These and other factors have led to an increasing demand for high
performance ICs.
We are also a supplier of ICs to other markets such as the automatic test
equipment ("ATE") market. In fiscal 2000, sales of communications and ATE
products represented 89% and 11%, respectively, of the Company's total revenues.
The Company's major customers include Alcatel, Ciena, Cisco, Fujitsu, LTX,
Lucent, Nortel, Sycamore and Tellabs.
Vitesse was incorporated in the State of Delaware in 1987. The Company's
principal offices are located at 741 Calle Plano, Camarillo, California, and its
phone number is (805) 388-3700.
Background
Communications
Public communications networks, such as those used by interexchange long
distance carriers ("IXCs") and local exchange carriers ("LECs") and specialized
networks such as those used by Internet service providers, are experiencing
dramatic growth in traffic. The volume of information required to be
transmitted across public networks has increased significantly in recent years
as a result of a variety of factors, including the increase in data transmission
and facsimile use, the rapid growth of the Internet, the increase in demand for
high speed interconnectivity between wide area networks ("WANs"), metropolitan
area networks ("MANs") and local area networks ("LANs"), and the growing demand
for remote network access. Public network service providers have been required
to upgrade their infrastructure to provide high-speed data services to customers
to meet these needs in addition to providing their standard telephone services.
Infrastructure improvements to public networks have most prominently included a
dramatic increase in the deployment of fiber optic technology to replace
conventional copper wire. Since optical fiber offers substantially greater
capacity, is less error prone and is easier to administer than copper wire, it
has become the transmission medium of choice for IXCs and, increasingly, LECs.
SONET (Synchronous Optical Network) in the United States and the equivalent
SDH (Synchronous Digital Hierarchy) in the rest of the world are the primary
standards for high-speed optical fiber transmission. The SONET/SDH standard
facilitates high data integrity and improved performance in terms of network
reliability and reduces maintenance and other operations costs by standardizing
interoperability among different vendors' equipment.
More recently, the demand for system bandwidth is being addressed by
transmitting multiple channels on a single fiber by a technique called
wavelength division multiplexing ("WDM"). The adoption of WDM has enabled
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system operators to significantly increase system bandwidth without having to
deploy additional fiber cables, a long and costly process. While WDM increases
the bandwidth carried by each optical fiber, it does not reduce the number of
electronic components required. Instead, WDM has accelerated the growth of
SONET/SDH deployment by eliminating fiber installation as a growth limiter.
Among the standards and protocols that have emerged to address the increase
in volume and complexity of data flowing through today's networks are
Asynchronous Transfer Mode ("ATM") and Internet Protocol ("IP"). ATM is based on
fixed-size packets, called cells, and is designed to efficiently integrate
voice, data and video and easily scale bandwidth. IP is a packet-based protocol
that is generally accepted as the industry standard for LAN data transfer and is
being increasingly used in MANs and WANs as well. Both ATM and IP packet
switching network technologies are being deployed over optical networks based on
the complementary SONET/SDH standards, known as ATM over SONET and Packet over
SONET ("POS"). Fiber optic applications designed to the SONET/SDH and ATM
standards use data transmission rates of 155 MHz, 622 MHz, 2.5 GHz or 10 GHz.
Performance improvements in processors and peripherals, along with the
transition to distributed architectures such as client/server and external
storage area networks ("SANs"), have spawned the need for very high speed data
interconnect and networking applications. This has led to a focus on the
methods of inter-connecting high-performance computers, peripheral equipment,
storage devices and networks.
The Fibre Channel standard is a practical, inexpensive, yet expandable
method for achieving high-speed data transfer among workstations, mainframes,
data storage devices and other peripherals. The Fibre Channel standard addresses
the need for very fast transfers of large volumes of information, while at the
same time relieving system manufacturers from the burden of supporting the
variety of networks and channels currently in place. Fibre Channel is especially
effective in situations where large blocks of data must be transferred within
and between buildings and over campus environments. Fibre Channel is capable of
transmitting at rates exceeding 1 gigabit per second in both directions
simultaneously and is also able to transport existing protocols over both
optical fiber and copper wire.
In the LAN environment, Ethernet is currently the most widespread standard,
operating at 10 to 100 megabits per second. However, LAN backbones are rapidly
being upgraded to Gigabit Ethernet and ATM in order to increase available
bandwidth. These network protocols, which enable expanded bandwidth in excess
of one gigabit per second, are emerging as the new standards for LAN backbones.
All of these trends in the communications market have resulted in increased
demand for communication ICs to meet the speed, performance and bandwidth
requirements of high-performance systems.
Strategy
The Company's strategy includes the following elements:
Target Growing Markets
Vitesse targets emerging high-growth areas in the communications market
such as SONET/SDH, ATM, IP, Fibre Channel, and Gigabit Ethernet, which require
ICs that are capable of high-bandwidth data transmission.
Reduce Costs of High-Performance Products
The Company continually strives to reduce the cost of its high-performance
products by increasing manufacturing yields, decreasing die sizes, and
integrating multiple functions onto a single chip.
Provide Complete Customer Solutions
One of the key elements of the Company's strategy is to address, in
addition to the physical layer, upper layers of high-performance communications
systems such as the switching and processing layers. This provides customers
with complete chip solutions for major portions of their hardware. Further, it
enables the Company to build defensible barriers against competitors who only
offer a partial or single circuit solution.
Develop "Technology Transparent" Products
The Company believes that there are a variety of process technologies
available to meet the requirements of the broad range of products that its
customers need. The Company endeavors to offer chip solutions to its customers
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using the most appropriate process technology for the particular application.
In addition to its internal wafer fabrication facilities, the Company
subcontracts its CMOS products to three state-of-the-art semiconductor
foundries. The Company intends to qualify other process technologies and
foundries in the future.
Establish Close Relationships with Customers' Engineering Management
The Company establishes close relationships with its customers' engineering
management and believes these relationships enable it to better understand the
customers' needs and win designs for existing and new systems.
Pursue Strategic Acquisitions
The Company frequently evaluates opportunities to enhance its products and
technologies through the acquisition of complementary products, technologies and
businesses. In fiscal 2000, the Company completed four such acquisitions.
Products and Customers
Communications
The Company offers several products that address the needs of
high-performance communications systems at the 622 Mb/s, 1.0 Gb/s, 1.25 Gb/s,
2.5 Gb/s and 10 Gb/s data rates for the SONET, ATM, IP, Fibre Channel and
Gigabit Ethernet markets. These products support the increasing speed
requirements of transmission channels and the transmission of multiple channels
on a single fiber. Today, most SONET systems utilize the 2.5 Gb/s (OC-48)
standard, though use of the 10 Gb/s (OC-192) standard is growing very rapidly.
The Company developed its first 2.5 Gb/s ICs in 1987 and today has a wide range
of 2.5 Gb/s ICs in the SONET market. Among the products offered in this area are
multiplexers, demultiplexers, framers, switch cores, clock generation and
recovery circuits, forward error correction circuits, laser drivers
optoelectronic receivers and amplifiers. These cost effective solutions for
transmission, control and switching provide wide design margins, increased
integration and overall lower system costs to the communications market.
Today's internet data networking systems require ever increasing levels of
integration, functionality and performance to meet stringent customer
requirements for higher bandwidth, reduced cost and shorter time to market. In
order to meet this challenge, complete line card and switch fabric chip set
solutions are being demanded from suppliers. The Company is addressing this
need with an expanding set of POS/ATM framers, ethernet Media Access
Controllers, packet processors and switch fabrics, which are designed for high
performance switch and router applications. These products address the need for
high bandwidth ports supporting STS-12, STS-48, STS-192 and Gigabit Ethernet and
allow aggregate system bandwidths from 20 Gb/s to greater than 1 Tb/s. The
recent acquisition of Orologic, Inc., and SiTera Incorporated has added traffic
management and network processor technology to the Company, forming the core of
packet processing components.
The Company's Fibre Channel ICs allow for the very fast transfer of large
volumes of data in SANs, JBOD ("Just a Bunch of Disks") and RAID ("Redundant
Array of Inexpensive Disks") subsystems, and peripheral devices, surpassing the
capacity of today's SCSI interfaces.
The entire line of the Company's Fibre Channel ICs focuses on eliminating
bandwidth bottlenecks in SANs, monitoring of vital statistics within the system,
and supplanting SCSI devices in today's fastest networks. The Company's range
of ICs for disk drives, hub and repeaters, host adapters, JBOD and RAID systems,
port bypass circuits and switches service the Fibre Channel market with high
bandwidth solutions for copper, fiber optic and backplane interconnects. The
Company has developed 2.0 Gb/s ICs designed to increase bandwidth and further
reduce bottlenecks in the storage marketplace. The Company has also developed
physical layer interface products for the Gigabit Ethernet market. These
Gigabit Ethernet products are designed to increase the bandwidth of LAN
backbones to 1.25 Gb/s as new standards for LAN backbones emerge.
The Company offers a line of gigabit analog chipsets for fiber optic
interfaces. Its 622 Mb/s, 1.0 Gb/s and 2.5 Gb/s ICs are utilized in SONET/SDH,
Gigabit Ethernet, and Fibre Channel subsystems. The Company introduced the
first low power, high-volume optoelectronic IC in 1995. These small ICs reduce
board space requirements and lower overall system costs. Vitesse is currently
expanding its higher speed optoelectronic product line to meet rapidly emerging
datacom and telecom requirements.
Today's system designers need to overcome the limitations of parallel
interfaces used in system backplanes, such as timing problems, impedance
matching and physical size. The Company's backplane products utilize a serial
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approach and eliminate limitations by supplying compact and simple
interconnects. The Company also supplies a series of crosspoint switches for use
in telecom and datacom applications. These backplane and switch ICs synchronize
buffering across bits, words, or channels to eliminate data skew.
Communications products accounted for 89% and 81% of the Company's total
revenues for fiscal 2000 and 1999, respectively. In fiscal 2000, the Company's
significant communications customers included Alcatel, Ciena, Cisco, Fujitsu,
IBM, Lucent, NEC, Sun Microsystems and Tellabs.
Automated Test Equipment
ATE products accounted for 11% and 19% of the Company's total revenues for
fiscal 2000 and fiscal 1999, respectively. Vitesse provides both custom and
standard products that offer a combination of high complexity, low power
dissipation and high speed for ATE. In fiscal 2000, the Company's significant
ATE customers included Ando, Hewlett Packard, LTX, Schlumberger and Teradyne.
The Company's ten largest customers accounted for approximately 61% and 66%
of total revenues in fiscal 2000 and fiscal 1999, respectively. In fiscal 2000
and fiscal 1999, sales to Lucent accounted for 15% and 18%, of the Company's
total revenues. No other customer accounted for more than 10% of the Company
total revenues in fiscal 2000.
Process Technology
The Company uses Gallium Arsenide ("GaAs") as the substrate in the internal
manufacturing of its products. GaAs has inherent physical properties which
allow electrons to move several times faster than within silicon. This higher
electron mobility provides the Company with the flexibility to manufacture ICs
that operate at much higher speeds than silicon devices or to operate at the
same speeds with reduced power consumption. The Company employs proprietary H-
GaAs process technology based on a refractory metal self-aligned gate ("SAG")
process. SAG technology is universally used in the manufacture of complex
silicon ICs. The process structure and logic implementation of the Company's
GaAs ICs are similar to traditional silicon MOS process.
Manufacturing
Wafer Fabrication
The Company fabricates four-inch wafers at its Camarillo, California plant
in a 6,000 square foot clean room, which has a rating of Class 10 (meaning there
are fewer than ten particles larger than 0.5 micron per cubic foot of air). In
1998 the Company started fabricating six-inch wafers at a newly constructed
plant in Colorado Springs, Colorado which includes a 10,000 square foot Class 1
clean room. Wafer fabrication equipment used by the Company is generally
identical to that used in a sub-micron silicon MOS fabrication facility. Process
technology is generally similar to that used in advanced sub-micron silicon
process technologies, with certain modifications necessary to accommodate GaAs
material properties.
As is typically the case with semiconductor manufacturing, the Company's
manufacturing yields vary significantly among products, depending on the
product's complexity and the Company's experience in manufacturing the
particular ICs. While the Company's process technology utilizes standard
silicon semiconductor manufacturing equipment, aggregate production quantities
have been relatively low and the process technology is significantly less
developed than silicon process technology used by competitors. This leads to
overall yields lower than levels typically achieved in the silicon process. The
Company expects that many of its current and future products may never be
produced in high volume.
Regardless of the process technology used, the fabrication of ICs is a
highly complex and precise process. Defects in masks, impurities in the
materials used, contamination of the manufacturing environment, equipment
failure and other difficulties in the fabrication process can cause a
substantial percentage of wafers to be rejected or numerous die on each wafer to
be non-functional.
By utilizing standard silicon IC manufacturing equipment the Company is
able to employ developments in silicon manufacturing technology to continue to
improve minimum feature size, dimension control, deposition and etch
capabilities. By eliminating the need for "custom" wafer fabrication equipment,
the Company can focus its
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resources on developing leading process technology rather than on developing
expensive customized manufacturing equipment.
The Company outsources the manufacturing of its silicon-based products to
suppliers that deliver either finished wafers or fully assembled and tested
products. The Company's semiconductor subcontractors include IBM, Taiwan
Semiconductor Manufacturing Corporation, LSI Logic, and NEC.
Assembly and Test
The Company outsources its IC packaging to third parties. For final
testing, the Company utilizes advanced automated VLSI testers and has
constructed several custom testers. However, in many cases, the Company cannot
test its products at full speed and must rely on numerous sub-circuit path
measurements to determine the performance of the IC.
Components and Raw Materials
The Company manufactures its products using a variety of components
procured from third-party suppliers. All of the Company's integrated circuits
are packaged by third parties. Certain components, materials and services are
available from only a limited number of sources. GaAs substrates and other raw
materials and equipment used in the production of the Company's ICs are
available from several suppliers. Although lead times are occasionally extended
in the industry, the Company has not experienced any material difficulty in
obtaining raw materials or assembly services.
Engineering, Research and Development
The market for the Company's products is characterized by rapid changes in
both GaAs and silicon process technologies. Because of continual improvements
in these technologies, the Company believes that its future success will depend
largely on its ability to continue to improve its product and process
technologies, to develop new technologies in order to maintain the performance
of its products relative to competitors, to adapt its products and process
technologies to technological changes and to adopt emerging industry standards.
Product Research and Development
The Company's present product research and development efforts are focused
on developing new products for its communications and ATE product lines.
Considerable design effort is being expended to increase the speed and
complexity and reduce the power dissipation of the Company's products.
Process Research and Development
The Company has implemented H-GaAs IV, a 0.4 micron GaAs FET technology
that offers higher complexity and lower power dissipation than previous Vitesse
technologies. The Company is currently engaged in research and development
projects focused on other process-related improvements to increase yields and
improve the speed, complexity and power dissipation characteristics of its
devices.
The Company's engineering, research and development expenses in fiscal
2000, 1999 and 1998 were $86.2 million, $57.3 million and $37.0 million,
respectively.
Competition
The high-performance communications IC market is highly competitive and
subject to rapid technological change, price erosion and heightened
international competition. The Company currently competes primarily directly
with the following categories of companies:
. High-performance integrated circuit suppliers such as Applied Micro
Circuits Corporation, Broadcom, Conexant, Hewlett Packard, Intel, Lucent
Technologies, Motorola, and PMC Sierra.
. Internal integrated circuit design units of systems companies such as Cisco
Systems, Fujitsu, and Lucent Technologies.
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Many of these companies have substantially greater marketing, financial,
technical and manufacturing resources than those of the Company.
Competition in the Company's markets is primarily based on
price/performance, product quality and the ability to deliver products in a
timely fashion. Product qualification is typically a lengthy process and some
prospective customers may be unwilling to invest the time or expense necessary
to qualify suppliers such as the Company. Prospective customers may also have
concerns about the relative advantages of our products compared to more familiar
silicon-based semiconductors. Further, customers may also be concerned about
relying on a relatively small company for a critical sole-sourced component. To
the extent that the Company fails to overcome these challenges, there could be
material adverse effects on the Company's business and financial results.
Sales and Customer Support
The Company's principal method of selling its products is through direct
sales to systems manufacturers by the Vitesse sales force. In certain markets
such as Japan, the Company also sells through value-added distributors.
Because of the large engineering support required in connection with the
sale of high performance ICs, the Company provides its customers with field
engineering support as well as engineering support from the Company's
headquarters. Typically, a field engineer will accompany a salesperson to the
initial customer visit to understand and evaluate the customer's requirements.
The salesperson and field engineer will determine whether additional engineering
analysis will be required by engineers based at the Company's headquarters. The
Company's sales cycle is typically lengthy and requires the continued
participation of salespersons, field engineers, engineers based at the Company's
headquarters, and senior management.
The Company's sales headquarters is located in Camarillo, California. The
Company has 12 additional sales and field application support offices in the
United States, and one each in Canada, France, Germany, Italy, Japan and United
Kingdom.
The Company generally warrants its products against defects in materials
and workmanship for a period of one year.
Licenses and Patents
The Company has been awarded 21 U.S. patents for various aspects of design
and process innovations used in the design and manufacture of its products. The
Company has three patent applications pending in several countries in Europe and
is preparing to file several more patent applications. The Company believes that
patents are of less significance in its industry than such factors as technical
expertise, innovative skills and the abilities of its personnel.
As is typical in the semiconductor industry, the Company has, from time to
time, received, and may receive in the future, letters from third parties
asserting patent rights, maskwork rights or copyrights on certain of the
Company's products and processes. None of the claims to date has resulted in
the commencement of any litigation against the Company nor has the Company to
date believed it is necessary to license any of the patent rights referred to in
such letters.
Backlog
Vitesse's sales are made primarily pursuant to standard purchase orders for
delivery of products. Quantities of the company's products to be delivered and
delivery schedules are frequently revised to reflect changes in customer needs.
For these reasons, the Company's backlog as of any particular date is not
representative of actual sales for any succeeding period and the Company
therefore believes that backlog is not a good indicator of future revenue.
Environmental Matters
The Company is 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 its manufacturing
process. Any failure to comply with present or future regulations could result
in the imposition of fines on the Company, the suspension of production or a
cessation of operations. In addition, such regulations could restrict the
Company's ability to expand its facilities at its present location or operate
its manufacturing facility in Colorado Springs, Colorado, or could require the
Company to acquire costly equipment or incur other significant expenses to
comply with environmental regulations or clean up prior discharges.
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Employees
As of September 30, 2000, the Company had 1,105 employees, including 547 in
engineering, research and development, 114 in marketing and sales, 393 in
operations and 51 in finance and administration. The Company's ability to
attract and retain qualified personnel is essential to its continued success.
None of the Company's employees is represented by a collective bargaining
agreement, nor has the Company ever experienced any work stoppage. The Company
believes its employee relations are good.
Item 2. Properties
The Company's executive offices and principal research and development and
fabrication facility is located in Camarillo, California, and is being leased
under a noncancellable operating lease that expires in 2009. The total space
occupied in this building is approximately 111,000 square feet. The Company has
a second wafer fabrication facility in Colorado Springs, Colorado that is being
leased under a synthetic lease that expires in 2001. This facility includes a
10,000 square foot clean room for wafer fabrication, and a product development
center. The Company has the option to purchase this facility at cost at the end
of the lease term. The Company leases an additional 45,000 square feet in
Camarillo for product development and 21,000 square feet in Santa Clara,
California for product development and sales offices. The Company also leases
space for twelve other product development centers in California, Colorado,
Denmark, Florida, Massachusetts, Minnesota, New Jersey, New Hampshire, North
Carolina, Oregon, Texas, and Vermont, and 18 sales and field application support
offices (12 in the United States, one in Canada, four in Europe and one in
Japan).
Item 3. Legal Proceedings
The Company is currently involved in several legal proceedings; however, it
believes that resolution of these matters, if resolved against the Company,
would not have a material and adverse affect on the Company.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.
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PART II
Item 5. Market for Company's Common Stock and Related Stockholder Matters
The information required by this item appears on page 17 of the Company's
2000 Annual Report to Shareholders and is incorporated herein by reference.
Item 6. Selected Financial Data
The selected financial data for each of the five years ended September 30,
2000, appears on page 17 of the Company's 2000 Annual Report to Shareholders and
is incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The information required by this item appears on pages 18 to 26 of the
Company's 2000 Annual Report to Shareholders and is incorporated herein by
reference.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
At September 30, 2000, the Company's long-term debt consisted primarily of
convertible subordinated debentures with interest at a fixed rate.
Consequently, the Company does not have significant cash flow exposure on its
long-term debt.
Item 8. Financial Statements and Supplementary Data
Information required by this item is included in pages 28 to 42 of the
Company's 2000 Annual Report to Shareholders, and is incorporated herein by
reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
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PART III
Item 10. Directors and Executive Officers of the Registrant
The directors and executive officers of the Company are as follows:
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Name Age Position
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Louis R. Tomasetta 51 President and Chief Executive Officer, Director
Ira Deyhimy 60 Vice President, Product Development
Christopher R. Gardner 40 Vice President & General Manager, Telecommunications
Eugene F. Hovanec 48 Vice President, Finance & Chief Financial Officer
Michael Logan 51 Vice President, Sales
James Mikkelson 52 Vice President, Technology Devel., Chief Technical Officer
Yatin Mody 37 Vice President, Controller
Vincent Chan 52 Director
James A. Cole 58 Director
Alex Daly 39 Director
Pierre R. Lamond 70 Chairman of the Board
John C. Lewis 65 Director
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Louis R. Tomasetta, a co-founder of the Company, has been President, Chief
Executive Officer and a Director since the Company's inception in February 1987.
From 1984 to 1987, he served as President of the integrated circuits division of
Vitesse Electronics Corporation. Prior to that, Dr. Tomasetta was the director
of the Advanced Technology Implementation department at Rockwell International
Corporation. Dr. Tomasetta has over 25 years experience in the management and
development of GaAs based businesses, products, and technology. He received
B.S., M.S., and Ph.D. degrees in electrical engineering from the Massachusetts
Institute of Technology.
Ira Deyhimy, a co-founder of the Company, has been Vice President of
Product Development since the Company's inception in February 1987. From 1984 to
1987, he was Vice President, Engineering at Vitesse Electronics Corporation.
Prior to that, Mr. Deyhimy was manager of Integrated Circuit Engineering at
Rockwell International Corporation. Mr. Deyhimy has over 25 years experience in
GaAs electronics. Mr. Deyhimy holds a B.S degree in physics from the University
of California at Los Angeles and a M.S. degree in physics from the California
State University at Northridge.
Christopher R. Gardner joined the Company in February 1987 and held various
engineering and engineering management positions through September 1996 when he
became Vice President & General Manager, ATE. In April 1999, he became Vice
President & General Manager, Telecommunications. Prior to 1987, Mr. Gardner was
a member of technical staff at AT&T Bell Laboratories. Mr. Gardner holds a B.S.
degree in electrical engineering from Cornell University and an M.S. degree in
electrical engineering from the University of California at Berkeley.
Eugene F. Hovanec joined the Company as Vice President, Finance and Chief
Financial Officer in December 1993. From 1989 to 1993, Mr. Hovanec served as
Vice President, Finance & Administration, and Chief Financial Officer at Digital
Sound Corporation. Prior to that, from 1984 to 1989, he served as Vice
President and Controller at Micropolis Corporation. Mr. Hovanec holds a Bachelor
of Business Administration degree from Pace University, New York. Mr. Hovanec
also serves as a Director of Interlink Electronics, Inc.
Michael Logan joined the Company in May 1988 and held various sales
management positions through January 2000 when he became Vice President, Sales.
Prior to joining Vitesse, Mr. Logan had several years of sales experience at
Gain Electronics Corporation. Mr. Logan received a B.S. degree in electrical
engineering from the University of Minnesota and an M.B.A degree from the
Wharton School of the University of Pennsylvania.
James Mikkelson, a co-founder of the Company, became Chief Technical
Officer in September 1997. He has served as Vice President of Technology
Development since the Company's inception in February 1987. From 1984 to 1987,
he served as Vice President, Operations at Vitesse Electronics Corporation.
Prior to that, he served as Project Manager at Hewlett-Packard Company,
responsible for the development and manufacturing of MOS VLSI circuits. Mr.
Mikkelson holds B.S. and M.S. degrees in electrical engineering from the
Massachusetts Institute of Technology.
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Yatin Mody joined the Company in March 1992 and held various positions
through November 1998 when he became Vice President and Controller. Prior to
that, Mr. Mody was at Deloitte and Touche, most recently as a manager. Mr. Mody
holds a Bachelor of Technology degree from the Indian Institute of Technology,
Madras and an M.B.A degree from the University of California at Los Angeles.
Vincent Chan has served as a Director of the Company since April 2000. He
also serves on the Massachusetts Institute of Technology's facility as the Joan
and Irwin Jacobs Professor of Electrical Engineering and Computer Science and
Aeronautics. He is concurrently the Director of MIT's Laboratory for
Information and Decision Systems. Dr. Chan has over 25 years experience leading
the development of advanced communication systems.
James A. Cole has served as a Director of the Company since February 1987.
He has been a General Partner of Windward Ventures since 1997 and he has been a
General Partner of Spectra Enterprise Associates since 1986. He was a founder
and Executive Vice President of Amplica, Inc., a GaAs microwave IC and
sub-system company. Mr. Cole also serves as a Director of Giga-Tronics, Inc. and
Spectrian Corporation.
Alex Daly became a Director of the Company in January 1998. He is Chairman,
President and Chief Executive Officer of a newly formed startup company, in the
network security area, Wahoo Networks. He was President and Chief Executive
Officer of Cygnus Solutions, a developer of software tools, from January 1998 to
January 2000. From 1995 to 1997 he served as Vice President of Sales and
Marketing and Chief Marketing Officer at C-Cube Microsystems, a developer of
digital video communications products. From 1990 to 1995, he served at Intel
Corporation, a semiconductor company, most recently as Director of Marketing for
the mobile computing group.
Pierre R. Lamond has been the Chairman of the Board of Directors since the
Company's inception in February 1987. Since August 1981, he has been a General
Partner of Sequoia Capital, a venture capital firm. Sequoia has financed
companies such as Cypress Semiconductor Corporation, Cisco, and C-Cube
Microsystems. Mr. Lamond was founder and Vice President of National
Semiconductor Corporation. He is also a Director of Redback Networks and a
number of privately held companies.
John C. Lewis became a Director of the Company in January 1990. He is
currently Chairman of the Board of Directors of Amdahl Corporation, a
manufacturer of large general purpose computer storage systems and software
products. Before joining Amdahl in 1977, he was President of Xerox Business
Systems. Mr. Lewis also serves as a Director of Cypress Semiconductor
Corporation, Cygnus Solutions and Pinnacle Systems.
Item 11. Executive Compensation
This item is answered by reference to the information set forth under the
captions "Compensation of Executive Officers", and "2001 Stock Incentive Plan"
in the Company's Proxy Statement for the 2001 Annual Meeting of Shareholders
filed with the Commission on December 22, 2000.
Item 12. Security Ownership of Certain Beneficial Owners and Management
This item is answered by reference to the information set forth under the
caption "Principal Ownership of Vitesse Semiconductor Corporation Common Stock"
in the Company's Proxy Statement for the 2001 Annual Meeting of Shareholders
filed with the Commission on December 22, 2000.
Item 13. Certain Relationships and Related Transactions
None.
10
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) The following documents are filed as part of this report:
<TABLE>
<CAPTION>
Page in
-------
1. Financial Statements: Annual Report
-------------
<S> <C>
The financial statements of the Company listed below are incorporated
herein by reference to the following pages of the 2000 Annual Report
to Shareholders:
Independent Auditors' Report 27
Consolidated Balance Sheets as of September 30, 2000 and 1999 28
Consolidated Statements of Operations for the years ended September 30, 2000, 1999 and 1998 29
Consolidated Statements of Shareholders' Equity for the years ended September 30, 2000, 1999 and 1998 30
Consolidated Statements of Cash Flows for the years ended September 30, 2000, 1999 and 1998 31
Notes to Consolidated Financial Statements 32
2. Consolidated Financial Statement Schedules: Page
----
The consolidated financial statement schedules of the Company are
included in Part IV of this report on the pages indicated:
Independent Auditors' Report on Consolidated Financial Statement Schedule 14
For the three fiscal years ended September 30, 2000--
II -- Valuation and Qualifying Accounts 15
All other schedules are omitted because they are not applicable or are not required.
3. Exhibits:
See Item 14(c) below.
</TABLE>
(b) Reports on Form 8-K
Report on Form 8-K/A, dated May 31, 2000 (filed August 9, 2000)
amending Current Report on Form 8-K to report the acquisition of
SiTera, Inc. under Item 5 of Form 8-K.
Report on Form 8-K, dated August 25, 2000 (filed September 5, 2000)
providing supplemental financial information previously included in the
Company's Annual Report on Form 10-K for the year ended September 30,
1999, to give retroactive effect to the Company's merger with SiTera,
Inc., on May 31, 2000, which was accounted for as a pooling of
interests.
(c) Exhibits. The following Exhibits are filed as part of, or incorporated
by reference into, this Report:
2.1/(5)/ Agreement and Plan of Merger and Reorganization among the
Registrant, Holiday Acquisition Corp. and Orologic, Inc. dated
March 24, 2000.
2.2/(7)/ Agreement and Plan of Reorganization, by and among the
Registrant, Southpaw Acquisition Corp., and SiTera, Inc., and
with respect to Article 8 only, Steven P. Flannery as
Stockholder Representative and U.S. Bank Trust National
Association as Escrow Agent dated April 19, 2000.
3.1/(6)/ Certificate of Incorporation of Registrant, as amended to
date.
3.2/(2)/ Bylaws of Registrant as amended to date.
4.1/(2)/ Specimen of Company's Common Stock Certificate.
11
<PAGE>
4.2/(6)/ Indenture, dated as of March 7, 2000, between the Company and
Lehman Brothers, Inc., Goldman Sachs & Co. and Prudential
Securities Incorporated, including the form of the Company's
4% Convertible Subordinated Notes Due 2005, filed herewith.
4.3/(6)/ Registration Rights Agreement, dated as of March 13, 2000,
between the Company and Lehman Brothers, Inc., Goldman, Sachs
& co. and Prudential Securities Incorporated, filed herewith.
10.1/(2)/ 1989 Stock Option Plan.
10.2/(2)/ 1991 Stock Option Plan.
10.3/(2)/ 1991 Employee Stock Purchase Plan.
10.4/(2)/ 1991 Directors' Stock Option Plan.
10.5/(2)/ Standard Form of Indemnification Agreement between Registrant
and its officers and directors.
10.9/(1)/ First Amendment to Lease between Carson Estate Company
(formerly Victoria Partnership) and Registrant.
10.10/(2)/ Lease dated January 31, 1991 between Camarillo I Development
Corporation and Registrant.
10.11/(2)/ Standard Form Proprietary Information Agreement.
10.16/(3)/ Agreement dated October 30, 1996 between ABN AMRO Bank N.V.,
Lease Plan North America, Inc. and Registrant.
10.17/(3)/ Agreement dated August 15, 1997 between ABN AMRO Bank N.V.,
Lease Plan North America, Inc. and Registrant.
10.20/(4)/ Agreement dated July 9, 1998 between Metlife Capital
Corporation and Registrant.
13.1 Registrant's 2000 Annual Report to Shareholders.
21.1 Subsidiaries of the Registrant.
23.1 Accountants' Consent
27.1 Financial Data Schedule
(1) Incorporated by reference from the Company's annual report on Form 10-K for
the period ended September 30, 1992.
(2) Incorporated by reference from the Company's registration statement on Form
S-1 (File no. 33-43548), effective December 10, 1991.
(3) Incorporated by reference from the Company's annual report on Form 10-K for
the period ended September 30, 1997.
(4) Incorporated by reference from the Company's annual report on Form 10-K for
the period ended September 30, 1998.
(5) Incorporated by reference from the Company's Current Report on Form 8-K
dated March 31, 2000.
(6) Incorporated by reference from the Company's quarterly report on Form 10-Q
for the period ended March 31, 2000.
(7) Incorporated by reference from the Company Current Report on Form 8-K dated
May 31, 2000.
(d) Financial Statement Schedules
See Item 14(a) above.
12
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
VITESSE SEMICONDUCTOR CORPORATION
Date: December 18, 2000 By: /s/ Eugene F. Hovanec
-----------------------------
Eugene F. Hovanec
Vice President, Finance
& Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Louis R. Tomasetta President and Chief Executive December 18, 2000
-----------------------------------------------------
Louis R. Tomasetta Officer (Principal Executive Officer)
/s/ Eugene F. Hovanec Vice President, Finance and December 18, 2000
-----------------------------------------------------
Eugene F. Hovanec Chief Financial Officer
/s/ Vincent Chan Director December 18, 2000
-----------------------------------------------------
Vincent Chan
/s/ James A. Cole Director December 18, 2000
-----------------------------------------------------
James A. Cole
/s/ Alex Daly Director December 18, 2000
-----------------------------------------------------
Alex Daly
/s/ Pierre R. Lamond Chairman of the Board of Directors December 18, 2000
------------------------------------------------------
Pierre R. Lamond
/s/ John C. Lewis Director December 18, 2000
-----------------------------------------------------
John C. Lewis
</TABLE>
13
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Vitesse Semiconductor Corporation:
Under date of October 16, 2000, we reported on the consolidated balance sheets
of Vitesse Semiconductor Corporation and subsidiaries as of September 30, 2000
and 1999, and the related consolidated statements of operations, shareholders'
equity, and cash flows for each of the years in the three-year period ended
September 30, 2000, as contained in the 2000 annual report to shareholders.
These consolidated financial statements and our report thereon are incorporated
by reference in the annual report on Form 10-K for the year ended September 30,
2000. In connection with our audits of the aforementioned consolidated financial
statements, we also audited the related consolidated financial statement
schedule as listed in the accompanying index. The financial statement schedule
is the responsibility of the Company's management. Our responsibility is to
express an opinion on the financial statement schedule based on our audits.
In our opinion, such financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.
Los Angeles, California
October 16, 2000
14
<PAGE>
VITESSE SEMICONDUCTOR CORPORATION
SCHEDULE II -- Valuation and Qualifying Accounts
Years ended September 30, 2000, 1999 and 1998
(in thousands)
<TABLE>
<CAPTION>
Balance at Charged to Balance
Beginning of Costs and Deductions/ at end
Period Expenses Write-offs of Period
------ -------- ---------- ---------
<S> <C> <C> <C> <C>
Year ended September 30, 2000
Deducted from Inventories:
Reserve for obsolescence $6,663 $ 9,166 $ 3,172 $12,657
Deducted from Accounts Receivable:
Allowance for doubtful accounts
and sales returns 3,500 7,679 1,054 10,125
Year ended September 30, 1999
Deducted from Inventories:
Reserve for obsolescence 4,155 3,774 1,266 6,663
Deducted from Accounts Receivable:
Allowance for doubtful accounts
and sales returns 1,088 4,945 2,533 3,500
Year ended September 30, 1998
Deducted from Inventories:
Reserve for obsolescence 3,121 1,034 --- 4,155
Deducted from Accounts Receivable:
Allowance for doubtful accounts
and sales returns 1,000 878 790 1,088
</TABLE>
15
