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AMCC Takes Quake

 Post-bubble survivor Quake Technologies Inc. got rewarded for its perseverance yesterday, as Applied Micro Circuits Corp. (Nasdaq: AMCC) announced a $69 million deal to acquire the company.Quake, which makes physical-layer (PHY) chips for 10-Gbit/s optical transceivers, employs just more than 50 people. Nearly all the employees are expected to join AMCC, says Mitch Kahn, Quake's vice president of marketing. (See AMCC Acquires Quake.)Quake CEO Daniel Trepanier would join AMCC and report directly to CEO Kambiz Hooshmand. The deal is expected to close this month.It's an awkward time for AMCC to make an acquisition, given the company is in the throes of the stock-options scandal and therefore isn't releasing full earnings reports. But the all-cash deal is easily affordable, judging from the $336 million in cash and equivalents carried on AMCC's March balance sheet.Founded in 2000, Quake builds chips targeting the 10-Gbit/s carrier metro market as well as shorter-reach enterprise and data center applications. The company raised $60 million during its lifetime, Kahn says — half of which came in a 2001 round that included Cisco Systems Inc. (Nasdaq: CSCO). (See Why Cisco Likes Quake.)Among Quake's favored targets is the XFP format — a smaller module considered a high-end play in Quake's early days. With XFP getting its first taste of the mainstream, Quake has already started moving on, producing a chip for the even smaller and cheaper SFP+ format for 10-Gbit/s Ethernet and Fibre Channel modules. (See Lower Prices Boosting 10-GigE and XFP Module Gets a Shrink.)The acquisition gives AMCC a quick entry into those markets, as well as Quake's chips for enterprise interfaces such as the LX4 standard for transmitting Ethernet across short distances of older fiber. (See Vendors Still Driving LX4.) Quake gets the backing of a larger company, likely accelerating its ability to secure new customers, Kahn says.Kahn wouldn't comment on whether Quake was profitable.Yesterday also happened to be the scheduled date for AMCC's first-quarter earnings update. The company declined to give out net income data due to the stock-options investigation, and yet the news was good, as revenues of $69.7 million edged out analysts' consensus estimate of $68.9 million, according to Reuters Research .Boosted by its “highest quarterly booking level in five years,” AMCC expects revenues to increase 5 to 8 percent in its second quarter, Hooshmand said on yesterday's earnings call with analysts. That would put AMCC's second-quarter revenues between $73.2 million and $76.7 million, surpassing the analyst forecast of $71.2 million.In a Securities and Exchange Commission (SEC) filing yesterday, AMCC also noted that the U.S. Attorney for the Northern District of California apparently is choosing not to continue an investigation into AMCC's past stock-option practices. But the filing added that the U.S. Attorney for California's Southern District is keeping its AMCC investigation alive.


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