Atheros Communications Announces Q2 2005 Results

Revenue, EPS and Gross Margins at High End of Guidance

Santa Clara, Calif. – July 25, 2005 – Atheros Communications, Inc. (NASDAQ: ATHR), a leading developer of advanced wireless solutions, today announced financial results for the second quarter of 2005, ended June 30, 2005.

Revenue in the second quarter was $43.4 million, up five percent from the $41.2 million reported in the first quarter.  Gross margins in the second quarter were 41.6 percent, compared with 44.5 percent in the first quarter.

In accordance with U.S. generally accepted accounting principles (GAAP), the company recorded a second quarter net loss of $216,000, or $0.00 per diluted share.  This compares with GAAP net income of $1.7 million, or $0.03 per diluted share in the first quarter of fiscal 2005.

Total cash and investments increased $5.2 million to $164.1 million at June 30, 2005, compared with $158.9 million reported at March 31, 2005.

Atheros reports net income and basic and diluted net income per share in accordance with GAAP and additionally on a non-GAAP basis.  Non-GAAP net income, where applicable, excludes the effect of the amortization of stock-based compensation.  In the second quarter of 2005, non-GAAP net income was $401,000, or $0.01 per diluted share, compared with non-GAAP net income of $2.1 million, or $0.04 per diluted share, in the first quarter of fiscal 2005. 

“Our wireless LAN (WLAN) business was strong in the second quarter as demonstrated by our sequential revenue growth and the significant increase in WLAN units shipped over Q1,” said Craig Barratt, president and CEO of Atheros.  “In addition, we achieved important design wins for our Radio-on-Chip for Mobile (ROCm®) solution for a variety of low-power consumer products and we expect significant revenue from these products to begin in 2006.  Our single-chip PCI Express WLAN solutions have been sampling with customers since the first quarter, and we continue to expect volume production of these products in the second half of the year.

“In late Q2, we began initial shipments of our AR1900 single-chip cellular solution into the Chinese PAS/PHS cellular market, and we remain on track to generate at least $10 million of revenue from this product in the second half of 2005,” said Barratt.  “We have multiple handset design wins for this industry-first, single-chip solution, and we are confident that it will be a significant revenue contributor in 2006.”

Technology Highlights   

• The company announced its first ROCm solutions. These single-chip WLAN solutions deliver the robust, high-throughput performance of Atheros data- and video-networking products plus the characteristics required for integration in mobile devices: low power consumption, small form factor and low-overhead on the host device.  The ROCm solutions are ideal for consumer products such as dual-mode cellular phones, Voice over Internet Protocol (VoIP) handsets, MP3 portable media players, digital still/video cameras and gaming consoles.

• Atheros announced the world's first complete single-chip 802.11a/g and 802.11g PCI Express WLAN solutions.  These chips integrate an entire WLAN solution in a low-cost digital CMOS design, and enable next-generation wireless multimedia applications in ultra-compact notebook and desktop PCs by supporting PCI Express' compact design and high-speed interconnect performance.

• Atheros announced that it now offers its JumpStart for Wireless™ security configuration software on a no-fee, open-source basis.  JumpStart for Wireless software allows users to install, configure and secure wireless networking equipment with just three mouse clicks.

Customer Highlights

• Lenovo Networks launched a high performance 802.11g router based on Atheros’ WLAN technology, and will bundle it with its latest Yang Tian series of desktop PCs.

• Atheros announced that it has teamed with China Netcom Broadband Corporation, Ltd., the leading broadband service provider in China, in the joint development of high-bandwidth WLAN services to support data, video and Voice-over-WLAN applications.  The Atheros single-chip 802.11g access point solution will be featured in new China Netcom Broadband Corporation, Ltd. access points and routers, providing improved wireless connectivity for businesses and consumers throughout China.

• NEC Corp., the leading supplier of PCs in Japan, launched 12 new laptop models that use Atheros' dual-band 802.11a/g WLAN solution with Super AG® and eXtended Range (XR™) capabilities.

• Atheros announced that its industry-leading 802.11a/g technology is featured in ICOM Inc.'s recently introduced access point and router, which support WLAN and wireless VoIP networking.

• The AR5005UX WLAN chipset is now featured in new 802.11a/g USB2.0 network adapters from I-O Data Device, Inc. and NEC Access Technica, Ltd.  These adapters are the first USB2.0 WLAN products in Japan to support 802.11a, 802.11g and 802.11b networks, as well as the popular Atheros Super AG performance enhancement technology.

• AIRAYA Corp. selected Atheros technology for its series of WirelessGRID™ bridges for public safety applications. The products enable secure, high-performance wireless multipoint and backhaul networks in the newly allocated homeland security and public safety 4.9GHz band.

• Livedoor Co., Ltd., a popular Internet service provider and web portal in Japan, is launching a new public WLAN service, called D-cubic, which incorporates Atheros XR and Super G® performance enhancement features.

• Aruba Networks, Strix Systems and Tropos announced products based on Atheros technology targeting large outdoor campus and metro-area WiFi networks.

New Vice President of Marketing

In a separate release today, the company announced that it has appointed Todd Antes as its vice president of marketing.  Antes has extensive experience in senior management roles in the wireless networking and cellular industries, including 10 years at Philips Semiconductors.

Conference Call

Atheros will broadcast its second quarter 2005 financial results conference call today, Monday, July 25, 2005, at 2:00 p.m. Pacific time (5:00 p.m. Eastern time).

To listen to the call, please dial (630) 395-0018 approximately 10 minutes prior to the start time.  The pass code is Atheros.  A taped replay will be available approximately one hour after the conclusion of the call and will remain available for one week. To access the replay, dial (203) 369-1432.

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

About Atheros Communications, Inc.

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

NOTE:  Atheros, the Atheros logo, Super G, Super AG, ROCm, JumpStart for Wireless and Atheros XR are trademarks of Atheros Communications, Inc.

Note on Forward-Looking Statements

Except for the historical information contained in this press release, the matters set forth in this press release, including but not limited to the features, capabilities and performance of our products; the expected revenues from the AR1900 product in the second half of 2005 and in 2006; the expected significant revenues from our ROCm products beginning in 2006; the expected timing of volume production of our PCI Express products; and the introduction of Atheros’ products in various customers’ products, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially, including, but not limited to, whether we are successful in marketing and selling our AR1900 product, ROCm products and PCI Express products; unforeseen defects in new products upon volume production and broad deployment; whether our cellular customers are successful; whether PHS continues to grow and be a successful cellular technology; the extent of growth in the mobile consumer products market; whether the stated customers continue to incorporate our chipsets in their products; the effects of competition and pricing pressures; difficulties in development of new and enhanced products; the rate of growth of wireless telecommunications markets; variability in quarterly operating results of Atheros and its customers; general economic conditions; and other risks detailed in Atheros' Quarterly Report on Form 10-Q for the quarter ended March 31, 2005, as filed with the SEC, and in other reports filed with the SEC by Atheros from time to time.  These forward-looking statements speak only as of the date hereof.  Atheros disclaims any obligation to update these forward-looking statements.

– Summary Financial Data PDF Link –

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

For press contact: Susan Lansing, 408-773-5216, susan@atheros.com, or Greg Wood, A&R Partners, 650-762-2838, gwood@arpartners.com

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