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Cavium Networks Announces Financial Results for Q1 2011

MOUNTAIN VIEW, Calif., April 28, 2011 – Cavium Networks, Inc. (NASDAQ: CAVM), a leading provider of highly integrated semiconductor products that enable intelligent processing for networking, communications, and the digital home, today announced financial results for the first quarter of 2011 ended March 31, 2011.

Revenue in the first quarter of 2011 was $63.6 million, a 6% sequential increase from the $59.8 million reported for the fourth quarter of 2010 and an increase of 53% from the $41.6 million reported for the first quarter of last year.

Generally Accepted Accounting Principles (GAAP) Results
Net income for the first quarter of 2011, on a GAAP basis, was $1.5 million, or $0.03 per diluted share, compared to net income of $34.6 million, or $0.70 per diluted share in the fourth quarter of 2010, and a net loss of $3.1 million, or $0.07 per diluted share in the first quarter of last year.  Gross margins were 60.9% in the first quarter of 2011 compared to 62.7% in the fourth quarter of 2010 and 59.6% in the first quarter of last year.  Total cash and cash equivalents were $69.4 million at March 31, 2011.

Non-GAAP Results
Cavium Networks believes that the presentation of non-GAAP financial measures provides important supplemental information to management and investors regarding financial and business trends relating to the company's financial condition and results of operations.  These measures should only be used to evaluate the Company’s results of operations in conjunction with the corresponding GAAP measures.  Non-GAAP financial measures in first quarter of 2011 exclude expenses totaling $15.0 million related to stock-based compensation and related payroll expense, amortization of acquired intangible assets and acquisition related expenses. Non-GAAP financial measures in the fourth quarter of 2010 exclude a one-time net tax benefit of $28.2 million. In addition, Non-GAAP financial measures in the fourth quarter of 2010 exclude expenses totaling $8.5 million related to stock-based compensation and related payroll expense, amortization of acquired intangible assets and acquisition related expenses. The reconciliation between GAAP and non-GAAP financial results is provided in the financial statements portion of this release.

Non-GAAP net income for the first quarter of 2011 was $16.5 million, or $0.32 per diluted share, compared with non-GAAP net income of $14.9 million, or $0.29 per diluted share in the fourth quarter of 2010.  Gross margins, on a non-GAAP basis, was 65.0% and operating margins (non-GAAP income from operations as a percentage of revenue), on a non-GAAP basis, was 25.4% in the first quarter of 2011.

“This was our eighth quarter of sequential sales growth, driven by strong growth in our core enterprise and service provider business.  We generated record quarterly sales, strong non-GAAP gross and operating margins, and record non-GAAP net income during the first quarter.  Furthermore, we experienced record design win momentum among a broad array of existing, as well as new, Tier-1 customers across our entire family of products” said Syed Ali, president and CEO of Cavium Networks.”

Recent News Highlights

  • April 28, 2011 - Cavium Networks announced that it has delivered its flagship 32-core OCTEON II CN6880 processor to multiple Tier 1 customers building a wide range of wireless and wired infrastructure networking applications. In OEM benchmarks, the OCTEON II CN6880 provides the industry’s highest performance across many networking, security, deep packet inspection (DPI) and compute intensive solutions based on their own real customer applications. OCTEON II is the first 64 bit processor to provide 48GHz of compute power on a single chip

  • March 9, 2011 - Cavium Networks Completes Acquisition of Celestial Semiconductor

  • March 2, 2011 - Yocto Project Aligns Technology with OpenEmbedded and Gains Corporate Collaborators

  • February 16, 2011 – Cavium Networks ranked number 5 from America's 25 Fastest-Growing Tech Companies According to Forbes

  • February 15, 2011 - Airspan Selects Cavium Networks OCTEON® Processors to Power its Next Generation 4G LTE Products

  • February 14, 2011 - Cavium Networks to Showcase Next Generation Security Solutions for Enterprise, Data Center and Cloud Computing at RSA 2011

  • February 14, 2011 - Cavium Networks Demonstrates Market-Leading, Comprehensive Solutions for 2.5/3G, WiMax and LTE Applications at Mobile World Congress 2011

  • February 14, 2011 - Cavium Networks and Picochip partner to Showcase Industry's First End-To-End LTE Femtocell at 2011 Mobile World Congress in Barcelona

  • February 9, 2011 - Cavium Networks, Kontron and Tata Elxsi Partner to Demonstrate Market Leading LTE eNodeB Solution at MWC 2011

  • February 8, 2011 - Cavium Networks Introduces First 40 Gbps "Bump-in-the-Wire" Deep Packet Inspection / Application Recognition Processor Family

  • January 31, 2011 - Cavium Networks Signs Definitive Agreement to Acquire China-Based Celestial Semiconductor
Cavium Networks, Inc. will broadcast its first quarter 2011 financial results conference call today, April 28, 2011, at 2 p.m. Pacific time (5 p.m. Eastern time).   The conference call will be available via a live web cast on the investor relations section of the Cavium Networks website at http://www.caviumnetworks.com.  Please access the website at least a few minutes prior to the start of the call in order to download and install any necessary audio software. An archived web cast replay of the call will be available on the web site for a limited period of time.

About Cavium Networks
Cavium Networks is a leading provider of highly integrated semiconductor products that enable intelligent processing for networking, communications and the digital home. Cavium Networks offers a broad portfolio of integrated, software-compatible processors ranging in performance from 10 Mbps to 40 Gbps that enable secure, intelligent functionality in enterprise, data-center, broadband/consumer and access and service provider equipment. Cavium Networks processors are supported by ecosystem partners that provide operating systems, tool support, reference designs and other services. Cavium Network’s principal offices are in Mountain View, CA with design team locations in California, Massachusetts, India and Taiwan. For more information, please visit: http://www.caviumnetworks.com.


For additional information, contact:

Cavium Networks Contact:
Angel Atondo
Sr. Marketing Communications Manager,
Cavium Networks, 805 East Middlefield Road,
Mountain View, CA 94043,
Telephone: +1 650-623-7033.
Email: angel.atondo@caviumnetworks.com








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Note on Forward-Looking Statements
This press release may contain forward-looking statements regarding future events that involve risks and uncertainties. Readers are cautioned that these forward-looking statements are only predictions and may differ materially from actual future events or results.  These forward-looking statements involve risks and uncertainties, as well as assumptions and current expectations.  Our actual results and the timing of events could differ materially from those anticipated in such forward-looking statements as a result of these risks, uncertainties and assumptions. The risks and uncertainties that could cause our results to differ materially from those expressed or implied by such forward-looking statements include but are not limited to the rate of new design wins, acceptance by customers of Cavium’s new product introductions, whether or not the company can continue to expand gross margins and operating margins, the rate at which existing design wins go into production, pricing pressures; general economic conditions; manufacturing difficulties; and other risks and uncertainties described more fully in our documents filed with or furnished to the Securities and Exchange Commission.  More information about these and other risks that may impact Cavium’s business are set forth in the “Risk Factors” section of our Form 10K filed with the Securities and Exchange Commission on February 28, 2011.  All forward-looking statements in this press release are based on information available to us as of the date hereof and qualified in their entirety by this cautionary statement, and we assume no obligation to revise or update these forward-looking statements.

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