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Cavium Networks Announces Financial Results for Q3 2010

MOUNTAIN VIEW, Calif., October 27, 2010 – 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 third quarter of 2010 ended September 30, 2010.

Revenue in the third quarter of 2010 was $55.2 million, an 11% sequential increase from the $49.9 million reported for the second quarter of 2010 and an increase of 113% from the $25.9 million reported for the third quarter of last year.

Generally Accepted Accounting Principles (GAAP) Results
Net income for the third quarter of 2010, on a GAAP basis, was $5.0 million, or $0.10 per diluted share, compared to net income of $0.6 million, or $0.01 per diluted share in the second quarter of 2010, and a net loss of $4.2 million, or $0.10 per diluted share in the third quarter of last year. Gross margins were 62.3% in the third quarter of 2010 compared to 60.8% in the second quarter of 2010 and 51.5% in the third quarter of 2009. Total cash and cash equivalents were $83.3 million at September 30, 2010.

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 the third quarter of 2010 exclude expenses totaling $7.6 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.

Net income for the third quarter of 2010, on a non-GAAP basis, was $12.5 million, or $0.25 per diluted share, compared with non-GAAP net income of $10.2 million, or $0.20 per share in the second quarter of 2010. Gross margins, on a non-GAAP basis, were 65.1% in the third quarter of 2010 compared to 64.4% in the second quarter of 2010. Operating margins (non-GAAP income from operations as a percentage of revenue), on a non-GAAP basis, were 23.9% in the third quarter of 2010 compared to 21.1% in the second quarter of 2010.

“Key financial metrics were positive across the board. Our record sales and strong sequential sales growth came from strength across multiple markets and geographies. This was our sixth consecutive quarter of double digit sequential sales growth, with growth coming from both our chip and software and services business. We generated more than $14 million in cash during the quarter. In addition, we increased non-GAAP gross margins by 70 basis points and operating margins by 280 basis points, sequentially. This led to record GAAP and non-GAAP earnings for the company” said Syed Ali, president and CEO of Cavium Networks. “Furthermore, design win traction continues to be strong across of our major product families”.

Recent News Highlights:

  • October 25, 2010 – Cavium and MontaVista announced availability of Android on ECONA processors and demonstration of next generation broadband gateways at BBWF, Paris

  • October 20, 2010 - MontaVista released its new Carrier Grade Linux 6.0 with Bare Metal Performance features and Embedded Virtualization for Multi-Core Architectures

  • October 20, 2010 - Kontron released the first Cavium OCTEON® II AdvancedMC module

  • October 19, 2010 - Cavium and Partners Demonstrated 4G Solutions at Chicago 4G WORLD

  • October 18, 2010 - Tata Elxsi extended its LTE Software Portfolio for Cavium Networks OCTEON II

  • October 05, 2010 - Cavium Introduced and demonstrated new PureVu-3D for 3D Wireless Display Solutions at CEATEC 2010

  • September 21, 2010 - Cavium Launched 10 GbE Intelligent Adapters for Secure Network, Storage and Cloud Computing

  • September 8, 2010 - Metaswitch reported trend-setting adoption of OCTEON amongst their customers

  • August 24, 2010 - Citrix Systems uses FIPS 140-2 Certified Adapters in Four New NetScaler® Platforms

  • Aug 11, 2010 - MontaVista Software Launched its Next Generation Community for Developers of Embedded Linux called Meld 2.0

  • August 04, 2010 - CriticalBlue announced availability of its Multicore Software Development Analysis Environment for OCTEON and OCTEON II Processors

  • July 29, 2010 - ViaSat Selected Cavium Networks Multi-Core OCTEON Plus Processors to Power its Next Generation Satellite Broadband Modems

  • July 27, 2010 – GE announced their new WANic product based on OCTEON II

  • July 27, 2010 - Advantech Selected OCTEON® II for Packetarium™ with Two New Platforms

  • Jul 22, 2010 - MontaVista Software Launched DevRocket 6.1 Integrated IDE for Embedded Linux Development
Conference Call
Cavium Networks, Inc. will broadcast its third quarter 2010 financial results conference call today, October 27th, 2010, 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 in 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 & service provider equipment. Cavium Networks processors are supported by ecosystem partners that provide operating systems, tool support, reference designs and other services. Cavium Networks principal offices are in Mountain View, California 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
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 March 1, 2010. 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.


OCTEON®, NITROX®, ECONA™ and PureVu™ are trademarks of Cavium Networks, Inc . All other trademarks are the property of their respective owners. All rights reserved. © Cavium Networks, Inc. 2009.


   

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