Date: 01/02/2011

Cavium Networks' revenue in 4Q 2010 increase by 8% sequentially to reach $59.8 million

Cavium Networks has reported a revenue of $59.8 million in the fourth quarter of 2010, a sequential growth of 8% from the $55.2 million reported for the third quarter of 2010 and an increase of 86% from the $32.1 million reported for the fourth quarter of last year. Revenue for fiscal year 2010 was $206.5 million, a 104% increase from the $101.2 million reported for fiscal year 2009.

"This quarter was our seventh quarter of strong sequential sales growth. In addition, design win traction continues to be very strong across our entire family of products, including numerous design wins for Octeon II, Purevu, Econa, and Nitrox III. We generated strong cash flow during the quarter. In addition, non-GAAP gross margins and non-GAAP operating income expanded sequentially by 10 and 180 basis points, respectively. This led to record quarterly GAAP and non-GAAP earnings for the company" said Syed Ali, president and CEO of Cavium Networks.

In another release Cavium Networks has announced that it has signed a definitive agreement to acquire China-based privately held Celestial Semiconductor, a fabless semiconductor company headquartered in Beijing, China with centers in Shenzhen and Shanghai. Celestial is a ARM-based system-on-a-chip (SoC) processor solutions provider for a range of digital media applications. Celestial provides a family of ARM-based high-performance SoCs with HD quality video processing, multi-source video input and multi-format video playback.

The net purchase price of the acquisition will be approximately $55 million, to be paid in a combination of cash and stock. In addition, there is an earnout provision whereby the purchase price can increase by up to $10 million contingent on achieving certain revenue milestones during the following 12 months. The acquisition is expected to close by the end of the first quarter of 2011. Cavium Networks expects this acquisition will be non-GAAP earnings neutral during the first half of 2011 and modestly accretive by the second half of 2011.

"Our highly integrated SoC processors enable feature rich, low cost and low power solutions that are being adopted by major telcos and service providers in China and other geographies. We are excited about leveraging Cavium Networks' world-class engineering, operations, sales and support resources to accelerate our reach to a broader set of worldwide customers," said Daniel Fu, CEO of Celestial Semiconductor. "Our complementary market focus and product technology synergies will reduce our development time and help our clients speed their time to market."

"Celestial Semiconductor's innovative SoC products complement Cavium Networks existing ECONA and PureVu product lines and will enable us to deliver feature rich combo products for a range of high volume applications in the Connected Home," said Syed Ali, President and CEO at Cavium Networks. "This acquisition further expands Cavium's TAM in the high growth digital media market. We see highly integrated, low cost and low power SoC solutions enabling a range of cable, internet and over-the-top content applications. Combing our technologies will enable Cavium to deliver compelling and differentiated end to end solutions for the entire digital video cycle."

Cavium Networks has also announced appointment of Rajiv Khemani as Chief Operating Officer. Mr. Khemani previously served as Vice President and General Manager of Cavium's Networking and Communications Division. In the expanded role of COO, he will oversee both the Networking and Communications Division and the Broadband & Consumer Division as well as manufacturing operations. He will continue to report to Syed Ali, Chairman, President and CEO.