Cavium Networks - News & Events

MOUNTAIN VIEW, Calif., October 20, 2008 – Cavium Networks (NASDAQ: CAVM), a leading provider of highly integrated semiconductor products that enable intelligent processing for networking, communications, storage, wireless and security applications, today announced financial results for the third quarter of 2008 ended September 30, 2008.

Revenue in the third quarter of 2008 was $24.5 million, a 14% sequential increase from the $21.6 million reported for the second quarter of 2008 and an increase of 73% from the $14.2 million reported for the third quarter of last year.

Generally Accepted Accounting Principles (GAAP) Results
Net income for the third quarter of 2008, on a GAAP basis, was $1.8 million, or $0.04 per share (diluted), compared to net income of $2.1 million, or $0.05 per diluted share in the second quarter of 2008, and net income of $1.3 million, or $0.03 per share in the third quarter of last year. Gross margins were 58.8% in the third quarter of 2008 compared to 63.8% in the second quarter of this year. Total cash and cash equivalents were $91.9 million at September 30, 2008.

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 2008 exclude $2.8 million in stock-based compensation and related payroll tax expense, amortization of acquired intangible assets and adjustments related to the acquisition of Star Semiconductor. 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 2008, on a non-GAAP basis, was $4.6 million, or $0.11 per share (diluted), compared with $3.8 million, or $0.09 per share (diluted) in the second quarter of the year and $2.1 million, or $0.05 per share (diluted) in the third quarter of last year. Gross margins, on a non-GAAP basis, were 62.8% in the third quarter of 2008 compared to 64.2% in the second quarter of this year.

“The third quarter was yet another strong quarter for us across all key metrics. We continue to deliver strong sequential and year-over-year growth along with robust expansion in operating margins,” said Syed Ali, president and CEO of Cavium Networks. “Non-GAAP operating margins have increased from 12.6% in the first quarter of 2008 to 16.8% in the second quarter of 2008, to 19.2% in the third quarter of 2008. Furthermore, non-GAAP income from operations increased 30.3% sequentially from Q2 2008 to Q3 2008, due to the strength in our business and leverage in our business model. We also continue to experience record design win rates with traction across all markets that we serve”.

Conference Call
Cavium Networks will broadcast its third quarter 2008 financial results conference call today, October 20, 2008 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.