A T H E R O S C O M M U N I C A T I O N S, I N C. Investor Relations Presentation Q1 2008 WIRELESS FUTURE. UNLEASHED NOW. ATHEROS COMMUNICATIONS
Safe Harbor Statement Some of the information in this presentation contains projections or other forwardlooking statements regarding future events or the future financial performance of Atheros Communications, Inc. These statements involve risks and uncertainties, and actual events or results may differ materially. Among the important factors which could cause actual results to differ materially from those in the forwardlooking statements are general economic and market conditions; the extent to which the markets for WLAN, Bluetooth, Ethernet and GPS semiconductors and other semiconductor products will grow; our ability to execute our business strategy; our ability to manage our growth and diversification into new markets; our ability to forecast accurately revenues from sales of our products and costs of production; the effects of competition in the marketplace; our ability to retain and attract employees; market acceptance of our existing and new products, including our XSPAN, ROCm, Ethernet, Bluetooth and GPS products; our ability to develop new products and technologies for WLAN, Bluetooth, Ethernet, GPS and other wireless and wired communications markets that are successful in these markets; and other factors detailed in our filings with the Securities and Exchange Commission, including our recent filings on Forms 10-K, 10-Q and 8-K. 2
3 Atheros Overview Profitable fabless semiconductor company driving highly integrated communications platforms Both a technology & cost leader Leveraging our core competency of building communications solutions in standard digital CMOS Strong product cycles driving revenue growth in core WLAN business Delivering on our promise to build a diversified communications IC semiconductor company ROCm Mobile WLAN solutions ROCm Bluetooth solutions Fast and Gigabit Ethernet solutions PHS/PAS single chip handset solutions GPS handset, PC and PND solutions
4 Recent Highlights Record Q4 revenue, gross margin and operating profit 11 th consecutive qtr of revenue growth; 10 th for operating profit Revenue up 7.5% sequentially, 30% year-over-year Particular strength with PC customers and continued Carrier Disciplined revenue growth paying dividends; 19% operating profit Introduction of many exciting WLAN products AR6002 Industry s lowest-power mobile 11g single-chip SOC AR9280/9281 11n PCI Express single-chip SOC solution for PCs AR9220/9223 11n PCI single-chip SOC solution for gateways Key new market product introductions AR8216/AR8316 Atheros 1 st 10/100 and Gigabit switching solutions AR8121 Gigabit Ethernet Controller cost-down for PCs AR3031 Bluetooth for headset applications
Atheros Expanding Into New Markets Market Size Expansion Of Atheros Technologies PCs Desktop, Notebook & Mini/PMPC Networking Gateways, APs, Routers and A/V Consumer Cellular, Gaming, PMP & Cameras 0-200m Units 200-500m Units >1B Units PHS/ PAS GPS GPS GPS Leverage Key OEM Customers 5
Industry Leading Customers Choose Atheros PC OEM Networking Consumer ODMs 6
Personal Computing 43% of Q4 Revenue Primary revenue comes from WLAN sales into PC OEMs ATHR is the non Centrino leader for WLAN in PC OEMs WLAN footprint at 11 of the top 12 PC OEMs Multiple generations of PCI and PCI Express solutions; 11ag, 11g and 11n (single and dual band) Gigabit and Fast Ethernet Products for PC OEMs LOM and PHY currently in mass production for desktop motherboards Cost downs of Ethernet products throughout 2007 Shipped over 20 million ports of Ethernet in 2007 Bluetooth products recently sampling with PC OEMs 7 Product tailored for PC OEM adoption; low cost solution
Personal Computing Expanding Opportunities Featured Product: ASUS Revolutionary EeePC In volume production Prices points sub-$300 Features Atheros 11g WLAN (AR2425) and 10/100 Ethernet Atheros new 9280/81 Single Chip 11n 2x2 802.11a/g/n & 1x2 802.11g/n Smallest footprint, most cost-effective package - 10mm x 10mm QFN package Contains up to 50% fewer RBOM components vs. competing 11n solution 8
Networking 52% of Q4 Revenue Primary revenue from sale of WLAN products to Retail channel 11n is major growth driver in 2008 Second generation integrated 11n SOC products introduced 11n Customers include D-Link, NETGEAR, Belkin, Linksys & TP-Link WLAN solutions for Enterprise & Carrier Customers Strong and growing presence in DSL home gateway solutions Design cycles are longer and stickier Driving a wide variety of enterprise and city-wide wireless solutions Introduced AR9220/9223 11n PCI single-chip SOC for gateways Two new switching solutions for 2008 AR8216 10/100 Ethernet switch AR8316 Gigabit Ethernet Switch 9
Carrier Opportunity 300 million broadband subscribers worldwide Attach-rate of WLAN on modems is increasing Atheros has WLAN reference designs with most major broadband IC vendors Atheros is part of major global carrier deployments Atheros has three products targeting the carriers High-end: AR9160/AR9106 (3x3 11n) Mid-tier: AR9220/9223 (single-chip 2x2 11n) Low-end: AR2417 (single-chip 11g with $1.00 RBOM) 10
Consumer 5% of Q4 Revenue Historically, revenue driven by our industry leading PAS Solution Highly integrated CMOS single chip solution Developed internally and in standard digital CMOS ROCm revenue an important growth driver Key Partnerships include QCOM, MSFT, TXN & Compal Strong design win traction Wins achieved in gaming, dual mode handsets, VOIP phones & cameras Launched ROCm Bluetooth headset solutions in Q4 07 GPS Products added in December 2007 11
Consumer Market Update ROCm mobile WLAN solutions have gained significant design win momentum 20+ design wins to date including the LG KS 20 HSDPA handset PC and Headset product line for Bluetooth Significant penetration in the PHS/PAS mobile handset market Expect 30%+ sequential growth in Q1 08 12
Atheros GPS Acquired u-nav in December 2007 Now have over 70 engineers working on GPS Atheros now has proven GPS technology Single-chip solution Mature software Shipping in volume into PND devices today Critical building block for multi-function radios Channel/customer synergies in PCs and Mobile devices Focused on PND, CE devices, PC and cellular penetration 13
Q4 07 Financial Summary Revenue of $114.3M; up 7.5%; at high end of guidance of 5-8% Record gross margins of 52.3%* Above the guided range of 48% - 49% Mix-shift to higher-margin products Q4 EPS * of $0.36; Above guidance of $.30 and up from $.28 in Q3 Strong balance sheet metrics Cash and investments increased to $250m; DSO and Inventory Turns metrics strong 14 Q108 Guidance for flat revenue, GM%* 50% - 51% and EPS* of $.27-$.28 * Note: Excludes non-cash FAS123R charges, acquisition related charges, benefit from tax valuation allowance release, nonoperating charge for impairment of long-term investments and the related tax impact of all proforma adjustments
Comparative and Sequential Revenue Growth 30% growth 110 11 consecutive quarters of revenue growth $114.3 140 100 90 $95.5 $100.8 $106.3 $95.5 120 100 $114.3 80 70 $73.2 $79.6 $87.8 80 $87.8 60 50 $53.1 $61.1 60 40 $43.4 $45.8 40 30 20 20 10 Q4 06 Q4 07 Q2 05 Q3 05 Q4 05 Q1 06 Q2 06 Q3 06 Q4 06 Q1 07 Q2 07 Q3 07 Q4 07 $ in millions $ in millions 15
Gross Margin % Trends 50 45 40 48.0% 47.6% 48.0% 49.7% 49.3% 52.3% Gross margins continue to exceed long term targets 35 30 25 Q4 gross margins above guidance and a record for ATHR 20 15 10 5 Using standard digital CMOS provides Atheros greater foundry supply options Q3 06 Q4 06 Q1 07 Q2 07 Q3 07 Q4 07 Target Gross Margin Model of 45% - 47% 16
Revenue Mix Q4 2007 Record 11g revenue and unit shipments Record revenue and unit shipments for PC OEMs PC OEM up 17% sequentially and Carrier still strong 17
Key Metrics ( 000 s Except Ratios ) Q1 07 Q2 07 Q3 07 Q4 07 Revenue/ Employee $565 $570 $566 $547 DSO 50 44 46 46 Inventory Turns 6.3 7.0 7.1 6.2 Cash Balance $206,400 $228,200 $248,304 $249,997 18
Target Operating Model Q3 2007 Q4 2007 Target Model Revenue 100.0% 100.0% 100.0% Gross Margin 49.3% 52.3% 45-47% R&D 20.0% 20.6% 16-18% SG&A 12.3% 12.7% 10-12% Operating Profit 17.0% 19.0% 17-19% Excludes non-cash FAS123R charges and acquisition related charges 19
Summary Leveraging our skills in CMOS integration and wireless systems solutions to build a large communications IC company Leader in WLAN solutions for Personal Computing and Networking R&D Investments over the past 2 years are driving strong operating performance today Multiple product lines driving 2008 growth and beyond Strong expansion of Core Wireless LAN 11a/b/g/n revenue Availability of a full line of 10/100/1000 Ethernet NIC, PHY & Switch products ROCm products for embedded WLAN achieving strong design win momentum Addition of the AR3000 ROCm Bluetooth products Acquisition of u-nav expand product portfolio to GPS 20
A T H E R O S C O M M U N I C A T I O N S, I N C. Investor Relations Presentation Q1 2008 WIRELESS FUTURE. UNLEASHED NOW. ATHEROS COMMUNICATIONS
A T H E R O S C O M M U N I C A T I O N S, I N C. Investor Relations Presentation Backup Slides WIRELESS FUTURE. UNLEASHED NOW. ATHEROS COMMUNICATIONS