Vitesse Reports Fourth Quarter and Fiscal Year 2013 Results

Non-GAAP Measures
A non-GAAP financial measure is a numerical measure of a company's performance, financial position, or cash flows that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP. Non-GAAP measures are not in accordance with, nor are they a substitute for, GAAP measures. Other companies may use different non-GAAP measures and presentation of results.

We provide non-GAAP measures of non-GAAP income (loss) from operations and non-GAAP net income (loss) as a supplement to financial results based on GAAP income (loss) from operations and GAAP net income (loss). The Company believes that the additional non-GAAP measures are useful to investors for the purpose of financial analysis. We believe the presentation of non-GAAP measures provides investors with additional insight into underlying operating results and prospects for the future by excluding gains, losses and other charges that are considered by management to be outside of the Company's core operating results. Management uses these measures internally to evaluate the Company's in-period operating performance before taking into account these non-operating gains, losses and charges. In addition, the measures are used for planning and forecasting of the Company's performance in future periods.

In deriving non-GAAP income (loss) from operations from GAAP income (loss) from operations, we exclude stock-based compensation charges, amortization of intangible assets, as well as restructuring and impairment charges. In deriving non-GAAP net income (loss) from GAAP net income (loss), we further exclude gain or loss on the embedded derivative. Stock-based compensation charges, amortization of intangible assets, and gain or loss on the embedded derivative represent charges that recur in amounts unrelated to the Company's operations. Restructuring and impairment costs relate to strategic initiatives that result in short term increases in costs that end with the fulfillment of the initiative and cost reductions in future periods.

The non-GAAP financial measures we provide have certain limitations because they do not reflect all of the costs associated with the operation of our business as determined in accordance with GAAP. Non-GAAP income (loss) from operations and Non-GAAP net income (loss) are in addition to, and are not a substitute for or superior to, income (loss) from operations and net income (loss), which are prepared in accordance with GAAP and may be different from non-GAAP measures used by other companies. A detailed reconciliation of the non-GAAP measures to the most directly comparable GAAP measure is set forth below. Investors are encouraged to review these reconciliations to appropriately incorporate the non-GAAP measures and the limitations of these measures into their analyses. For complete information on stock-based compensation, amortization of intangible assets, restructuring and impairment charges, and the change in the fair value of our embedded derivatives, please see our Form 10-K for the year ended September 30, 2013.

                                                                            
                                                                            
                     VITESSE SEMICONDUCTOR CORPORATION                      
                   UNAUDITED CONSOLIDATED BALANCE SHEETS                    
                                                                            
                                                        September 30,       
                                                     2013          2012     
                                                 ------------  ------------ 
                                                  (in thousands, except par 
                                                           value)           
                     ASSETS                                                 
Current assets:                                                             
  Cash                                           $     68,863  $     23,891 
  Accounts receivable, net                              9,807         9,403 
  Inventory, net                                       10,692        12,060 
  Prepaid expenses and other current assets             1,897         2,125 
                                                 ------------  ------------ 
    Total current assets                                    91,259                47,479  
    Property,  plant  and  equipment,  net                                        3,107                  3,832  
    Other  intangible  assets,  net                                                    1,170                  1,175  
    Other  assets                                                                                    3,425                  4,130  
                                                                                                  ------------    ------------  
                                                                                                  $          98,961    $          56,616  
                                                                                                  ============    ============  
                              LIABILITIES  AND  STOCKHOLDERS'  EQUITY  (DEFICIT)                              
Current  liabilities:                                                                                                                
    Accounts  payable                                                              $            7,436    $            5,726  
    Accrued  expenses  and  other  current  liabilities              12,245                12,188  
    Deferred  revenue                                                                            2,215                      871  
                                                                                                  ------------    ------------  
        Total  current  liabilities                                                    21,896                18,785  
    Other  long-term  liabilities                                                          407                      574  
    Long-term  debt,  net                                                                    16,366                15,852  
    Compound  embedded  derivative                                                            -                  2,899  
    Convertible  subordinated  debt,  net                                      44,384                42,521  
                                                                                                  ------------    ------------  
        Total  liabilities                                                                    83,053                80,631  
                                                                                                  ------------    ------------  
                                                                                                                                                        
Stockholders'  equity  (deficit):                                                                                          
    Preferred  stock,  $0.01  par  value:  10,000                                                                    
      shares  authorized;  Series  B  Non  Cumulative,                                                            
      Convertible,  nil  and  135  shares  outstanding                                                            
      at  September  30,  2013  and  2012,  respectively                          -                          1  
    Common  stock,  $0.01  par  value:  250,000  shares                                                          
      authorized;  57,545  and  25,812  shares                                                                          
      outstanding  at  September  30,  2013  and  2012,                                                            
      respectively                                                                                      575                      258  
    Additional  paid-in-capital                                                1,891,661          1,829,976  
    Accumulated  deficit                                                            (1,876,328)      (1,854,250)
                                                                                                  ------------    ------------  
        Total  stockholders'  equity  (deficit)                              15,908              (24,015)
                                                                                                  ------------    ------------  
                                                                                                  $          98,961    $          56,616  
                                                                                                  ============    ============  
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        
                                          VITESSE  SEMICONDUCTOR  CORPORATION                                            
                            UNAUDITED  CONSOLIDATED  STATEMENTS  OF  OPERATIONS                              
                                                                                                                                                        
                                                                    Three  Months  Ended                Year  Ended            
                                                                          September  30,                  September  30,        
                                                                  --------------------    --------------------  
                                                                        2013              2012              2013              2012      
                                                                  ---------    ---------    ---------    ---------  
                                                                        (in  thousands,  except  per  share  data)      
Net  revenues:                                                                                                                              
    Product  revenues                              $    26,455    $    28,053    $  101,334    $  109,920  
    Intellectual  property  revenues              420            1,415            2,439            9,563  
                                                                  ---------    ---------    ---------    ---------  
        Net  revenues                                        26,875          29,468        103,773        119,483  
                                                                  ---------    ---------    ---------    ---------  
Costs  and  expenses:                                                                                                                  
    Cost  of  product  revenues                    12,753          12,379          46,763          46,407  
    Engineering,  research  and                                                                                                  
      development                                              9,940          10,195          41,927          42,713  
    Selling,  general  and                                                                                                            
      administrative                                        7,593            7,727          30,210          29,822  
    Restructuring  and  impairment                      -          (1,460)                  -          (1,424)
    Amortization  of  intangible                                                                                                
      assets                                                              81                  96                347                330  
                                                                  ---------    ---------    ---------    ---------  
        Costs  and  expenses                            30,367          28,937        119,247        117,848  
                                                                  ---------    ---------    ---------    ---------  
(Loss)  income  from  operations              (3,492)              531        (15,474)          1,635  
Other  expense  (income)  :                                                                                                        
    Interest  expense,  net                            1,997            1,956            7,916            7,778  
    Gain  on  compound  embedded                                                                                                  
      derivative                                                        -          (1,124)            (803)        (4,897)
    Other  expense  (income),  net                      34                  19                  39                  40  
                                                                  ---------    ---------    ---------    ---------  
        Other  expense,  net                              2,031                851            7,152            2,921  
                                                                  ---------    ---------    ---------    ---------  
Loss  before  income  tax  benefit            (5,523)            (320)      (22,626)        (1,286)
Income  tax  benefit                                          242          (1,537)            (548)            (174)
                                                                  ---------    ---------    ---------    ---------  
Net  (loss)  income                                $    (5,765)  $      1,217    $  (22,078)  $    (1,112)
                                                                  =========    =========    =========    =========  
                                                                                                                                                        
Net  (loss)  income  per  common                                                                                                
  share  --  basic                                    $      (0.10)  $        0.05    $      (0.55)  $      (0.04)
Net  (loss)  income  per  common                                                                                                
  share  -  diluted                                  $      (0.10)  $        0.05    $      (0.55)  $      (0.04)
Weighted  average  shares                                                                                                          
  outstanding-  basic                                  57,254          25,628          40,311          25,121  
Weighted  average  shares                                                                                                          
  outstanding-  diluted                              57,254          26,513          40,311          25,121  
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        
                                          VITESSE  SEMICONDUCTOR  CORPORATION                                            
    UNAUDITED  RECONCILIATION  OF  GAAP  NET  (LOSS)  INCOME  TO  NON-GAAP  NET  LOSS      
                                                                                                                                                        
                                                                    Three  Months  Ended                                                
                                                                          September  30,                  September  30,        
                                                                  --------------------    --------------------  
                                                                        2013              2012              2013              2012      
                                                                  ---------    ---------    ---------    ---------  
                                                                        (in  thousands,  except  per  share  data)      
                                                                                                                                                        
GAAP  net  (loss)  income                      $    (5,765)  $      1,217    $  (22,078)  $    (1,112)
                                                                  ---------    ---------    ---------    ---------  
                                                                                                                                                        
Adjustments:                                                                                                                                
Stock-based  compensation  charges          1,091            1,141            4,396            4,442  
Amortization  of  intangible                                                                                                    
  assets                                                                  81                  96                347                330  
Restructuring  and  impairment                                                                                                
  charges                                                                  -          (1,460)                  -          (1,424)
Gain  on  compound  embedded                                                                                                      
  derivative                                                            -          (1,124)            (803)        (4,897)
                                                                  ---------    ---------    ---------    ---------  
Total  GAAP  to  non-GAAP                                                                                                            
  adjustments                                                  1,172          (1,347)          3,940          (1,549)
                                                                  ---------    ---------    ---------    ---------  
Non-GAAP  net  (loss)  income              $    (4,593)  $        (130)  $  (18,138)  $    (2,661)
                                                                  =========    =========    =========    =========  
                                                                                                                                                        
Net  (loss)  income  per  common                                                                                                
  share                                                                                                                                            
Basic:                                                                                                                                            
GAAP  net  (loss)  income                      $      (0.10)  $        0.05    $      (0.55)  $      (0.04)
Adjustments                                                      0.02            (0.05)            0.10            (0.06)
                                                                  ---------    ---------    ---------    ---------  
Non-GAAP  net  (loss)  income              $      (0.08)  $              -    $      (0.45)  $      (0.10)
                                                                  =========    =========    =========    =========  
                                                                                                                                                        
Net  (loss)  income  per  common                                                                                                
  share                                                                                                                                            
Diluted:                                                                                                                                        
GAAP  net  (loss)  income                      $      (0.10)  $        0.05    $      (0.55)  $      (0.04)
Adjustments                                                      0.02            (0.05)            0.10            (0.06)
                                                                  ---------    ---------    ---------    ---------  
Non-GAAP  net  (loss)  income              $      (0.08)  $              -    $      (0.45)  $      (0.10)
                                                                  =========    =========    =========    =========  
                                                                                                                                                        
                                                                                                                                                        
              UNAUDITED  RECONCILIATION  OF  GAAP  (LOSS)  INCOME  FROM  OPERATIONS              
                                  TO  NON-GAAP  (LOSS)  INCOME  FROM  OPERATIONS                                    
                                                                                                                                                        
GAAP  (loss)  income  from                                                                                                          
  operations                                            $    (3,492)  $          531    $  (15,474)  $      1,635  
                                                                  ---------    ---------    ---------    ---------  
Adjustments:                                                                                                                                
Stock-based  compensation  charges          1,091            1,141            4,396            4,442  
Amortization  of  intangible                                                                                                    
  assets                                                                  81                  96                347                330  
Restructuring  and  impairment                                                                                                
  charges                                                                  -          (1,460)                  -          (1,424)
                                                                  ---------    ---------    ---------    ---------  
Total  GAAP  to  non-GAAP                                                                                                            
  adjustments                                                  1,172              (223)          4,743            3,348  
                                                                  ---------    ---------    ---------    ---------  
Non-GAAP  (loss)  income  from                                                                                                  
  operations                                            $    (2,320)  $          308    $  (10,731)  $      4,983  
                                                                  =========    =========    =========    =========  
                                                                                                                                                        
 




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