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Vitesse Reports Fourth Quarter and Fiscal Year 2013 Results

CAMARILLO, CA -- (Marketwired) -- Dec 05, 2013 -- Vitesse Semiconductor Corporation (NASDAQ: VTSS)

Vitesse Semiconductor Corporation (NASDAQ: VTSS), a leading provider of advanced IC solutions for Carrier and Enterprise networks, reported its financial results for the fourth quarter and fiscal year 2013, ended September 30, 2013.

"During the year, we executed our new product strategy and continued converting design wins to meaningful revenue," said Chris Gardner, CEO of Vitesse. "Fiscal 2013 new product revenue grew 82% year-over-year, reaching 33% of revenue. More importantly, we continue to build for the future. 2013 new product design wins grew 40%, strengthening Vitesse's foundation for continued new product growth in 2014 and beyond."

"Through ongoing R&D investment, we have developed patented technology advantages that solve the critical needs of our customers: service delivery, synchronization, security, and signal integrity. As a result, Vitesse is emerging as the de facto provider of Ethernet-based ICs for 4G/LTE Mobile and Cloud Access for Carrier and Enterprise networks. Our plan is to also expand into adjacent markets such as the Internet of Things. With this momentum, new product revenue is expected to ramp to $55 million in 2014. Vitesse is poised to achieve sustainable profitability."

Fourth Quarter Fiscal Year 2013 Financial Results Summary

Fiscal Year 2013 Financial Results Summary

Balance Sheet Data at September 30, 2013 as Compared to September 30, 2012

Financial Outlook
For the first quarter of fiscal year 2014, ending December 31, 2013, Vitesse expects revenue to be in the range of $25.0 million to $27.0 million and product margins are expected to be between 53% and 54%. GAAP operating expenses are expected to be between $18.5 million and $19.5 million.

December 5, 2013 Conference Call Information
A conference call is scheduled for today, December 5, 2013, at 1:30 p.m. Pacific Time / 4:30 p.m. Eastern Time to report financial results for the fourth quarter and fiscal year 2013.

To listen to the conference call via telephone, dial 888.523.1228 (U.S. toll-free) or 719.457.2697 (International) and provide the passcode 8701276. Participants should dial in at least 10 minutes prior to the start of the call. To listen via the Internet, the webcast can be accessed through the investor section of the Vitesse corporate web site at www.vitesse.com.

The playback of the conference call will be available approximately two hours after the call concludes and will be accessible on the Vitesse corporate web site or by calling 877.870.5176 (U.S. toll-free) or 858.384.5517 (International) and entering the passcode 8701276. The audio replay will be available for seven days.

About Vitesse
Vitesse (NASDAQ: VTSS) designs a diverse portfolio of high-performance semiconductor solutions for Carrier and Enterprise networks worldwide. Vitesse products enable the fastest-growing network infrastructure markets including Mobile Access/IP Edge, Cloud Computing and SMB/SME Enterprise Networking. Visit www.vitesse.com or follow us on Twitter @VitesseSemi.

Vitesse is a registered trademark of Vitesse Semiconductor Corporation in the United States and other jurisdictions. All other trademarks or registered trademarks mentioned herein are the property of their respective holders.

VTSS-F

Cautions Regarding Forward Looking Statements
All statements included or incorporated by reference in this release and the related conference call for analysts and investors, other than statements or characterizations of historical fact, are forward-looking statements that are based on our current expectations, estimates and projections about our business and industry, management's beliefs, and certain assumptions made by us, all of which are subject to change. Forward-looking statements can often be identified by words such as "anticipates," "believes," "estimates," "expects," "intends," "plans," "predicts," and similar terms, and variations or negatives of these words. Examples of forward-looking statements in this release include the Company's financial outlook for its first fiscal quarter of 2014, projected revenues from design wins and anticipated revenue growth. Forward-looking statements are not guarantees of future performance and the Company's actual results may differ significantly from the results discussed in the forward-looking statements. Factors and uncertainties that could affect the Company's forward-looking statements include, among other things: identification of feasible new product initiatives, management of R&D efforts and the resulting successful development of new products and product platforms; acceptance by customers of the Company's products; reliance on key suppliers; rapid technological change in the industries in which the Company operates; and competitive factors, including pricing pressures and the introduction by others of new products with similar or better functionality than the Company's products. These and other risks are more fully described in the Company's filings with the Securities and Exchange Commission, including the Company's most recently filed Annual Report on Form 10-K and Quarterly Report on Form 10-Q, which should be read in conjunction herewith for a further discussion of important factors that could cause actual results to differ materially from those in the forward-looking statements. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

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 
                                 =========  =========  =========  ========= 
                                                                            

Company Contact: 
Marty McDermut 
Vitesse Semiconductor 

www.vitesse.com 
+1.805.388.3700 

invest@vitesse.com 

Agency Contact:
Becky Herrick
LHA

www.lhai.com 
+1.415.433.3777

VTSS@lhai.com