SANTA CLARA, Calif. -- Atheros Communications, Inc. (Nasdaq: ATHR - News), a leading developer of advanced wireless solutions, today announced record financial results for the fourth quarter of 2006 and the year ended Dec. 31, 2006.

Revenue in the fourth quarter was $87.8 million, up 10 percent from the $79.6 million reported in the third quarter of 2006 and up 65 percent from the $53.1 million reported in the fourth quarter of 2005. In accordance with U.S. generally accepted accounting principles (GAAP), the company recorded a fourth quarter net loss of $953,000 or a loss of $0.02 per diluted share. In the fourth quarter, the GAAP net loss included $11.4 million in estimated acquisition related expenses. This compares with GAAP net income of $6.3 million or $0.11 per diluted share in the third quarter of 2006 and $13.1 million or $0.24 per share in the fourth quarter of 2005. Total cash and investments were $185.9 million at Dec. 31, 2006.

Atheros reports operating income, net income and basic and diluted net income per share in accordance with GAAP and additionally on a non-GAAP basis. Non-GAAP net income excludes, where applicable, the effect of stock-based compensation, the tax benefit due to the partial release of deferred tax asset valuation allowance, amortization of acquired intangible assets and acquisition related charges. A reconciliation of GAAP to non-GAAP condensed consolidated statements of operations is presented in the financial statements portion of this release.

Non-GAAP gross margins in the fourth quarter were 47.6 percent, slightly above the company's guided range of 46.5 to 47.5 percent, compared with 48.0 percent in the third quarter of 2006 and 46.7 percent in the fourth quarter of 2005. Non-GAAP operating income increased to 15.3 percent of revenue from the 14.5 percent reported in the third quarter of 2006.

Non-GAAP net income in the fourth quarter was $12.7 million or $0.22 per diluted share, compared with non-GAAP net income of $10.5 million or $0.19 per diluted share in the third quarter of 2006 and $5.9 million or $0.11 per diluted share in the fourth quarter of 2005.

For the year ended Dec. 31, 2006, revenue was $301.7 million, up 64 percent from the $183.5 million reported in 2005. Net income in accordance with GAAP for 2006 was $18.9 million or $0.34 per diluted share. 2006 GAAP net income included $12.3 million in estimated acquisition related expenses. For the prior year, GAAP net income was $16.7 million or earnings of $0.31 per diluted share. Non-GAAP net income for 2006 was $40.7 million or $0.73 per diluted share, compared with non-GAAP net income of $11.0 million or $0.21 per diluted share in 2005.

"This marks Atheros' seventh consecutive quarter of revenue growth and the sixth consecutive quarter that we achieved record non-GAAP operating income and earnings," said Craig Barratt, president and CEO. "During 2006, the strength of our wireless LAN business plus the initial revenue contribution from our diversification efforts enabled us to record a 64 percent increase in yearly revenue while increasing non-GAAP net income by 270 percent. We reported record revenue and non-GAAP earnings in each quarter of 2006.

"Earlier today, we announced the first of Atheros' Bluetooth family of solutions, which is the industry's first Bluetooth 2.1 + Enhanced Data Rate (EDR)-ready solution targeted for the PC market," Dr. Barratt said. "Our single-chip solution, the AR3011, is the smallest and lowest-cost Bluetooth design to date and is intended to drive adoption of Bluetooth technology into laptops and desktops, where Atheros has technical expertise and strong customer relationships.

"In the fourth quarter, we again saw tremendous revenue growth from our XSPAN(TM) family of 802.11n products, which accounted for a record amount of our revenue. Earlier this month at the Consumer Electronics Show, we showcased an XSPAN-powered access point that supported eight data streams simultaneously, including two high definition TVs. Atheros' superior solutions, coupled with an extremely strong customer base, are the foundation for our success in this growing market. We continue to expect 11n to be the number one growth driver for the company in 2007," he said.

Atheros Communications Inc. (Nasdaq: ATHR)