##### Table of Contents





UNITED STATES SECURITIES AND
    EXCHANGE COMMISSIONWashington, D.C.
    20549
      Form 10-K
      (Mark One)þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    March 31, 2008ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to   Commission file number:
    000-23193
      APPLIED MICRO CIRCUITS
    CORPORATION
 (Exact name of registrant as
    specified in its charter)
      Delaware(State or other jurisdiction
    of 
    incorporation or organization)

94-2586591(I.R.S. Employer
    Identification No.)215 Moffett Park Drive, Sunnyvale, CA(Address of principal
    executive offices)

94089(zip
    code)   Registrants telephone number, including area code:
 (408) 542-8600
      Securities registered pursuant to Section 12(b) of the
    Act:
  Title of Each Class

Name of Exchange on Which RegisteredCommon Stock, $0.01 par value

The Nasdaq Stock Market   Securities registered pursuant to Section 12(g) of the
    Act:
 None
      þ o
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. þ
  12b-2
 Large
    accelerated
    filer þ
    Accelerated
    filer o
    Non-accelerated
    filer o
    Smaller reporting
    company o (Do not check if a smaller
    reporting company)
  Rule 12b-2).  Yes o þ




---



##### 





APPLIED
    MICRO CIRCUITS CORPORATION
    ANNUAL REPORT ON
    FORM 10-K
    FOR THE FISCAL YEAR ENDED
    MARCH 31, 2008
  TABLE OF CONTENTS
   
 PagePART IItem 1.


Business


1Item 1A.


Risk Factors


12Item 1B.


Unresolved Staff Comments


27Item 2.


Properties


27Item 3.


Legal Proceedings


28Item 4.


Submission of Matters to a Vote of Security
    Holders


28PART IIItem 5.


Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities


28Item 6.


Selected Financial Data


31Item 7.


Managements Discussion and Analysis of
    Financial Condition and Results of Operations


32Item 7A.


Quantitative and Qualitative Disclosure about
    Market Risk


49Item 8.


Financial Statements and Supplementary Data


50Item 9.


Changes in and Disagreements With Accountants on
    Accounting and Financial Disclosure


50Item 9A.


Controls and Procedures


50Item 9B.


Other Information


53PART IIIItem 10.


Directors, Executive Officers and Corporate
    Governance


53Item 11.


Executive Compensation


53Item 12.


Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters


53Item 13.


Certain Relationships and Related Transactions


53Item 14.


Principal Accountant Fees and Services


53PART IVItem 15.


Exhibits and Financial Statement Schedules


54Signatures


56Financial Statements


F-1EXHIBIT 21.1EXHIBIT 23.1EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2   i




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CAUTIONARY
    STATEMENT ABOUT FORWARD-LOOKING STATEMENTS
    Form 10-K,
 PART I  Item 1.
    Business.  408-542-8600. Form 10-K, Form 10-Q, Form 8-K 1-800-SEC-0330. http://www.sec.gov.
  Overview
   1




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Industry
    Background
  The
    Communications Industry
  video-on-demand, e-commerce,
    The
    Storage Industry
   2




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AMCC
    Strategy
  tm IP-based
    Processing
  IP-based
  Transporting
     3




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Storing
    Products
    and Customers
  Integrated
    Communications Products
    Physical Layer Products:
      Framer and Pointer Processor Products:
 4




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Packet Processing Products: look-up,
  Cell Switching Products:
  Embedded Processor Products: IP-based
 5




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Storage
    Products
    RAID Controllers: tm
  Embedded Processors:
  Technology
    Knowledge
    of Communications and Storage Systems
    Design
    of Communications ICs and Storage Solutions
   6




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Research
    and Development
        Manufacturing
  Manufacturing
    of Integrated Circuits
    Wafer
    Fabrication
   7




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Assembly
    and Testing
    Manufacturing
    of Printed Circuit Board Assemblies
  off-the-shelf
  Sales and
    Marketing
      Backlog
    Competition
     8




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Proprietary
    Rights
        Environmental
    Matters
   9




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Employees
    Executive
    Officers of the Registrant
    Name

Age

PositionKambiz Hooshmand


46


President and Chief Executive Officer, Member of the Board of
    DirectorsRobert G. Gargus


56


Senior Vice President and Chief Financial OfficerDaryn Lau


43


Senior Vice President, Corporate Development and StrategyRussell G. Johnson


43


Senior Vice President, General Manager, StorageShiva K. Natarajan


42


Vice President, Corporate Controller and Chief Accounting OfficerCynthia Moreland


48


Vice President, General Counsel and SecretaryRoger Wendelken


41


Vice President, World Wide SalesMichael Major


51


Vice President, Human Resources   Kambiz Hooshmand
  Robert G. Gargus
  Daryn Lau
  Russell G. Johnson
 10




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Shiva K. Natarajan
  Cynthia Moreland
  Roger Wendelken
  Michael Major
  Financial
    Information about Segments, Certain Significant Customers and
    Geographic Areas
  Form 10-K.
 11




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##### Table of Contents



Item 1A.
    Risk
    Factors.  RISK
    FACTORS
  Before deciding to invest in us or to maintain or increase
    your investment, you should carefully consider the risks
    described below, in addition to the other information contained
    in this report and in our other filings with the SEC. We update
    our descriptions of the risks and uncertainties facing us in our
    periodic reports filed with the SEC. The risks and uncertainties
    described below and in our other filings are not the only ones
    facing us. Additional risks and uncertainties not presently
    known to us or that we currently deem immaterial may also affect
    our business. If any of these known or unknown risks or
    uncertainties actually occurs, our business, financial condition
    and results of operations could be seriously harmed. In that
    event, the market price for our common stock could decline and
    you may lose your investment.
  Our
    business strategy may contemplate the acquisition of other
    companies, products and technologies. Merger and acquisition
    activities involve numerous risks and we may not be able to
    address these risks successfully without substantial expense,
    delay or other operational or financial problems.
    
    potential dilution to our stockholders;
    use of a significant portion of our cash reserves;
    diversion of managements attention;
    failure to retain or integrate key personnel;
    difficulty in completing an acquired companys in-process
    research or development projects;
    amortization of acquired intangible assets and deferred
    compensation;
    customer dissatisfaction or performance problems with an
    acquired companys products or services;
    costs associated with acquisitions or mergers;
    difficulties associated with the integration of acquired
    companies, products or technologies;
    difficulties competing in markets that are unfamiliar to us;
    ability of the acquired companies to meet their financial
    projections; and
    assumption of unknown liabilities, or other unanticipated events
    or circumstances.     12




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Our
    operating results may fluctuate because of a number of factors,
    many of which are beyond our control.
    
    communications, information technology and semiconductor
    industry conditions;
    fluctuations in the timing and amount of customer requests for
    product shipments;
    the reduction, rescheduling or cancellation of orders by
    customers, including as a result of slowing demand for our
    products or our customers products or over-ordering of our
    products or our customers products;
    changes in the mix of products that our customers buy;
    the gain or loss of one or more key customers or their key
    customers, or significant changes in the financial condition of
    one or more of our key customers or their key customers;
    our ability to introduce, certify and deliver new products and
    technologies on a timely basis;
    the announcement or introduction of products and technologies by
    our competitors;
    competitive pressures on selling prices;
    the ability of our customers to obtain components from their
    other suppliers;
    market acceptance of our products and our customers
    products;
    fluctuations in manufacturing output, yields or other problems
    or delays in the fabrication, assembly, testing or delivery of
    our products or our customers products;
    increases in the costs of products or discontinuance of products
    by suppliers;
    the availability of external foundry capacity, contract
    manufacturing services, purchased parts and raw materials
    including packaging substrates;
    problems or delays that we and our foundries may face in
    shifting the design and manufacture of our future generations of
    IC products to smaller geometry process technologies and in
    achieving higher levels of design and device integration;
    the amounts and timing of costs associated with warranties and
    product returns;
    the amounts and timing of investments in research and
    development;
    the amounts and timing of the costs associated with payroll
    taxes related to stock option exercises or settlement of
    restricted stock units;
    costs associated with acquisitions and the integration of
    acquired companies, products and technologies;
    the impact of potential one-time charges related to purchased
    intangibles;
    our ability to successfully integrate acquired companies,
    products and technologies;
    the impact on interest income of a significant use of our cash
    for an acquisition, stock repurchase or other purpose;
    the effects of changes in interest rates or credit worthiness on
    the value and yield of our short-term investment portfolio;
    costs associated with compliance with applicable environmental,
    other governmental or industry regulations including costs to
    redesign products to comply with those regulations or lost
    revenue due to failure to comply in a timely manner;
    the effects of changes in accounting standards; 13




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
    costs associated with litigation, including without limitation,
    attorney fees, litigation judgments or settlements, relating to
    the use or ownership of intellectual property or our internal
    option review or other claims arising out of our operations;
    our ability to identify, hire and retain senior management and
    other key personnel;
    the effects of war, acts of terrorism or global threats, such as
    disruptions in general economic activity and changes in
    logistics and security arrangements; and
    general economic and industry conditions.  Our
    business, financial condition and operating results would be
    harmed if we do not achieve anticipated revenues.
    
    the reduction, rescheduling or cancellation of customer orders;
    declines in the average selling prices of our products;
    delays when our customers are transitioning from old products to
    new products;
    a decrease in demand for our products or our customers
    products;
    a decline in the financial condition or liquidity of our
    customers or their customers;
    delays in the availability of our products or our
    customers products;
    the failure of our products to be qualified in our
    customers systems or certified by our customers;
    excess inventory of our products held by our customers,
    resulting in a reduction in their order patterns as they work
    through the excess inventory of our products;
    fabrication, test, product yield, or assembly constraints for
    our products that adversely affect our ability to meet our
    production obligations;
    the failure of one of our subcontract manufacturers to perform
    its obligations to us;
    our failure to successfully integrate acquired companies,
    products and technologies; and
    shortages of raw materials or production capacity constraints
    that lead our suppliers to allocate available supplies or
    capacity to other customers, which may disrupt our ability to
    meet our production obligations.       14




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Our
    business substantially depends upon the continued growth of the
    technology sector and the Internet.
    The
    loss of one or more key customers, the diminished demand for our
    products from a key customer, or the failure to obtain
    certifications from a key customer or its distribution channel
    could significantly reduce our revenues and
    profits.
      
    customers may stop incorporating our products into their own
    products with limited notice to us and may suffer little or no
    penalty as a result of such action;
    customers or prospective customers may not incorporate our
    products into their future product designs;
    design wins (as explained below) with customers or prospective
    customers may not result in sales to such customers;
    the introduction of new products by customers may occur later or
    be less successful in the market than planned;
    we may successfully design a product to customer specifications
    but the customer may not be successful in the market;
    sales of customer product lines incorporating our products may
    rapidly decline or such product lines may be phased out;
    our agreements with customers typically are non-exclusive and do
    not require them to purchase a minimum quantity of our products;
    many of our customers have pre-existing relationships with our
    current or potential competitors that may cause our customers to
    switch from using our products to using competing products;
    some of our OEM customers may develop products internally that
    would replace our products;
    we may not be able to successfully develop relationships with
    additional network equipment vendors;
    our relationships with some of our larger customers may deter
    other potential customers (who compete with these customers)
    from buying our products;
    the impact of terminating certain sales representatives or sales
    personnel as a result of a Company workforce reduction or
    otherwise; and
    some of our customers and prospective customers may become less
    viable. 15




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There
    is no guarantee that design wins will become actual orders and
    sales.
    Any
    significant order cancellations or order deferrals could cause
    unplanned inventory growth resulting in excess inventory which
    may adversely affect our operating results.
        Our
    customers products typically have lengthy design cycles. A
    customer may decide to cancel or change its product plans, which
    could cause us to lose anticipated sales.
   16




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An
    important part of our strategy is to continue our focus on the
    markets for communications and storage equipment. If we are
    unable to further expand our share of these markets or react
    timely or properly to emerging trends, our revenues may not grow
    and could decline.
            Our
    industry and markets are subject to consolidation, which may
    result in stronger competitors, fewer customers and reduced
    demand.
    Our
    operating results are subject to fluctuations because we rely
    heavily on international sales.
    
    foreign currency exchange fluctuations;
    changes in regulatory requirements;
    tariffs and other barriers; 17




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
    timing and availability of export licenses;
    political and economic instability;
    difficulties in accounts receivable collections;
    difficulties in staffing and managing foreign operations;
    difficulties in managing distributors;
    difficulties in obtaining governmental approvals for
    communications and other products;
    reduced or uncertain protection for intellectual property rights
    in some countries;
    longer payment cycles to collect accounts receivable in some
    countries;
    burdens of complying with a wide variety of complex foreign laws
    and treaties; and
    potentially adverse tax consequences.        Our
    cash and cash equivalents and portfolio of short-term
    investments and long-term marketable securities are exposed to
    certain market risks.
    Our
    restructuring activities could result in management
    distractions, operational disruptions and other
    difficulties.
   18




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Our
    markets are subject to rapid technological change, so our
    success depends heavily on our ability to develop and introduce
    new products.
    
    rapidly changing technologies;
    evolving and competing industry standards;
    changing customer needs;
    frequent introductions of new products and enhancements;
    increased integration with other functions;
    long design and sales cycles;
    short product life cycles; and
    intense competition.      The
    markets in which we compete are highly competitive, and we
    expect competition to increase in these markets in the
    future.
    
    our ability to partner with OEM and channel partners who are
    successful in the market;
    success in designing and subcontracting the manufacture of new
    products that implement new technologies; 19




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
    product quality, interoperability, reliability, performance and
    certification;
    customer support;
    time-to-market;
    price;
    production efficiency;
    design wins;
    expansion of production of our products for particular systems
    manufacturers;
    end-user acceptance of the systems manufacturers products;
    market acceptance of competitors products; and
    general economic conditions.        Our
    dependence on third-party manufacturing and supply relationships
    increases the risk that we will not have an adequate supply of
    products to meet demand or that our cost of materials will be
    higher than expected.
    
    reduced control over delivery schedules and quality;
    inadequate manufacturing yields and excessive costs;
    difficulties selecting and integrating new subcontractors;
    potential lack of adequate capacity during periods of excess
    demand; 20




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
    limited warranties on products supplied to us;
    potential increases in prices;
    potential instability in countries where third-party
    manufacturers are located; and
    potential misappropriation of our intellectual property.              Our
    operating results depend on manufacturing output and yields of
    our ICs and printed circuit board assemblies, which may not meet
    expectations.
   21




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work-in-process
  We may
    experience difficulties in transitioning to smaller geometry
    process technologies or in achieving higher levels of design
    integration and that may result in reduced manufacturing yields,
    delays in product deliveries and increased
    expenses.
    product-by-product
  We
    must develop or otherwise gain access to improved IC process
    technologies.
    The
    complexity of our products may lead to errors, defects and bugs,
    which could negatively impact our reputation with customers and
    result in liability.
      
    additional development costs;
    loss of, or delays in, market acceptance; 22




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
    diversion of technical and other resources from our other
    development efforts;
    claims by our customers or others against us; and
    loss of credibility with our current and prospective customers.    If our
    internal control over financial reporting is not considered
    effective, our business and stock price could be adversely
    affected.
  Form 10-K
    and/or
  Our
    future success depends in part on the continued service of our
    key senior management, design engineering, sales, marketing, and
    manufacturing personnel and our ability to identify, hire and
    retain additional, qualified personnel.
     23




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Our
    ability to supply a sufficient number of products to meet demand
    could be severely hampered by a shortage of water, electricity
    or other supplies, or by natural disasters or other
    catastrophes.
          We
    could incur substantial fines or litigation costs associated
    with our storage, use and disposal of hazardous
    materials.
    Environmental
    laws and regulations could cause a disruption in our business
    and operations.
   24




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Any
    acquisitions we make could disrupt our business and harm our
    results of operations and financial condition.
    
    problems combining or integrating the purchased operations,
    technologies or products;
    unanticipated costs;
    diversion of managements attention from our core business;
    adverse effects on existing business relationships with
    suppliers and customers;
    risks associated with entering markets in which we have limited
    or no prior experience; and
    potential loss of key employees, particularly those of the
    acquired organizations.    
    issue stock that would dilute our current stockholders
    percentage ownership;
    incur debt;
    assume liabilities;
    incur amortization or impairment expenses related to goodwill
    and other intangible assets; or
    incur large and immediate write-offs.    We may
    not be able to protect our intellectual property
    adequately.
     25




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We
    could be harmed by litigation involving patents, proprietary
    rights or other claims.
        Our
    stock price is volatile.
    
    our anticipated or actual operating results;
    announcements or introductions of new products by us or our
    competitors;
    anticipated or actual operating results of our customers, peers
    or competitors;
    technological innovations or setbacks by us or our competitors;
    conditions in the semiconductor, communications or information
    technology markets;
    the commencement or outcome of litigation or governmental
    investigations; 26




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
    changes in ratings and estimates of our performance by
    securities analysts;
    announcements of merger or acquisition transactions;
    management changes;
    our inclusion in certain stock indices; and
    other events or factors.    The
    anti-takeover provisions of our certificate of incorporation and
    of the Delaware general corporation law may delay, defer or
    prevent a change of control.
    If we
    issue additional shares of stock in the future, it may have a
    dilutive effect on our stockholders.
    Item 1B.
    Unresolved
    Staff Comments.    Item 2.
    Properties.           27




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Item 3.
    Legal
    Proceedings.    Item 4.
    Submission
    of Matters to a Vote of Security Holders.   PART II  Item 5.
    Market
    for Registrants Common Equity, Related Stockholder Matters
    and Issuer Purchases of Equity Securities.  1-for-4
  Fiscal Year Ended March 31, 2008

High


LowFirst Quarter

$
14.32


$
10.00Second Quarter

$
12.72


$
9.64Third Quarter

$
13.68


$
8.74Fourth Quarter

$
8.87


$
6.61   Fiscal Year Ended March 31, 2007

High


LowFirst Quarter

$
16.28


$
9.52Second Quarter

$
11.84


$
8.36Third Quarter

$
15.20


$
11.16Fourth Quarter

$
15.88


$
13.00     Dividend
    Policy
    Recent
    Sales of Unregistered Securities
    Securities
    Authorized for Issuance under Equity Compensation
    Plans
    Issuer
    Purchases of Equity Securities
    28




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Total Number ofShares Purchased


Maximum Amountas Part of Publicly


That May Yet BeTotal Number of


Average Price


Announced Plans


Purchased Under thePeriod

Shares Purchased


Paid per Share


or Programs


Plans or ProgramsJanuary 1  January 31, 2008


1,079


$
11.12



1,079


$
8,517February 1  February 29, 2008


272



11.02



272



5,517March 1 March 31, 2008(1)














5,517Total shares repurchased


1,351


$
11.10



1,351    29




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5-year
  COMPARISON
    OF 5 YEAR CUMULATIVE TOTAL RETURN*
    Among Applied Micro Circuits Corporation
  
   *
    
    Represents a hypothetical $100 investment on March 31, 2003
    in stock or index-including reinvestment of dividends.  Fiscal Year Ended March 31,2003

2004

2005

2006

2007

2008Applied Micro Circuits Corporation


100.00



175.15



100.61



124.85



111.96



55.06S&P 500


100.00



135.12



144.16



161.07



180.13



170.98NASDAQ Composite


100.00



151.01



152.38



181.06



189.63



177.49NASDAQ Telecommunications


100.00



200.32



177.07



231.87



243.70



223.89NASDAQ Electronic Components


100.00



172.38



143.55



159.34



147.79



144.65   The stock price performance included in this graph is not
    necessarily indicative of future stock price performance.
 30




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Item 6.
    Selected
    Financial Data.    Year Ended March 31,2008


2007


2006


2005


2004(In thousands, except per share amounts)Consolidated Statement of Operations Data:Net revenues

$
246,146


$
292,852


$
261,844


$
253,756


$
131,177Cost of revenues


126,668



140,714



122,392



123,253



57,604Gross profit


119,478



152,138



139,452



130,503



73,573Operating expenses:Research and development


97,550



96,418



93,770



122,072



129,083Selling, general and administrative


61,907



67,971



62,157



65,080



50,325Acquired in-process research and development






13,300







13,400



21,800Amortization of purchased intangibles


5,321



4,995



4,588



6,960



1,097Restructuring charges


2,985



1,291



12,602



9,622



22,325Option investigation, net


1,072



5,344











Purchased intangible asset impairment charges














27,330



Goodwill impairment charges


71,494







131,216







Litigation settlement, net


1,125











29,250



Total operating expenses


241,454



189,319



304,333



273,714



224,630Operating loss


(121,976
)


(37,181
)


(164,881
)


(143,211
)


(151,057
)Interest income, net


8,635



13,125



15,617



18,699



35,007Other income, net


1,944



250



256







8,340Loss before income taxes


(111,397
)


(23,806
)


(149,008
)


(124,512
)


(107,710
)Income tax expense (benefit)


3,724



402



(636
)


2,861



(1,776
)Net loss

$
(115,121
)

$
(24,208
)

$
(148,372
)

$
(127,373
)

$
(105,934
)Basic and diluted net loss per share:Net loss per share

$
(1.70
)

$
(0.34
)

$
(1.97
)

$
(1.65
)

$
(1.38
)Shares used in calculating basic and diluted net loss per share


67,775



71,076



75,210



77,364



76,619   March 31,2008


2007


2006


2005


2004Consolidated Balance Sheet Data:Working capital

$
172,818


$
307,062


$
336,930


$
396,258


$
841,467Goodwill and intangible assets, net


320,155



415,644



381,066



534,514



240,193Total assets


632,847



816,512



825,426



1,102,395



1,188,103Long-term debt and capital lease obligations including current
    portion














34



303Total stockholders equity

$
580,712


$
760,822


$
762,808


$
977,198


$
1,120,547  31




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Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations.    
    Caution concerning forward-looking
    statements.  This section discusses how
    forward-looking statements made by us in the MD&A and
    elsewhere in this report are based on managements present
    expectations about future events and are inherently susceptible
    to uncertainty and changes in circumstances.
    Overview.  This section provides an
    introductory overview and context for the discussion and
    analysis that follows in the MD&A.
    Critical accounting policies.  This section
    discusses those accounting policies that are both considered
    important to our financial condition and operating results and
    require significant judgment and estimates on the part of
    management in their application.
    Results of operations.  This section provides
    an analysis of our results of operations for the three fiscal
    years ended March 31, 2008. A brief description is provided
    of transactions and events that impact the comparability of the
    results being analyzed.
    Financial condition and liquidity.  This
    section provides an analysis of our cash position and cash
    flows, as well as a discussion of our financing arrangements and
    financial commitments.  CAUTION
    CONCERNING FORWARD-LOOKING STATEMENTS
    OVERVIEW
   32




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##### Table of Contents



Fiscal Year Ended March 31,2008


2007% of Net





% of Net


Increase


%Amount


Revenue


Amount


Revenue


(Decrease)


ChangeNet revenues

$
246,146



100.0
%

$
292,852



100.0
%

$
(46,706
)


(15.9
)%Cost of revenues


126,668



51.5



140,714



48.0



(14,046
)


(10.0
)Gross profit


119,478



48.5



152,138



52.0



(32,660
)


(21.5
)Total operating expenses


241,454



98.1



189,319



64.6



52,135



27.5Operating loss


(121,976
)


(49.6
)


(37,181
)


(12.7
)


(84,795
)


(228.1
)Interest and other income, net


10,579



4.3



13,375



4.6



(2,796
)


(20.9
)Loss before income taxes


(111,397
)


(45.3
)


(23,806
)


(8.1
)


(87,591
)


(367.9
)Income tax expense (benefit)


3,724



1.5



402



0.1



3,322



826.4Net loss

$
(115,121
)


(46.8
)%

$
(24,208
)


(8.3
)%

$
(90,913
)


(375.5
)%     Fiscal Year Ended March 31,2007


2006% of Net





% of Net


Increase


%Amount


Revenue


Amount


Revenue


(Decrease)


ChangeNet revenues

$
292,852



100.0
%

$
261,844



100.0
%

$
31,008



11.8
%Cost of revenues


140,714



48.0



122,392



46.7



18,322



15.0Gross profit


152,138



52.0



139,452



53.3



12,686



9.1Total operating expenses


189,319



64.6



304,333



116.2



(115,014
)


(37.8
)Operating loss


(37,181
)


(12.7
)


(164,881
)


(63.0
)


127,700



77.4Interest and other income, net


13,375



4.6



15,873



6.1



(2,498
)


(15.7
)Loss before income taxes


(23,806
)


(8.1
)


(149,008
)


(56.9
)


125,202



84.0Income tax expense (benefit)


402



0.1



(636
)


(0.2
)


1,038



163.2Net loss

$
(24,208
)


(8.3
)%

$
(148,372
)


(56.7
)%

$
124,164



83.7
%   Net Revenue.
    
    the timing, rescheduling or cancellation of significant customer
    orders and our ability, as well as the ability of our customers,
    to manage inventory corrections;
    the qualification, availability and pricing of competing
    products and technologies and the resulting effects on sales and
    pricing of our products.
    our ability to specify, develop or acquire, complete, introduce,
    and market new products and technologies in a cost effective and
    timely manner; 33




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##### Table of Contents




    the rate at which our present and future customers and end-users
    adopt our products and technologies in our target markets;
    general economic and market conditions in the semiconductor
    industry and communications markets; and
    combinations of companies in our customer base, resulting in the
    combined company choosing our competitors IC
    standardization other than our supported product platforms.      2008

2007

2006Avnet (distributor)


22
%


23
%


21
%Sanmina  SCI



*



*


10
%     *
    
    Less than 10% of total net revenues for period indicated.      Fiscal Years Ended March 31,2008


2007


2006United States of America

$
86,964


$
127,226


$
115,043Other North America


23,553



24,214



27,686Europe


45,030



50,780



47,246Asia


89,532



89,571



70,951Other


1,067



1,061



918$
246,146


$
292,852


$
261,844     Net Loss.
  
    stock-based compensation expense;
    amortization of purchased intangibles;
    acquired in-process research and development
    (IPR&D);
    litigation settlement costs;
    restructuring charges;
    goodwill impairment charges;
    combinations of companies within our customer base;
    purchased intangible asset impairment charges; and
    income tax expenses (benefits).   34




---



##### Table of Contents



CRITICAL
    ACCOUNTING POLICIES
      Inventory
    Valuation and Warranty Liabilities
  part-by-part
   35




---



##### Table of Contents



Goodwill
    and Intangible Asset Valuation
    Goodwill
    and Other Intangible Assets
   36




---



##### Table of Contents



Investments
   37




---



##### Table of Contents



and/or
  Restructuring
    Charges
  and/or
  Valuation
    of Deferred Income Taxes
       38




---



##### Table of Contents



Stock-Based
    Compensation Expense
  Share-Based
    Payment
  Revenue
    Recognition
  Revenue Recognition
 39




---



##### Table of Contents



RESULTS
    OF OPERATIONS
  Comparison
    of the Fiscal Year Ended March 31, 2008 to the Fiscal Year
    Ended March 31, 2007
  Net Revenues.
  Fiscal Years Ended March 31,2008


2007% of Net





% of Net


Increase


%Amount


Revenue


Amount


Revenue


(Decrease)


ChangeICP

$
190,472



77.4
%

$
237,987



81.3
%

$
(47,515
)


(20.0
)%Storage


52,031



21.1



50,861



17.4



1,170



2.3Other


3,643



1.5



4,004



1.3



(361
)


(9.0
)$
246,146



100.0
%

$
292,852



100.0
%

$
(46,706
)


(15.9
)%         Fiscal Years Ended March 31,2008


2007% of Net





% of Net





%Amount


Revenue


Amount


Revenue


Decrease


ChangeFocus

$
219,173



89.0
%

$
254,066



86.8
%

$
(34,893
)


(13.7
)%Nonfocus


26,973



11.0



38,786



13.2



(11,813
)


(30.5
)$
246,146



100.0
%

$
292,852



100.0
%

$
(46,706
)


(15.9
)%  40




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##### Table of Contents



Gross Profit.
  Fiscal Years Ended March 31,2008


2007% of Net





% of Net





%Amount


Revenue


Amount


Revenue


Decrease


ChangeNet revenues

$
246,146



100.0
%

$
292,852



100.0
%

$
(46,706
)


(15.9
)%Cost of revenues


126,668



51.5



140,714



48.0



(14,046
)


(10.0
)Gross profit

$
119,478



48.5
%

$
152,138



52.0
%

$
(32,660
)


(21.5
)%       Research and Development and Selling, General and
    Administrative Expenses.
  Fiscal Years Ended March 31,2008


2007% of Net





% of Net


Increase


%Amount


Revenue


Amount


Revenue


(Decrease)


ChangeResearch and development

$
97,550



39.6
%

$
96,418



32.9
%

$
1,132



1.2
%Selling, general and administrative

$
61,907



25.2
%

$
67,971



23.2
%

$
(6,064
)


(8.9
)%   Research and Development.
  Selling, General and Administrative.
 41




---



##### Table of Contents



Stock-Based Compensation.
  Fiscal Years Ended March 31,2008


2007% of Net





% of Net


Increase


%Amount


Revenue


Amount


Revenue


(Decrease)


ChangeCosts of revenues

$
671



0.3
%

$
594



0.2
%

$
77



13.0
%Research and development


4,797



1.9



3,765



1.3



1,032



27.4Selling, general and administrative


5,839



2.4



5,994



2.0



(155
)


(2.6
)$
11,307



4.6
%

$
10,353



3.5
%

$
954



9.2
%     Acquired In-process Research and
    Development.
  Goodwill and Purchased Intangible Asset Impairment
    Charges.
  Restructuring Charges.
  Fiscal Years Ended March 31,2008


2007% of Net





% of Net





%Amount


Revenue


Amount


Revenue


Increase


ChangeRestructuring charges

$
2,985



1.2
%

$
1,291



0.4
%

$
1,694



131.2
%    42




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##### Table of Contents



Option investigation.
  Litigation settlement, net.
  Interest and Other Income.
  Fiscal Years Ended March 31,2008


2007% of Net





% of Net


Increase


%Amount


Revenue


Amount


Revenue


(Decrease)


ChangeInterest income, net

$
8,635



3.5
%

$
13,125



4.5
%

$
(4,490
)


(34.2
)%Other income, net

$
1,944



0.8
%

$
250



0.1
%

$
1,694



677.6
%   Interest Income net.
  Other Income, net.
  Income Taxes.
  Fiscal Years Ended March 31,2008


2007% of Net





% of Net





%Amount


Revenue


Amount


Revenue


Increase


ChangeIncome tax expense

$
3,724



1.5
%

$
402



0.1
%

$
3,322



826.4
%     Comparison
    of the Fiscal Year Ended March 31, 2007 to the Fiscal Year
    Ended March 31, 2006
  Net Revenues.
 43




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##### Table of Contents



Fiscal Years Ended March 31,2007


2006% of Net





% of Net


Increase


%Amount


Revenue


Amount


Revenue


(Decrease)


ChangeICP

$
237,987



81.3
%

$
204,681



78.2
%

$
33,306



16.3
%Storage


50,861



17.4



51,255



19.6



(394
)


(0.8
)Other


4,004



1.3



5,908



2.2



(1,904
)


(32.2
)$
292,852



100.0
%

$
261,844



100.0
%

$
31,008



11.8
%         Fiscal Years Ended March 31,2007


2006% of Net





% of Net


Increase


%Amount


Revenue


Amount


Revenue


(Decrease)


ChangeFocus

$
254,066



86.8
%

$
207,331



79.2
%

$
46,735



22.5
%Nonfocus


38,786



13.2



54,513



20.8



(15,727
)


(28.8
)$
292,852



100.0
%

$
261,844



100.0
%

$
31,008



11.8
%   Gross Profit.
  Fiscal Years Ended March 31,2007


2006% of Net





% of Net





%Amount


Revenue


Amount


Revenue


Increase


ChangeNet revenues

$
292,852



100.0
%

$
261,844



100.0
%

$
31,008



11.8
%Cost of revenues


140,714



48.0



122,392



46.7



18,322



15.0Gross profit

$
152,138



52.0
%

$
139,452



53.3
%

$
12,686



9.1
%    44




---



##### Table of Contents



Research and Development and Selling, General and
    Administrative Expenses.
  Fiscal Years Ended March 31,2007


2006% of Net





% of Net





%Amount


Revenue


Amount


Revenue


Increase


ChangeResearch and development

$
96,418



32.9
%

$
93,770



35.8
%

$
2,648



2.8
%Selling, general and administrative

$
67,971



23.2
%

$
62,157



23.7
%

$
5,814



9.4
%   Research and Development.
  Selling, General and Administrative.
  Stock-Based Compensation.
  Fiscal Years Ended March 31,2007


2006% of Net





% of Net





%Amount


Revenue


Amount


Revenue


Increase


ChangeCosts of revenues

$
594



0.2
%

$
89



0.1
%

$
505



567.4
%Research and development


3,765



1.3



2,690



1.0



1,075



39.9Selling, general and administrative


5,994



2.0



3,761



1.4



2,233



59.4$
10,353



3.5
%

$
6,540



2.5
%

$
3,813



58.3
%       Goodwill and Purchased Intangible Asset Impairment
    Charges.
 45




---



##### Table of Contents



Restructuring Charges.
  Fiscal Years Ended March 31,2007


2006% of Net





% of Net





%Amount


Revenue


Amount


Revenue


(Decrease)


ChangeRestructuring charges

$
1,291



0.4
%

$
12,602



4.8
%


(11,311
)


(89.8
)%   Interest and Other Income.
  Fiscal Years Ended March 31,2007


2006% of Net





% of Net





%Amount


Revenue


Amount


Revenue


(Decrease)


ChangeInterest income, net

$
13,125



4.5
%

$
15,617



6.0
%

$
(2,492
)


(16.0
)%Other income, net

$
250



0.1
%

$
256



0.1
%

$
(6
)


(2.3
)%   Interest Income net.
  Other Income, net.
  Income Taxes.
  Fiscal Years Ended March 31,2007


2006% of Net





% of Net





%Amount


Revenue


Amount


Revenue


Increase


ChangeIncome tax expense (benefit)

$
402



0.1
%

$
(636
)


(0.2
)%

$
1,038



163.2
%     FINANCIAL
    CONDITION AND LIQUIDITY
  long-term
 46




---



##### Table of Contents



47




---



##### Table of Contents



1-for-4
  00-19, Accounting for Derivative Financial Instruments Indexed to,
    and Potentially Settled in, a Companys Own Stock
      Fiscal Year Ended March 31,2008


2007Open market repurchases:Aggregate repurchase price

$
56,950


$
20,137Repurchased shares


4,950



1,561Average price per share

$
11.50


$
12.90Structured agreements:Shares acquired in settlement


2,057



1,924Average price per share*

$
11.18


$
13.00Total shares acquired by repurchase or in settlement


7,007



3,485Average price per share

$
11.41


$
12.96  48




---



##### Table of Contents



*
    
    The average price per share of shares acquired in settlements of
    structured stock repurchase agreements during the fiscal years
    ended March 31, 2008 and 2007 does not include gains on
    settlements in cash of $2.3 million and $1.7 million,
    respectively.    OtherOperating


PurchaseLeases


Commitments


TotalFiscal Years Ending March 31, 2009

$
13,425


$
21,674


$
35,0992010


4,140







4,1402011


984







9842012 and thereafter










Total minimum payments

$
18,549


$
21,674


$
40,223   Off-Balance
    Sheet Arrangements
      Item 7A.
    Quantitative
    and Qualitative Disclosure about Market Risk.       49




---



##### Table of Contents



Fair ValueValuation of Securities Given an Interest Rate Decrease of X
    Basis Points (BPS)


as of


Valuation of Securities Given an Interest Rate Increase of X
    Basis Points (BPS)(150 BPS)


(100 BPS)


(50 BPS)


March 31, 2008


50 BPS


100 BPS


150 BPSAvailable-for-sale investments

$
160,519


$
157,561


$
154,819


$
152,119


$
149,656


$
147,311


$
144,864         Item 8.
    Financial
    Statements and Supplementary Data.  Page F-l.
  Item 9.
    Changes
    in and Disagreements With Accountants on Accounting and
    Financial Disclosure.    Item 9A.
    Controls
    and Procedures.  Conclusion
    Regarding the Effectiveness of Disclosure Controls and
    Procedures
    Rule 13a-15(b), Form 10-K.
 50




---



##### Table of Contents



Managements
    Report on Internal Control Over Financial Reporting
  Rules 13a-15(f). Internal
    Control  Integrated Framework Internal Control  Integrated Framework
    Changes
    in Internal Control Over Financial Reporting
   51




---



##### Table of Contents



Report of
    Independent Registered Public Accounting Firm
                 Ernst &
    Young LLP
    52




---



##### Table of Contents



Item 9B.
    Other
    Information.   PART III  Item 10.
    Directors,
    Executive Officers and Corporate Governance.  Executive Officers
  Directors
    http://www.amcc.com
  Item 11.
    Executive
    Compensation.    Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters.      Item 13.
    Certain
    Relationships and Related Transactions.    Item 14.
    Principal
    Accountant Fees and Services.   53




---



##### Table of Contents



PART IV  Item 15.
    Exhibits
    and Financial Statement Schedules.    Financial Statements
  page F-l.
  Financial Statement Schedule
      Exhibits Regulation S-K)
      3
.1(1)

Amended and Restated Certificate of Incorporation of the Company.3
.2(2)

Amended and Restated Bylaws of the Company.3
.3(17)

Certificate of Amendment of Amended and Restated Certificate of
    Incorporation of the Company.4
.1(3)

Specimen Stock Certificate.10
.1(3)

Form of Indemnification Agreement between the Company and each
    of its officers and directors.10
.2(16)*

Form of Restricted Stock Unit Agreement under the 1992 Equity
    Incentive Plan.10
.3(16)*

Form of Option Agreement under the 1992 Equity Incentive Plan.10
.4(16)*

1992 Equity Incentive Plan.10
.5(11)*

1997 Directors Stock Option Plan, as amended, and
    form of Option Agreement.10
.6(3)*

401(k) Plan effective April 1, 1985 and form of Enrollment
    Agreement.10
.9(3)

Industrial Real Estate Lease dated October 29, 1996 between the
    Company and ADI Mesa Partners AMCC, L.P.10
.24(5)*

1998 Employee Stock Purchase Plan and form of Subscription
    Agreement.10
.26(4)*

1998 Stock Incentive Plan of Cimaron Communications Corporation,
    as amended.10
.30(6)

Lease of Engineering Building by and between Kilroy Realty, L.P.
    and the Company dated February 17, 1999.10
.32(9)

Amendment No. 1 to Lease of Engineering Building by and between
    Kilroy Realty, L.P. and the Company dated November 30, 1999.10
.33(4)*

2000 Equity Incentive Plan, as amended, and form of Option
    Agreement.10
.34(16)*

Form of Restricted Stock Unit Agreement under the 2000 Equity
    Incentive Plan.10
.35(7)

Lease of Facilities in Andover, Massachusetts between 200
    Minuteman Limited Partnership and Registrant dated September 13,
    2000.10
.37(5)

MMC Networks, Inc. 1997 Stock Plan and form of Option Agreement.10
.38(4)*

AMCC Deferred Compensation Plan.10
.42(10)+

Patent License Agreement between the Company and IBM dated
    September 28, 2003.10
.43(10)+

Intellectual Property Agreement between the Company and IBM
    dated September 28, 2003.10
.47(12)*

Offer of Employment dated February 22, 2005 by and between the
    Company and Kambiz Hooshmand.10
.52(13)*

Amendment to Offer of Employment dated February 8, 2006 by and
    between the Company and Kambiz Hooshmand.10
.53(14)*

Offer of Employment dated September 14, 2005 by and between the
    Company and Robert Gargus.10
.54(14)*

Offer of Employment dated April 27, 2005, by and between the
    Company and Daryn Lau.10
.55(14)*

Employment and Non-Solicitation Agreement dated May 24, 2004 by
    and between the Company and Brian Wilkie.10
.57(16)*

Employment and Non-Solicitation Agreement dated March 17, 2004
    by and between the Company and Barbara Murphy.10
.58(15)*

Executive Severance Benefit Plan dated September 19, 2007.10
.59(18)*

Severance and Consulting Agreement dated February 1, 2008
    by and between the Company and Robert Bagheri. 54




---



##### Table of Contents



11
.1(8)

Computation of Per Share Data under SFAS 128.21
.1

Subsidiaries of the Registrant.23
.1

Consent of Independent Registered Public Accounting Firm.24
.1

Power of Attorney (see page 56).31
.1

Certification of Chief Executive Officer pursuant to Rule
    13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as
    amended.31
.2

Certification of Chief Financial Officer pursuant to Rule
    13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as
    amended.32
.1

Certification of Chief Executive Officer pursuant to
    18 U.S.C. 1350, as adopted pursuant to Section 906 of the
    Sarbanes-Oxley Act of 2002.32
.2

Certification of Chief Financial Officer pursuant to
    18 U.S.C. 1350, as adopted pursuant to Section 906 of the
    Sarbanes-Oxley Act of 2002.     *
    
    Management contract or compensatory plan.  +
    
    The Company has been granted confidential treatment for certain
    portions of these agreements and certain terms and conditions
    have been redacted from the exhibits.  (1)
    
    Incorporated by reference to Exhibit 3.2 filed with the
    Companys Registration Statement
    (No. 333-37609)
    filed October 10, 1997, and as amended by Exhibit 3.3
    filed with the Companys Registration Statement
    (No. 333-45660)
    filed September 12, 2000.(2)
    
    Incorporated by reference to identically numbered exhibit filed
    with the Companys Quarterly Report on
    Form 10-Q
    for the quarter ended December 31, 2001.(3)
    
    Incorporated by reference to identically numbered exhibit filed
    with the Companys Registration Statement
    (No. 333-37609)
    filed October 10, 1997, or with any amendments thereto,
    which registration statement became effective November 24,
    1997.(4)
    
    Incorporated by reference to identically numbered exhibit filed
    with the Companys Quarterly Report on
    Form 10-Q
    for the quarter ended June 30, 2002.(5)
    
    Incorporated by reference to identically numbered exhibit filed
    with the Companys Annual Report on
    Form 10-K
    for the year ended March 31, 2001.(6)
    
    Incorporated by reference to identically numbered exhibit filed
    with the Companys Annual Report on
    Form 10-K
    for the year ended March 31, 1999.(7)
    
    Incorporated by reference to identically numbered exhibit filed
    with the Companys Quarterly Report on
    Form 10-Q
    for the quarter ended September 30, 2000.(8)
    
    The Computation of Per Share Data under SFAS 128 is
    included in the Notes to the Consolidated Financial Statements
    included in this Report.(9)
    
    Incorporated by reference to identically numbered exhibit filed
    with the Companys Annual Report on
    Form 10-K
    for the year ended March 31, 2000.(10)
    
    Incorporated by reference to identically numbered exhibit filed
    with the Companys Quarterly Report on
    Form 10-Q
    for the quarter ended September 30, 2003.(11)
    
    Effective March 31, 2005, our Board of Directors terminated
    our 1997 Directors Stock Option Plan (the
    Directors Plan). The Directors Plan provided for the
    automatic grant of stock options to our non-employee directors
    upon initial election to the Board of Directors and annually
    thereafter. The termination of the Directors Plan will not
    affect any stock options previously granted pursuant to the
    Directors Plan.(12)
    
    Incorporated by reference to identically numbered exhibit filed
    with the Companys Annual Report on
    Form 10-K
    for the year ended March 31, 2005.(13)
    
    Incorporated by reference to Exhibit 99.1 filed with the
    Companys Current Report on
    Form 8-K
    filed March 3, 2006.(14)
    
    Incorporated by reference to identically numbered exhibit filed
    with the Companys Annual Report on
    Form 10-K
    for the year ended March 31, 2006.(15)
    
    Incorporated by reference to Exhibit 99.1 filed with the
    Companys Current Report on
    Form 8-K
    filed November 9, 2007(16)
    
    Incorporated by reference to identically numbered exhibit filed
    with the Companys Annual Report on
    Form 10-K
    for the year ended March 31, 2007.(17)
    
    Incorporated by reference to Exhibit 3.1 filed with the
    Companys Current Report on Form 8-K filed on
    December 11, 2007.(18)
    
    Incorporated by reference to Exhibit 99.1 file with the
    Companys Current Report on
    Form 8-K
    filed February 7, 2008. 55




---



##### Table of Contents



SIGNATURES    APPLIED MICRO CIRCUITS CORPORATION
  By:
    /s/  Kambiz
    Hooshmand  Kambiz Hooshmand
 President and Chief Executive Officer
    POWER OF
    ATTORNEY
  Form 10-K,
    Signature

Title

Date/s/  Kambiz
    HooshmandKambiz
    Hooshmand

Chief Executive Officer, President and Director
    (Principal Executive Officer)

May 27, 2008/s/  Robert
    G. GargusRobert
    G. Gargus

Senior Vice President and Chief Financial Officer
    (Principal Financial and Accounting Officer)

May 27, 2008/s/  Cesar
    CesarattoCesar
    Cesaratto

Chairman of the Board

May 27, 2008/s/  Niel
    RansomNiel
    Ransom

Director

May 27, 2008/s/  Fred
    ShlapakFred
    Shlapak

Director

May 27, 2008/s/  Arthur
    B. StabenowArthur
    B. Stabenow

Director

May 27, 2008/s/  Julie
    H. SullivanJulie
    H. Sullivan

Director

May 27, 2008/s/  Donald
    ColvinDonald
    Colvin

Director

May 27, 2008  56




---



##### Table of Contents



INDEX TO
    FINANCIAL STATEMENTS  PageReport of Independent Registered Public
    Accounting Firm


F-2Consolidated Balance Sheets as of March 31,
    2008 and 2007


F-3Consolidated Statements of Operations for the
    fiscal years ended March 31, 2008, 2007 and 2006


F-4Consolidated Statements of Cash Flows for the
    fiscal years ended March 31, 2008, 2007 and 2006


F-5Consolidated Statements of Stockholders
    Equity for the fiscal years ended March 31, 2008, 2007 and
    2006


F-6Notes to Consolidated Financial Statements


F-7  F-1




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM               Ernst &
    Young LLP
    F-2




---



##### Table of Contents



APPLIED
    MICRO CIRCUITS CORPORATION
 CONSOLIDATED
    BALANCE SHEETS  March 31,2008


2007(In thousands, except par value)ASSETSCurrent assets:Cash and cash equivalents

$
42,689


$
51,595Short-term investments-available-for-sale


100,200



232,875Accounts receivable, net


28,800



32,558Inventories


37,966



31,286Other current assets


11,340



14,438Total current assets


220,995



362,752Marketable securities


51,919



Property and equipment, net


25,995



27,150Goodwill


264,130



335,857Purchased intangibles, net


56,025



79,787Other assets


13,783



10,966Total assets

$
632,847


$
816,512LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable

$
25,518


$
26,893Accrued payroll and related expenses


6,087



10,021Other accrued liabilities


14,655



16,383Deferred revenue


1,917



2,393Total current liabilities


48,177



55,690Deferred tax liability


3,958



Commitments and contingenciesStockholders equity:Preferred stock, $0.01 par value:Authorized shares  2,000, none issued and outstanding






Common stock, $0.01 par value:Authorized shares  375,000 at March 31, 2008 and
    157,500 at March 31, 2007Issued and outstanding shares  64,779 at
    March 31, 2008 and 70,743 at March 31, 2007


648



709Additional paid-in capital


5,896,616



5,956,344Accumulated other comprehensive income (loss)


(4,976
)


224Accumulated deficit


(5,311,576
)


(5,196,455
)Total stockholders equity


580,712



760,822Total liabilities and stockholders equity

$
632,847


$
816,512    F-3




---



##### Table of Contents



APPLIED
    MICRO CIRCUITS CORPORATION
 CONSOLIDATED
    STATEMENTS OF OPERATIONS  Fiscal Years Ended March 31,2008


2007


2006(In thousands, except per share data)Net revenues

$
246,146


$
292,852


$
261,844Cost of revenues


126,668



140,714



122,392Gross profit


119,478



152,138



139,452Operating expenses:Research and development


97,550



96,418



93,770Selling, general and administrative


61,907



67,971



62,157Acquired in-process research and development






13,300



Amortization of purchased intangible assets


5,321



4,995



4,588Restructuring charges


2,985



1,291



12,602Option investigation, net


1,072



5,344



Goodwill impairment charges


71,494







131,216Litigation settlement, net


1,125







Total operating expenses


241,454



189,319



304,333Operating loss


(121,976
)


(37,181
)


(164,881
)Interest income, net


8,635



13,125



15,617Other income, net


1,944



250



256Loss before income taxes


(111,397
)


(23,806
)


(149,008
)Income tax expense (benefit)


3,724



402



(636
)Net loss

$
(115,121
)

$
(24,208
)

$
(148,372
)Basic and diluted net loss per share:Net loss per share

$
(1.70
)

$
(0.34
)

$
(1.97
)Shares used in calculating basic and diluted net loss per share


67,775



71,076



75,210    F-4




---



##### Table of Contents



APPLIED
    MICRO CIRCUITS CORPORATION
 CONSOLIDATED
    STATEMENTS OF CASH FLOWS  Fiscal Years Ended March 31,2008


2007


2006(In thousands)Operating activities:Net loss

$
(115,121
)

$
(24,208
)

$
(148,372
)Adjustments to reconcile net loss to net cash provided by (used
    for) operating activitiesDepreciation


6,542



8,410



12,902Amortization of purchased intangibles


23,762



24,751



22,232Acquired in-process research and development






13,300



Goodwill and purchased intangible asset impairment charges


71,494







131,216Stock-based compensation expense:Stock options


9,350



10,211



6,540Restricted stock units


1,957



142



Non-cash restructuring charges


316



2,798



4,395Litigation settlement


1,125







Realized gain on sale of strategic investment


(4,649
)






(672
)Impairment of strategic investment


3,000







Impairment of marketable securities


1,682







Net loss (gain) on disposals of property


23



120



(4
)Changes in operating assets and liabilities:Accounts receivable


3,758



(4,790
)


2,277Inventories


(6,680
)


(5,307
)


(6,927
)Other assets


2,282



(1,336
)


34,388Accounts payable


(1,375
)


1,214



640Accrued payroll and other accrued liabilities


(7,103
)


(11,566
)


(62,782
)Deferred tax liability


3,957







Deferred revenue


(476
)


(1,230
)


(403
)Net cash provided by (used for) operating activities


(6,156
)


12,509



(4,570
)Investing activities:Proceeds from sales and maturities of short-term investments


623,619



468,570



1,082,451Purchases of short-term investments


(550,137
)


(403,080
)


(1,025,274
)Purchase of property, equipment and other assets


(7,021
)


(6,732
)


(7,933
)Proceeds from the sale of strategic equity investments


5,249







672Purchase of strategic investment


(5,000
)


(1,500
)


(3,500
)Proceeds from sale of real estate






4,788



Proceeds from sale of property, equipment and other assets


1,646







101Net cash paid for acquisitions


232



(71,971
)


Net cash provided by (used for) investing activities


68,588



(9,925
)


46,517Financing activities:Proceeds from issuance of common stock


6,431



2,850



6,745Repurchase of company stock


(56,950
)


(20,137
)


(9,947
)Funding of structured stock repurchase agreements


(41,830
)


(9,398
)


(105,000
)Funds received from structured stock repurchase agreements
    including gains


21,112



26,963



40,144Payments on long-term debt






(289
)


(34
)Other


(101
)


(103
)


(126
)Net cash used for financing activities


(71,338
)


(114
)


(68,218
)Net increase (decrease) in cash and cash equivalents


(8,906
)


2,470



(26,271
)Cash and cash equivalents at beginning of year


51,595



49,125



75,396Cash and cash equivalents at end of year

$
42,689


$
51,595


$
49,125Supplementary cash flow disclosure:Cash paid for:Interest

$
17


$
4


$
86Income taxes


656



369



884Unrealized gains/(losses) on available for sale securities


(4,998
)


11,823



(4,279
)    F-5




---



##### Table of Contents



APPLIED
    MICRO CIRCUITS CORPORATION
  CONSOLIDATED STATEMENTS OF STOCKHOLDERS
    EQUITY
  AccumulatedAdditional





Other





TotalCommon Stock


Paid in


Deferred


Comprehensive


Accumulated


StockholdersShares


Amount


Capital


Compensation


Income (Loss)


Deficit


Equity(In thousands)Balance, March 31, 2005


77,082


$
772


$
6,016,269


$
(9,101
)

$
(6,867
)

$
(5,023,875
)

$
977,198Issuance of common stock


966



10



6,735















6,745Repurchase of common stock


(991
)


(10
)


(9,937
)














(9,947
)Funding of structured stock repurchase agreements


(3,197
)


(32
)


(104,968
)














(105,000
)Funds received from structured stock repurchases agreements
    including gains










40,144















40,144Stock-based compensation expense














6,540











6,540Elimination of deferred compensation related to terminations










(474
)


474











Comprehensive loss:Net loss






















(148,372
)


(148,372
)Foreign currency translation loss


















(221
)






(221
)Unrealized loss on short-term investments, net of tax


















(4,279
)






(4,279
)Total comprehensive loss


























(152,872
)Balance, March 31, 2006


73,860



740



5,947,769



(2,087
)


(11,367
)


(5,172,247
)


762,808Issuance of common stock


368



4



2,846















2,850Repurchase of common stock


(1,561
)


(16
)


(20,121
)














(20,137
)Funding of structured stock repurchase agreements


(1,924
)


(19
)


(9,379
)














(9,398
)Funds received from structured stock repurchases agreements
    including gains










26,963















26,963Stock-based compensation expense










10,353















10,353Elimination of deferred compensation related to adoption of
    SFAS 123(R)










(2,087
)


2,087











Comprehensive loss:Net loss






















(24,208
)


(24,208
)Foreign currency translation loss


















(232
)






(232
)Unrealized gain on short-term investments, net of tax


















11,823







11,823Total comprehensive loss


























(12,617
)Balance, March 31, 2007


70,743



709



5,956,344







224



(5,196,455
)


760,822Issuance of common stock


1,043



10



6,421















6,431Repurchase of common stock


(4,950
)


(50
)


(56,900
)














(56,950
)Funding of structured stock repurchase agreements


(2,057
)


(21
)


(41,809
)














(41,830
)Funds received from structured stock repurchases agreements
    including gains










21,112















21,112Stock-based compensation expense










11,448















11,448Comprehensive loss:Net loss






















(115,121
)


(115,121
)Foreign currency translation loss


















(202
)






(202
)Unrealized loss on short-term investments, net of tax


















(4,998
)






(4,998
)Total comprehensive loss


























(120,321
)Balance, March 31, 2008


64,779


$
648


$
5,896,616


$



$
(4,976
)

$
(5,311,576
)

$
580,712    F-6




---



##### Table of Contents



APPLIED
    MICRO CIRCUITS CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
  1.
    Summary
    of Significant Accounting Policies  Business
  system-on-a-chip
  Basis
    of Presentation
      Accounting
    changes:
  Accounting for
    Uncertainty in Income Taxes  an Interpretation of
    FASB Statement No. 109.
  1-for-4
    reverse stock split:
  1-for-4
  Use of
    Estimates
   F-7




---



##### Table of Contents



APPLIED
    MICRO CIRCUITS CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Revenue
    Recognition
  Revenue
    Recognition
  Cash
    and Cash Equivalents
    Short-Term
    Investments and Marketable Securities
  Accounting for Certain Investments in Debt and Equity
    Securities (SFAS 115).
   F-8




---



##### Table of Contents



APPLIED
    MICRO CIRCUITS CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  and/or
  Strategic
    Equity Investments
    Fair
    Value of Financial Instruments
    Concentration
    of Credit Risk
     F-9




---



##### Table of Contents



APPLIED
    MICRO CIRCUITS CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Inventories
  first-in, part-by-part
  Warranty
    Reserves
  and/or
    Year Ended March 31,2008


2007Beginning balance

$
2,692


$
4,066Charged to costs of revenues


412



708Acquired Quake Technologies warranty liability






202Payments


(91
)


(897
)Reductions to estimated liability


(1,538
)


(1,387
)Ending balance

$
1,475


$
2,692   Property
    and Equipment
    Goodwill
    and Purchased Intangible Assets
    Goodwill and Other
    Intangible Assets
 F-10




---



##### Table of Contents



APPLIED
    MICRO CIRCUITS CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  and/or
  Accounting for the Impairment or
    Disposal of Long-Lived Assets and/or
  Research
    and Development
    Advertising
    Cost
    Income
    Taxes
  Accounting for Income Taxes
  Stock-Based
    Compensation
  Share-Based Payment
 F-11




---



##### Table of Contents



APPLIED
    MICRO CIRCUITS CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Accounting
    for Stock Issued to Employees, Accounting for Stock-Based Compensation
  , Share-Based
    Payment,
    Fiscal Year Ended March 31,2008


2007


2006*Stock-based compensation expense by type of awardsStock options

$
9,456


$
10,211


$
6,540Restricted stock units


1,993



142



Total stock-based compensation


11,449



10,353



6,540Stock-based compensation capitalized to inventory


(142
)






Total stock-based compensation expense

$
11,307


$
10,353


$
6,540     *
    
    Stock-based compensation expense recorded in accordance with
    APB25, the intrinsic value method.    Employee StockEmployee Stock Options


Purchase PlansFiscal Years Ended


Fiscal Years EndedMarch 31,


March 31,2008


2007


2006(2)


2008


2007(1)


2006(2)Expected life (years)


3.9



4.4



3.2



0.5



0.5



1.3Risk-free interest rate


4.1
%


4.7
%


4.1
%


3.6
%


5.2
%


2.9
%Volatility


0.50



0.55



0.52



0.54



0.43



0.64Dividend yield



%



%



%



%



%



%Expected forfeiture


6.1
%


5.7
%



%



%



%



%Weighted average fair value

$
5.08


$
7.72


$
4.60


$
2.98


$
3.92


$
6.00  F-12




---



##### Table of Contents



APPLIED
    MICRO CIRCUITS CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (1)
    
    In fiscal 2007, the Company reduced its offering period under
    its employee stock purchase plan from 24 months to
    6 months.(2)
    
    This was prior to the adoption of FAS 123(R) by the
    Company. The stock-based compensation expense for this period
    has been disclosed but not recognized in the Companys
    Consolidated Financial Statements.  Compensation Amortization Period.
  Expected Life.
  Expected Volatility.
  Risk-Free Interest Rate.
  Expected Dividends.
  Expected Forfeitures.
    Fiscal Year Ended March 31,2008


2007


2006*Stock-based compensation included in various expenses:Cost of revenues

$
813


$
594


$
89Research and development


4,797



3,765



2,690Selling, general and administrative


5,839



5,994



3,761Total stock-based compensation


11,449



10,353



6,540Stock-based compensation capitalized to inventory


(142
)






Total stock-based compensation expense

$
11,307


$
10,353


$
6,540     *
    
    This was prior to the adoption of FAS 123(R) by the
    Company. Stock-based compensation expense recorded in accordance
    with APB25, the intrinsic value method. F-13




---



##### Table of Contents



APPLIED
    MICRO CIRCUITS CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
       Accounting for Stock-Based Compensation 
    Transition and Disclosure,
  Fiscal Year EndedMarch 31, 2006Net loss

$
(148,372
)Add:Stock based employee compensation expense included in net loss,
    net of tax


6,540Deduct:Compensation expense determined under fair value based method
    for all awards, net of tax


(41,843
)Pro forma net loss

$
(183,675
)Basic loss per share:Net loss

$
(1.97
)Net loss  pro forma

$
(2.44
)Diluted loss per share:Net loss

$
(1.97
)Net loss  pro forma

$
(2.44
)   Comprehensive
    Income (Loss)
  Comprehensive Income
    (Loss),
 F-14




---



##### Table of Contents



APPLIED
    MICRO CIRCUITS CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    March 31,2008


2007Unrealized loss on investments

$
(5,190
)

$
(191
)Gain on foreign currency translation


214



415$
(4,976
)

$
224   Segments
    of a Business Enterprise
  Disclosures about Segments of an
    Enterprise and Related Information,
    
    the nature of products and services;
    the nature of the production processes;
    the type or class of customer for their products and
    services; and
    the methods used to distribute their products or provide their
    services.    Recent
    Accounting Pronouncements
  Fair Value Measurements,
  The
    Fair Value Option for Financial Assets and Financial
    Liabilities,
  No. 07-3 (EITF 07-3), Accounting for Nonrefundable Advance Payments for Goods or
    Services Received for Use in Future Research and Development
    Activities EITF 07-3 EITF 07-3
 F-15




---



##### Table of Contents



APPLIED
    MICRO CIRCUITS CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  EITF 07-3
  Business Combinations  a replacement of
    FASB Statement No. 141,
  Noncontrolling Interests in Consolidated Financial
    Statements  an amendment of ARB No. 51,
  2.
    Investments  Short-Term
    Investments and Marketable Securities
   F-16




---



##### Table of Contents



APPLIED
    MICRO CIRCUITS CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Amortized


Gross Unrealized


EstimatedCost


Gains


Losses


Fair ValueAt March 31, 2008:U.S. Treasury securities and agency bonds

$
8,486


$
352


$



$
8,838Corporate bonds


13,774



67



410



13,431Mortgage-backed and asset-backed securities


52,794



509



466



52,837Closed-end bond funds


59,866



128



4,373



55,621Preferred stock and options


22,369



163



1,140



21,392$
157,289


$
1,219


$
6,389


$
152,119Reported as:Short-term investments available-for-sale













$
100,200Marketable securities














51,919$
152,119   Amortized


Gross Unrealized


EstimatedCost


Gains


Losses


Fair ValueAt March 31, 2007:U.S. Treasury securities and agency bonds

$
39,700


$
39


$
314


$
39,425Corporate bonds


21,175



31



328



20,878Mortgage-backed and asset-backed securities


62,021



100



1,301



60,820Closed-end bond funds


86,902



874



2,524



85,252Preferred stock and options


22,649



50



496



22,203Marketable equity securities*


600



3,697







4,297$
233,047


$
4,791


$
4,963


$
232,875     *
    
    Marketable equity securities represents the Companys
    equity investment in Mellanox Technologies, Ltd., an Israeli
    company listed on the Nasdaq Stock Market. The amortized cost of
    this investment was reclassified from other assets to short-term
    investments in the fiscal year ended March 31, 2007 and
    subsequently sold during the fiscal year ended March 31,
    2008.    Cost


Fair ValueLess than 1 year

$
2,653


$
2,657Mature in 1  2 years


1,366



1,385Mature in 3  5 years


23,425



23,569Mature after 5 years


47,750



47,566$
75,194


$
75,177Reported under:Short-term investments available-for-sale





$
50,152Marketable securities






25,025$
75,177  F-17




---



##### Table of Contents



APPLIED
    MICRO CIRCUITS CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Less Than 12 Months of


12 Months or More ofUnrealized Losses


Unrealized Losses


TotalEstimated


Gross


Estimated


Gross


Estimated


GrossFair


Unrealized


Fair


Unrealized


Fair


UnrealizedValue


Losses


Value


Losses


Value


LossesU.S. Treasury securities and agency Bonds

$
4,909


$
7


$



$



$
4,909


$
7Corporate bonds


2,070



101



5,924



309



7,994



410Mortgage-backed and asset-backed securities


5,972



68



19,101



398



25,073



466Closed-end bond funds


21,294



1,592



26,731



2,774



48,025



4,366Preferred stock and options


11,720



1,124



163



16



11,883



1,140$
45,965


$
2,892


$
51,919


$
3,497


$
97,884


$
6,389     Strategic
    Equity Investments
   F-18




---



##### Table of Contents



APPLIED
    MICRO CIRCUITS CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  3.
    Certain
    Financial Statement Information  Accounts
    receivable:
  March 31,2008


2007(In thousands)Accounts receivable

$
30,113


$
34,116Less: allowance for bad debts


(1,313
)


(1,558
)$
28,800


$
32,558   Inventories:
  March 31,2008


2007(In thousands)Finished goods

$
28,753


$
16,691Work in process


5,338



9,630Raw materials


3,875



4,965$
37,966


$
31,286   Other
    current assets:
  March 31,2008


2007(In thousands)Deposits

$
469


$
1,247Prepaid expenses


9,819



10,435Interest receivable


410



1,104Other


642



1,652$
11,340


$
14,438   Property
    and equipment:
  Useful


March 31,Life


2008


2007(In years)


(In thousands)Machinery and equipment


5-7


$
35,142


$
43,084Leasehold improvements


1-15



8,364



10,156Computers, office furniture and equipment


3-7



64,386



76,809Buildings


31.5



2,756



2,756Land


N/A



9,800



11,302120,448



144,107Less: accumulated depreciation and amortization






(94,453
)


(116,957
)$
25,995


$
27,150  F-19




---



##### Table of Contents



APPLIED
    MICRO CIRCUITS CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Goodwill
    and purchased intangible assets:
    Fiscal Years Ended March 31,2008


2007


2006Goodwill beginning balance

$
335,857


$
296,260


$
427,476Goodwill related to acquisitions (Note 4)






39,597



Canadian tax settlement


(233
)






Impairment charges (Note 8)


(71,494
)






(131,216
)Goodwill ending balance

$
264,130


$
335,857


$
296,260       March 31, 2008


March 31, 2007Accumulated








AccumulatedAmortization








Amortizationand








andGross


Impairments


Net


Gross


Impairments


NetDeveloped technology

$
425,000


$
(383,745
)

$
41,255


$
425,000


$
(365,411
)

$
59,589Backlog/customer relationships


6,330



(4,687
)


1,643



6,330



(4,288
)


2,042Patents/core technology
    rights/tradename


62,305



(49,178
)


13,127



62,305



(44,149
)


18,156$
493,635


$
(437,610
)

$
56,025


$
493,635


$
(413,848
)

$
79,787     Cost of


OperatingSales


Expenses


TotalFiscal years ending March 31,2009

$
17,823


$
5,237


$
23,0602010


12,097



4,018



16,1152011


10,500



4,018



14,5182012


875



852



1,7272013






250



250Thereafter






355



355Total

$
41,295


$
14,730


$
56,025   Other
    Assets:
  March 31,2008


2007(In thousands)Non-current portion of prepaid expenses

$
4,251


$
3,386Strategic investments


7,000



5,000Other


2,532



2,580$
13,783


$
10,966  F-20




---



##### Table of Contents



APPLIED
    MICRO CIRCUITS CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Other
    accrued liabilities:
  March 31,2008


2007(In thousands)Executive deferred compensation

$
3,558


$
3,422Employee related liabilities


2,475



2,732Restructuring liabilities


1,578



350Warranty


1,475



2,692Professional fees


785



1,199Current income taxes


322



1,212Other taxes


317



918Other


4,145



3,858$
14,655


$
16,383   Interest
    income, net:
  Fiscal Years Ended March 31,2008


2007


2006(In thousands)Interest income

$
11,482


$
13,982


$
16,463Net realized loss on short-term investments


(1,148
)


(853
)


(760
)Impairment of marketable securities


(1,682
)






Interest expense


(17
)


(4
)


(86
)$
8,635


$
13,125


$
15,617   Other
    income, net:
  Fiscal Years Ended March 31,2008


2007


2006(In thousands)Gain on strategic investments

$
4,649


$
21


$
672Impairment of strategic investment


(3,000
)






Net (loss) gain on disposals of property


(21
)


(61
)


4Net foreign currency gain (loss)


(51
)


87



(543
)Other


367



203



123$
1,944


$
250


$
256  F-21




---



##### Table of Contents



APPLIED
    MICRO CIRCUITS CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Net
    loss per share:
    Fiscal Years Ended March 31,2008


2007


2006Net loss

$
(115,121
)

$
(24,208
)

$
(148,372
)Shares used in basic and diluted net loss per share computation:Weighted average common shares outstanding


67,775



71,076



75,210Shares used in basic and diluted net loss per share computation


67,775



71,076



75,210Basic and diluted net loss per share:Basic and diluted net loss per share

$
(1.70
)

$
(0.34
)

$
(1.97
)     4.
    Acquisitions    Fiscal
    2007
  Quake Technologies, Inc
 F-22




---



##### Table of Contents



APPLIED
    MICRO CIRCUITS CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Business Combinations
  Fiscal 2007QuakeNet tangible assets

$
8,411In-process research and development


13,300Developed technology


11,500Backlog/customer relationships


2,800Patents/core technology rights/tradename


3,200Purchased inventory fair value adjustment


2,395Stock-based compensation


3,417Goodwill


39,597Total consideration

$
84,620     Fiscal 2007QuakeCash paid and merger fees

$
81,203Value of assumed options


3,417Total consideration

$
84,620         In-Process
    Research and Development
  Accounting
    for Research and Development Costs, Applicability of FASB Statement
    No. 2 to Business Combinations Accounted for by the
    Purchase Method, an Interpretation of FASB Statement
    No. 2
   F-23




---



##### Table of Contents



APPLIED
    MICRO CIRCUITS CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        Range ofNumber

Range of

Estimated

AdjustedDevelopment

IPR&D

of

Estimated %

Cost to

DiscountCompany Acquired

Projects

Charge

Projects

Complete

Complete

Rates(In thousands)





(In thousands)Fiscal 2007:Quake Technologies

Serial physical layer

$
13,300



2


35% - 76%

$
4,536


23% - 29%     5.
    Stockholders
    Equity  Preferred
    Stock
    Common
    Stock
    1-for-2, 1-for-3 1-for-4. 1-for-4
  Stock
    Repurchase Program
   F-24




---



##### Table of Contents



APPLIED
    MICRO CIRCUITS CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    EITF 00-19, Accounting for Derivative Financial Instruments Indexed to,
    and Potentially Settled in, a Companys Own Stock
        Fiscal YearEnded March 31,2008


2007Open market repurchases:Aggregate repurchase price

$
56,950


$
20,137Repurchased shares


4,950



1,561Average price per share

$
11.50


$
12.90Structured agreements:Shares acquired in settlement


2,057



1,924Average price per share*

$
11.18


$
13.00Total shares acquired by repurchase or in settlement


7,007



3,485Average price per share

$
11.41


$
12.96     *
    
    The average price per share of shares acquired in settlements of
    structured stock repurchase agreements during the fiscal years
    ended March 31, 2008 and 2007 does not include gains on
    settlements in cash of $2.3 million and $1.7 million,
    respectively. F-25




---



##### Table of Contents



APPLIED
    MICRO CIRCUITS CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Stock
    Options
             F-26




---



##### Table of Contents



APPLIED
    MICRO CIRCUITS CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        Fiscal Years Ended March 31,2008


2007


2006Weighted





Weighted





WeightedAverage





Average





AverageExercise





Exercise





ExerciseOptions


Price


Options


Price


Options


PriceOutstanding at beginning of year


12,486


$
21.84



13,524


$
23.28



16,679


$
26.54Granted and assumed


1,544



11.12



1,754



12.36



2,410



11.80Exercised


(205
)


7.32



(366
)


7.80



(453
)


3.28Forfeited


(4,611
)


27.42



(2,426
)


25.12



(5,112
)


30.40Outstanding at end of year


9,214


$
17.57



12,486


$
21.84



13,524


$
23.28Vested at end of year


6,956


$
19.39



9,894


$
24.32



10,932


$
26.00     WeightedAverageRemaining


Weighted





WeightedOptions


Contractual


Average


Options


AverageRange of Exercise Prices

Outstanding


Life


Exercise Price


Exercisable


Exercise Price$ 0.19 - $ 11.92


2,185



5.75


$
9.61



1,379


$
9.8711.93 -  13.16


1,922



6.94



12.61



1,151



12.6813.17 -  15.72


1,849



5.66



14.45



1,264



14.4215.73 -  26.16


2,999



1.92



22.99



2,903



23.2226.17 - 300.13


259



2.39



81.14



259



81.14$ 0.19 - $300.13


9,214



4.64


$
17.57



6,956


$
19.39     Restricted
    Stock Units
   F-27




---



##### Table of Contents



APPLIED
    MICRO CIRCUITS CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Fiscal Years Ended March 31,2008


2007Outstanding at the beginning of the year


184



Awarded during the year


1,405



194Vested during the year


(221
)


(3
)Cancelled during the year


(168
)


(7
)Outstanding at the end of the year


1,200



184       Employee
    Stock Purchase Plan
    Common
    Shares Reserved for Future Issuance
    Stock Options and Restricted Stock Units:Granted and outstanding


9,214Restricted Stock Units


1,200Authorized for future grants


7,956Stock purchase plan


1,67020,040  F-28




---



##### Table of Contents



APPLIED
    MICRO CIRCUITS CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  6.
    Income
    Taxes    Fiscal Years Ended March 31,2008


2007


2006Pre-tax loss:Domestic

$
(115,093
)

$
(25,374
)

$
(150,802
)Foreign


3,696



1,568



1,794Total pre-tax loss

$
(111,397
)

$
(23,806
)

$
(149,008
)     Fiscal Years Ended March 31,2008


2007


2006Current:Federal

$



$



$
Foreign


(374
)


314



(939
)State


141



88



303Total current


(233
)


402



(636
)Deferred:Federal


3,370







State


587







Total deferred


3,957







$
3,724


$
402


$
(636
)     Fiscal Years Ended March 31,2008


2007


2006$


%


$


%


$


%Tax at federal statutory rate

$
(38,989
)


35
%

$
(8,332
)


35
%

$
(52,153
)


35
%In-process research and development










5,152



(22
)






Goodwill


27,693



(25
)










31,566



(21
)Tax exempt interest


















(851
)


State taxes, net of federal benefit


(4,161
)


4



(889
)


4



(5,565
)


4Federal tax credits










(4,858
)


20



(4,858
)


3State tax credits










(1,561
)


7



(1,579
)


1Valuation allowance


18,294



(16
)


9,995



(42
)


31,772



(21
)Change in contingency reserve


(442
)














(1,475
)


1Other


1,329



(1
)


895



(4
)


2,507



(2
)$
3,724



(3
)%

$
402



(2
)%

$
(636
)



%  F-29




---



##### Table of Contents



APPLIED
    MICRO CIRCUITS CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    March 31,2008


2007Deferred tax assets:Net operating loss carryforwards

$
264,303


$
351,959Research and development credit carryforwards


68,418



114,969Inventory write-downs and other reserves


13,278



18,501Capitalization of inventory and research and development costs


11,688



17,220Intangible assets


26,705



24,660Other


24,783



21,125Total deferred tax assets


409,175



548,434Deferred tax liabilities:Depreciation and amortization


(2,915
)


(5,287
)Purchase accounting


(3,951
)


(7,391
)Net deferred tax asset


402,309



535,756Valuation allowance


(402,309
)


(535,756
)$



$
Deferred tax liability  goodwill amortization


(3,957
)


$
(3,957
)

$
        F-30




---



##### Table of Contents



APPLIED
    MICRO CIRCUITS CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Accounting for Uncertainty in Income Taxes,
    Unrecognized Tax Benefits  Opening Balance

$
37,446Gross decreases  tax positions in prior period


Gross increase  current-period tax positions


181Settlements


(775
)Lapse of statute of limitations


Unrecognized Tax Benefits  Ending Balance

$
36,852               7.
    Goodwill
    and Purchased Intangible Asset Impairments:   F-31




---



##### Table of Contents



APPLIED
    MICRO CIRCUITS CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
         F-32




---



##### Table of Contents



APPLIED
    MICRO CIRCUITS CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    8.
    Restructuring
    Charges  Accounting for Costs Associated with
    Exit or Disposal Activities
  Facilities


PropertyConsolidation and


andWorkforce


Operating Lease


EquipmentReduction


Commitments


Impairments


TotalLiability, March 31, 2006

$
5,830


$
1,814


$



$
7,644Charged to expense


500



328



2,794



3,622Cash payments


(5,287
)


(504
)






(5,791
)Noncash charges










(2,794
)


(2,794
)Reductions to estimated liability


(693
)


(1,638
)






(2,331
)Liability, March 31, 2007


350











350Charged to expense


1,993



853



316



3,162Cash payments


(1,441
)










(1,441
)Noncash charges










(316
)


(316
)Reductions to estimated liability


(177
)










(177
)Liability, March 31, 2008

$
725


$
853


$



$
1,578     Facilities


PropertyConsolidation and


andWorkforce


Operating Lease


EquipmentReduction


Commitments


Impairments


TotalApril 2003 Restructuring ProgramLiability, March 31, 2006

$



$
907


$



$
907Cash payments






(88
)






(88
)Reductions to estimated liability






(819
)






(819
)Liability, March 31, 2007

$



$



$



$
 F-33




---



##### Table of Contents



APPLIED
    MICRO CIRCUITS CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Facilities


PropertyConsolidation and


andWorkforce


Operating Lease


EquipmentReduction


Commitments


Impairments


TotalJuly 2005 Restructuring ProgramLiability, March 31, 2006

$



$
907


$



$
907Cash payments






(88
)






(88
)Reductions to estimated liability






(819
)






(819
)Liability, March 31, 2007

$



$



$



$
March 2006 Restructuring ProgramLiability, March 31, 2006


5,830











5,830Charged to expense






328



2,794



3,122Cash payments


(4,917
)


(328
)






(5,245
)Noncash charge










(2,794
)


(2,794
)Reductions to estimated liability


(613
)










(613
)Liability, March 31, 2007

$
300


$



$



$
300Cash payments


(155
)










(155
)Reductions to estimated liability


(145
)










(145
)Liability, March 31, 2008

$



$



$



$
June 2006 Restructuring ProgramCharged to expense

$
500


$



$



$
500Cash payments


(370
)










(370
)Reductions to estimated liability


(80
)










(80
)Liability, March 31, 2007

$
50


$



$



$
50Cash payments


(18
)










(18
)Reductions to estimated liability


(32
)










(32
)Liability, June 30, 2007

$



$



$



$
July 2007 Restructuring ProgramCharged to expense

$
733


$



$



$
733Cash payments


(709
)










(709
)Liability, March 31, 2008

$
24


$



$



$
24September 2007 Restructuring ProgramCharged to expense

$
812


$



$



$
812Cash payments


(459
)










(459
)Liability, March 31, 2008

$
353


$



$



$
353March 2008 Restructuring ProgramCharged to expense

$
448


$
853


$
316


$
1,617Cash payments


(100
)










(100
)Noncash charge










(316
)


(316
)Liability, March 31, 2008

$
348


$
853


$



$
1,201  F-34




---



##### Table of Contents



APPLIED
    MICRO CIRCUITS CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
               F-35




---



##### Table of Contents



APPLIED
    MICRO CIRCUITS CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  9.
    Commitments      OtherOperating


PurchaseLeases


Commitments


TotalFiscal Years Ending March 31,2009

$
13,425


$
21,674


$
35,0992010


4,140







4,1402011


984







9842012 and thereafter










Total minimum payments

$
18,549


$
21,674


$
40,223       10.
    Employee
    Retirement Plan    11.
    Significant
    Customer and Geographic Information    2008

2007

2006Avnet


22
%


23
%


21
%Sanmina  SCI


*



*



10
%     *
    
    Less than 10% of total net revenues for period indicated.   F-36




---



##### Table of Contents



APPLIED
    MICRO CIRCUITS CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Fiscal Years Ended March 31,2008


2007


2006United States of America

$
86,964


$
127,226


$
115,043Other North America


23,553



24,214



27,686Europe


45,030



50,780



47,246Asia


89,532



89,571



70,951Other


1,067



1,061



918$
246,146


$
292,852


$
261,844     12.
    Contingencies  Legal
    Proceedings
     F-37




---



##### Table of Contents



APPLIED
    MICRO CIRCUITS CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      In re Applied
    Micro Circuits Derivative Litigation In re Applied Micro Circuits
    Corporation Shareholder Derivative Litigation Rule 14a-9
 F-38




---



##### Table of Contents



APPLIED
    MICRO CIRCUITS CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        Segen v. Rickey, et al Rule 16b-3
 F-39




---



##### Table of Contents



APPLIED
    MICRO CIRCUITS CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Regulatory
    Proceedings
    13.
    Quarterly
    Information (unaudited)    Fiscal Year 2008


Fiscal Year 2007Q1(1)


Q2(2)


Q3(3)


Q4(4)


Q1(5)


Q2(6)


Q3(7)


Q4(8)(In thousands, except per share data)Net revenues

$
50,135


$
58,210


$
66,267


$
71,534


$
69,679


$
76,364


$
76,642


$
70,167Cost of revenues


26,498



30,328



33,311



36,531



31,528



35,536



37,799



35,851Gross profit


23,637



27,882



32,956



35,003



38,151



40,828



38,843



34,316Total operating expenses


43,150



43,251



39,474



115,579



42,193



58,072



46,023



43,031Operating loss


(19,513
)


(15,369
)


(6,518
)


(80,576
)


(4,042
)


(17,244
)


(7,180
)


(8,715
)Interest and other income


3,076



6,906



2,148



(1,551
)


3,365



3,429



3,121



3,460Loss before income taxes


(16,437
)


(8,463
)


(4,370
)


(82,127
)


(677
)


(13,815
)


(4,059
)


(5,255
)Income tax expense (benefit)


(17
)


(410
)


(31
)


4,182



140



74



113



75Net loss

$
(16,420
)

$
(8,053
)

$
(4,339
)

$
(86,309
)

$
(817
)

$
(13,889
)

$
(4,172
)

$
(5,330
)Basic and diluted net (loss) per share

$
(0.23
)

$
(0.12
)

$
(0.06
)

$
(1.33
)

$
(0.01
)

$
(0.20
)

$
(0.06
)

$
(0.08
)Shares used in calculating basic and diluted net (loss) per share


70,414



68,783



67,015



64,886



72,795



70,441



70,450



70,618     (1)
    
    Revenues were $50.1 million and basic and diluted loss per
    share was $0.23.(2)
    
    The consolidated operating results for the second quarter of
    fiscal 2008 included a $1.4 million restructuring charge
    and $4.7 million gain on the sale of a strategic investment.(3)
    
    The consolidated operating results for the third quarter of
    fiscal 2008 included a $1.0 million recovery from our
    insurance provider for our option related expenses and
    $0.8 million impairment of marketable securities.(4)
    
    The consolidated operating results for the fourth quarter of
    fiscal 2008 included a $71.5 million goodwill impairment
    charge, a $1.5 million restructuring charge, a
    $1.1 million litigation settlement charge,
    $1.4 million for option investigation related expenses for
    the settlement of a derivative action, $3.0 million
    impairment of a strategic investment, $0.8 million
    impairment of marketable securities and $3.9 million
    amortization of tax deductible goodwill from an acquisition of
    IBMs Power PRS Switch Fabric line in September 2003.(5)
    
    The consolidated operating results for the first quarter of
    fiscal 2007 included a $1.2 million restructuring charge
    and $0.6 million for option investigation expenses. F-40




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##### Table of Contents



APPLIED
    MICRO CIRCUITS CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   (6)
    
    The consolidated operating results for the second quarter of
    fiscal 2007 included a $13.3 million in-process research
    and development charge related to the Quake acquisition, a
    $1.4 million restructuring charge and $1.1 million for
    option investigation expenses.(7)
    
    The consolidated operating results for the third quarter of
    fiscal 2007 included a $0.1 million restructuring charge
    and $2.7 million for option investigation expenses.(8)
    
    The consolidated operating results for the fourth quarter of
    fiscal 2007 included a $1.4 million reduction in
    restructuring charge and $0.9 million for option
    investigation expenses. F-41




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##### Table of Contents



SCHEDULE II 
    VALUATION AND QUALIFYING ACCOUNTS
  Balance at


Charged to


Charged to





Balance atBeginning of


Costs and


Other





End ofDescription

Period


Expenses


Accounts


Deductions


Period(In thousands)Year ended March 31, 2008:Allowance for doubtful accounts

$
1,558


$



$



$
245


$
1,313Year ended March 31, 2007:Allowance for doubtful accounts

$
1,354


$



$
204


$



$
1,558Year ended March 31, 2006:Allowance for doubtful accounts

$
1,784


$



$



$
430


$
1,354  F-42




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##### Table of Contents



Exhibit Index
  ExhibitNumber

Description3
.1(1)

Amended and Restated Certificate of Incorporation of the Company.3
.2(2)

Amended and Restated Bylaws of the Company.3
.3(17)

Certificate of Amendment of Amended and Restated certificate of
    Incorporation of the Company.4
.1(3)

Specimen Stock Certificate.10
.1(3)

Form of Indemnification Agreement between the Company and each
    of its officers and directors.10
.2(16)*

Form of Restricted Stock Unit Agreement under the 1992 Equity
    Incentive Plan.10
.3(16)*

Form of Option Agreement under the 1992 Equity Incentive Plan.10
.4(16)*

1992 Equity Incentive Plan.10
.5(11)*

1997 Directors Stock Option Plan, as amended, and
    form of Option Agreement.10
.6(3)*

401(k) Plan effective April 1, 1985 and form of Enrollment
    Agreement.10
.9(3)

Industrial Real Estate Lease dated October 29, 1996 between
    the Company and ADI Mesa Partners AMCC, L.P.10
.24(5)*

1998 Employee Stock Purchase Plan and form of Subscription
    Agreement.10
.26(4)*

1998 Stock Incentive Plan of Cimaron Communications Corporation,
    as amended.10
.30(6)

Lease of Engineering Building by and between Kilroy Realty, L.P.
    and the Company dated February 17, 1999.10
.32(9)

Amendment No. 1 to Lease of Engineering Building by and
    between Kilroy Realty, L.P. and the Company dated
    November 30, 1999.10
.33(4)*

2000 Equity Incentive Plan, as amended, and form of Option
    Agreement.10
.34(16)*

Form of Restricted Stock Unit Agreement under the 2000 Equity
    Incentive Plan.10
.35(7)

Lease of Facilities in Andover, Massachusetts between 200
    Minuteman Limited Partnership and Registrant dated
    September 13, 2000.10
.37(5)

MMC Networks, Inc. 1997 Stock Plan and form of Option Agreement.10
.38(4)*

AMCC Deferred Compensation Plan.10
.42(10)+

Patent License Agreement between the Company and IBM dated
    September 28, 2003.10
.43(10)+

Intellectual Property Agreement between the Company and IBM
    dated September 28, 2003.10
.47(12)*

Offer of Employment dated February 22, 2005 by and between
    the Company and Kambiz Hooshmand.10
.52(13)*

Amendment to Offer of Employment dated February 8, 2006 by
    and between the Company and Kambiz Hooshmand.10
.53(14)*

Offer of Employment dated September 14, 2005 by and between
    the Company and Robert Gargus.10
.54(14)*

Offer of Employment dated April 27, 2005, by and between
    the Company and Daryn Lau.10
.55(14)*

Employment and Non-Solicitation Agreement dated May 24,
    2004 by and between the Company and Brian Wilkie.10
.57(16)*

Employment and Non-Solicitation Agreement dated March 17,
    2004 by and between the Company and Barbara Murphy.10
.58(15)*

Executive Severance Benefit Plan dated September 19, 2007.10
.59(18)*

Severance and Consulting Agreement dated February 1, 2008
    by and between the Company and Robert Bagheri.11
.1(8)

Computation of Per Share Data under SFAS 128.21
.1

Subsidiaries of the Registrant.23
.1

Consent of Independent Registered Public Accounting Firm.24
.1

Power of Attorney (see page 56).31
.1

Certification of Chief Executive Officer pursuant to
    Rule 13a-14(a)
    and
    Rule 15d-14(a)
    of the Securities Exchange Act, as amended.31
.2

Certification of Chief Financial Officer pursuant to
    Rule 13a-14(a)
    and
    Rule 15d-14(a)
    of the Securities Exchange Act, as amended.




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##### Table of Contents



ExhibitNumber

Description32
.1

Certification of Chief Executive Officer pursuant to
    18 U.S.C. 1350, as adopted pursuant to Section 906 of
    the Sarbanes-Oxley Act of 2002.32
.2

Certification of Chief Financial Officer pursuant to
    18 U.S.C. 1350, as adopted pursuant to Section 906 of
    the Sarbanes-Oxley Act of 2002.     *
    
    Management contract or compensatory plan.  +
    
    The Company has been granted confidential treatment for certain
    portions of these agreements and certain terms and conditions
    have been redacted from the exhibits.  (1)
    
    Incorporated by reference to Exhibit 3.2 filed with the
    Companys Registration Statement
    (No. 333-37609)
    filed October 10, 1997, and as amended by Exhibit 3.3
    filed with the Companys Registration Statement
    (No. 333-45660)
    filed September 12, 2000.(2)
    
    Incorporated by reference to identically numbered exhibit filed
    with the Companys Quarterly Report on
    Form 10-Q
    for the quarter ended December 31, 2001.(3)
    
    Incorporated by reference to identically numbered exhibit filed
    with the Companys Registration Statement
    (No. 333-37609)
    filed October 10, 1997, or with any amendments thereto,
    which registration statement became effective November 24,
    1997.(4)
    
    Incorporated by reference to identically numbered exhibit filed
    with the Companys Quarterly Report on
    Form 10-Q
    for the quarter ended June 30, 2002.(5)
    
    Incorporated by reference to identically numbered exhibit filed
    with the Companys Annual Report on
    Form 10-K
    for the year ended March 31, 2001.(6)
    
    Incorporated by reference to identically numbered exhibit filed
    with the Companys Annual Report on
    Form 10-K
    for the year ended March 31, 1999.(7)
    
    Incorporated by reference to identically numbered exhibit filed
    with the Companys Quarterly Report on
    Form 10-Q
    for the quarter ended September 30, 2000.(8)
    
    The Computation of Per Share Data under SFAS 128 is
    included in the Notes to the Consolidated Financial Statements
    included in this Report.(9)
    
    Incorporated by reference to identically numbered exhibit filed
    with the Companys Annual Report on
    Form 10-K
    for the year ended March 31, 2000.(10)
    
    Incorporated by reference to identically numbered exhibit filed
    with the Companys Quarterly Report on
    Form 10-Q
    for the quarter ended September 30, 2003.(11)
    
    Effective March 31, 2005, our Board of Directors terminated
    our 1997 Directors Stock Option Plan (the
    Directors Plan). The Directors Plan provided for the
    automatic grant of stock options to our non-employee directors
    upon initial election to the Board of Directors and annually
    thereafter. The termination of the Directors Plan will not
    affect any stock options previously granted pursuant to the
    Directors Plan.(12)
    
    Incorporated by reference to identically numbered exhibit filed
    with the Companys Annual Report on
    Form 10-K
    for the year ended March 31, 2005.(13)
    
    Incorporated by reference to Exhibit 99.1 filed with the
    Companys Current Report on
    Form 8-K
    filed March 3, 2006.(14)
    
    Incorporated by reference to identically numbered exhibit filed
    with the Companys Annual Report on
    Form 10-K
    for the year ended March 31, 2006.(15)
    
    Incorporated by reference to Exhibit 99.1 filed with the
    Companys Current Report on
    Form 8-K
    filed November 9, 2007(16)
    
    Incorporated by reference to identically numbered exhibit filed
    with the Companys Annual Report on
    Form 10-K
    for the year ended March 31, 2007.(17)
    
    Incorporated by reference to Exhibit 3.1 filed with the
    Companys Current Report on
    Form 8-K
    filed December 11, 2007.(18)
    
    Incorporated by reference to Exhibit 99.1 file with the
    Companys Current Report on
    Form 8-K
    filed February 7, 2008.