Vitesse delivers upside surprise

Vitesse Semiconductor topped analysts' estimates by a penny a share in its second quarter Monday, earning $27 million, or 16 cents a share, on sales of $100.2 million.

First Call consensus pegged the chipmaker for a profit of 15 cents a share this time around.

Ahead of the earnings report, Vitesse (Nasdaq: VTSS) shares surged up 18 3/8, or 34 percent, to 73 1/16.

The $100.2 million in sales marks a 50 percent improvement from the year-ago quarter when it raked in $15.5 million, or 9 cents a share, on sales of $66.9 million.

Including a one-time charge of $450 million related to the acquisition of Orologic Inc., a fabless chipmaker, Vitesse posted a second-quarter loss of $18.6 million, or 12 cents a share.

"This was another excellent quarter with continued strength in sales of our datacom products and accelerating growth in sales of our telecom products due to increased production volume and shipments of OC-192 systems," said CEO Lou Tomasetta in a prepared release. "On a strategic note, the acquisition of Orologic, with its traffic management and ATM SAR chips, solidified our position as the most complete solution provider for OC-48 network processor applications."

Last quarter, Vitesse met analysts' estimates, earning $23.6 million, or 14 cents a share, on sales of $89.2 million.

Investors should have seen this latest upside surprise coming as Tomasetta predicted the company would see operating income and gross margin growth at 40 percent and 70 percent, respectively, in the next five to eight quarters.

Vitesse shares peaked at 115 11/16 in March after falling to a 52-week low of 20 3/8 last April.

All 21 analysts covering the stock maintain either a "buy" or "strong buy" recommendation.

First Call consensus sees Vitesse earning 66 cents a share in the fiscal year.