Whatever you think you've heard about the chip sector's renewed health, forget it.

After the close of the market Tuesday investors heard a load of earnings reports from the dark side of the chip industry: the companies that fill the almost nonexistent demand for communications and networking components. You've heard of a mini-PC revival and the rebound

Intel

and

AMD

got in the December quarter.

But

Applied Micro Circuits

(AMCC)

,

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Vitesse

(VTSS)

and

Altera

(ALTR) - Get Report

went into the 2001 downturn focused on supplying all of the new telecom carriers, ISPs and networking markets with the equipment they were so willing to buy. And while they've pushed to get new customers in healthier markets, there was little to be excited about as 2001 finished.

Take Vitesse, an investor darling in 2000 that saw its stock drop 86% from a high last January of $75.86 to the end of 2001. Vitesse closed trading Tuesday at $12.36, with Wall Street expecting $39 million in revenue and a 13 cents-a-share loss in the first quarter of its fiscal 2002, according to Multex.com. Vitesse turned in $39.1 million in revenue and 12 cents a share in pro forma losses to slimly beat the Street. Although the results represented the first sequential revenue improvement of the year, Vitesse's revenue dropped 76% from $165 million in revenue and 148% from 25 cents a share in profits when compared to the first quarter of 2001.

Altera worked to slim down its communications revenue exposure to 50% from the previous year's 66%, but nonetheless the component maker is still looking for that all-elusive bottom. Altera's revenue fell 7% sequentially to $162.5 million, a 56% year-over-year drop. Nonetheless, Altera equaled Street estimates by turning in 3 cents a share in earnings. Altera shares traded down 4% to close at $22 Tuesday.

Finally, AMCC, another popular stock when the bubble was still taking on air, hovers near a bottom. AMCC finished the third quarter of its fiscal year 2002 with $40.2 million in revenue, a 3% sequential drop and a whopping 72% decline from the third quarter of 2001. AMCC continues to take on losses with a 4 cents a share pro forma shortfall in the quarter; AMCC narrowly missed Street estimates of $41 million in revenue and met forecasts of a 4 cents a share pro forma loss in the quarter. AMCC's stock price fell 6% to $9.81.

"Our end markets remained sluggish and customers continue to work through excess inventory," said AMCC CEO David Rickey.

Of course, all of the reported earnings have become distorted in the past few quarters as the companies have spruced up their numbers by deducting excess inventories, goodwill related to acquisitions, restructuring charges and investment losses. According to generally accepted accounting principles, the three companies looked much worse, as Altera lost 9 cents a share, AMCC fell 27 cents a share short and Vitesse lost 54 cents per share.