Updated from 4:43 p.m. ET

Communications chip maker

Applied Micro Circuits

(AMCC)

said Tuesday that it earned 9 cents a share excluding charges in the fourth quarter ended March 31, in line with analysts' expectations. But the company offered a dismal outlook for the fiscal first quarter ending June 30, saying revenue could fall by as much as 42% and earnings could evaporate.

A year earlier, Applied Micro earned 8 cents a share, and it earned 16 cents a share in the third quarter ended Dec. 31. Including charges stemming from acquisitions, stock compensation and options and amortization, the company posted a loss of 65 cents a share in its fourth quarter.

Meanwhile, revenue came in at $121.1 million, below the $125 million to $135 million range the company discussed last month. In fact, CEO Dave Rickey said at the time that revenue couldn't fall lower than $125 million. A year earlier it brought in $57 million in revenue, and recorded $143.3 million in revenue in the December quarter.

Rickey said during a conference call after the results were released that he expects revenue to fall to $70 million to $85 million and earnings per share to come in at break-even to 2 cents a share in the fiscal first quarter. Analysts had expected revenue of $106.36 million and earnings of 7 cents a share, according to

Thomson Financial/First Call

.

Rickey has hope that the weak first quarter will be the bottom in terms of sales for Applied Micro, but he also said that orders continue to be "anemic" and that the company has no visibility. The only evidence it has to support talk of a turnaround comes from what the company is hearing from its customers about their own demand. Applied Micro's biggest customers are

Nortel Networks

(NT)

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and

Cisco Systems

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.

The company said it isn't planning layoffs, but will cut back its hiring rate as well as decrease discretionary spending such as noncritical travel and bonuses.

Applied Micro and other communication chip makers have had a rough time this year as their telecommunications and networking company customers have reined in spending amid weak demand and growing inventories.

The company's stock also had a tough first quarter. After closing out 2000 at $75.60, it fell to a low $11.31 on April 4. The stock has benefited from the turnaround in the chip stocks that has been under way for the past two weeks, and closed Tuesday down $1.62, or 6%, at $23.98. For the year, it's off 68%. In after-hours trading on the

Island

electronic communications network, the stock fell to $22.18.

Still not everyone believes the stock is cheap.

Merrill Lynch

lowered its rating on Applied Micro to a neutral from accumulate Monday as part of an overall look at the communication chip sector. Merrill noted the company's high valuation. (Merrill hasn't done underwriting for Applied Micro.)

"Given the projected level of inventory growth, and real risk for anemic demand from the telcos to stretch into 2002, we think it makes sense for investors to take some money off the table on the higher multiple names," analyst Mark Lipacis wrote.