8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): February 2, 2010

NetLogic Microsystems, Inc.

(Exact Name of Registrant as Specified in Charter)

Delaware	000-50838	77-0455244
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(I.R.S. Employer Identification Number)

1875 Charleston Road, Mountain View, CA 94043

(Address of Principal Executive Offices) (Zip Code)

Registrant’s telephone number, including area code: (650) 961-6676

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions ( see  General Instruction A.2. below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02. Results of Operations and Financial Condition.

The information contained in this report and the exhibit attached hereto is furnished solely pursuant to Item 2.02 of Form 8-K and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section. The information contained herein and the exhibit attached hereto shall not be incorporated by reference into any filing with the Securities and Exchange Commission made by NetLogic Microsystems, Inc., whether made before or after the date hereof, except as shall be expressly set forth by specific reference in such filing.

On February 2, 2010, we issued a press release announcing our financial results for the three months and twelve months ended December 31, 2009, which is included in this report as Exhibit 99.1. The press release should be read in conjunction with the statements regarding forward-looking statements that are included in the text of the press release.

Discussion of Non-GAAP Financial Measures

In addition to disclosing financial results calculated in accordance with U.S. generally accepted accounting principles (GAAP), the Company also reports certain non-GAAP financial measures.  Non-GAAP financial measures exclude the effects of stock-based compensation, changes in contingent earn-out liability, amortization of acquired intangible assets, fair value adjustments of acquired inventory, acquisition-related costs, interest income on a bridge loan to RMI Corporation (“RMI”), debt issuance cost write-off, establishment of deferred tax asset valuation allowance on a portion of the Company’s California research and development credit carryforward, tax effect of inventory fair value adjustments, certain tax reserves relating to an intercompany license agreement, and the effects of excluding stock-based compensation on the number of diluted shares used in calculating non-GAAP earnings per share.

We utilize a number of different financial measures, both GAAP and non-GAAP, in analyzing and assessing the overall performance of our business, in making operating decisions, forecasting and planning for future periods, and determining payments under compensation programs. We consider the use of the non-GAAP measures presented in our press release to be helpful in assessing the performance of the operation of our core business which comprises the ongoing revenue and expenses of our business excluding certain items that render comparisons with prior periods or analysis of on-going operating trends more difficult, such as non-cash expenses not directly related to the actual cash costs of development, sale, delivery or support of our products, or expenses that are reflected in periods unrelated to when the actual amounts were incurred or paid. Consistent with this approach, we believe that disclosing non-GAAP financial measures provides useful supplemental data that, while not a substitute for financial measures prepared in accordance with GAAP, allows for greater transparency in the review of our financial and operational performance. In addition, we have historically reported non-GAAP results to the investment community and believe that continuing to do so provides investors with a useful measure for comparing results over time. In assessing the overall health of our business for the periods covered in our press release and, in particular, in evaluating the non-GAAP financial line items presented in our press release, we have excluded items in the following three general categories, each of which are described below: Stock-Based Compensation Related Items, Acquisition Related Expenses and Other Items. We also provide additional detail below regarding the shares used to calculate our non-GAAP net income per share.

Non-GAAP net income reflects net income adjusted for the following items:

• Stock-based Compensation and Related Payroll Taxes. We provide non-GAAP information relative to our expense for stock-based compensation and related payroll tax. We began to include stock-based compensation expense in our GAAP financial measures in January 2006. Because of varying available valuation methodologies, subjective assumptions and the variety of award types, which affect the calculations of stock-based compensation, we believe that the exclusion of stock-based compensation allows for more accurate comparisons of our operating results to our peer companies. Stock-based compensation is very different from other forms of compensation that have a fixed and unvarying cash cost. In contrast, the expense associated with an award of an option for shares of our stock is unrelated to the amount of compensation ultimately received by the employee.  Furthermore, the amount of expense that we record is based on a stock-based compensation valuation methodology and underlying assumptions that may vary over time and that do not reflect any cash expenditure. The expense associated with an award of options for shares of company stock in one quarter may have a very different expense than an award of an identical number of options in a different quarter. Finally, the expense we recognize for options may be very different than the expense that other companies recognize for awarding a comparable option, which can make it difficult to assess our operating performance relative to our competitors. Similar to stock-based compensation, payroll tax on stock option exercises is dependent on our stock price and the timing of employee exercises over which our management has little control, and as such does not correlate to the operation of our business. Because of these unique characteristics of stock-based compensation expense and the related payroll tax, management excludes these expenses when analyzing our business performance.

• Acquisition-Related Expenses. We exclude certain expense items resulting from acquisitions including the following, when applicable: (i) changes in RMI contingent earn-out liability; (ii) amortization of purchased intangible assets associated with our acquisitions; (iii) fair value adjustments of acquired inventory; (iv) acquisition-related costs; and (v) interest income on the bridge loan to RMI. We believe that providing non-GAAP information for acquisition-related expense items in addition to the corresponding GAAP information allows the users of our financial statements to better review and understand the historic and current results of our continuing operations, and also facilitates comparisons with less acquisitive peer companies.

(i) Changes in RMI contingent earn-out liability. In accordance with changes in GAAP requirements for business combination accounting of contingent earn-out consideration effective in 2009, an estimated fair value of contingent earn-out consideration is recorded at the close of an acquisition.  As changes to the estimated fair value occur, which may be for a variety of reasons, including but not limited to, changes in our stock price,  we are required to record the changes in the estimated liability through our operating results until the liability is fixed.  Under the terms of the merger agreement with RMI, a substantial portion of the contingent earn-out consideration  is payable in stock.  We evaluate this contingent earn-out consideration as part of total purchase consideration of the business and do not consider changes in the total purchase consideration recorded in our operating results to meaningfully reflect the near-term performance of our business.

(ii) Amortization of intangible assets.   The amortization of purchased intangible assets associated with our acquisitions results in recording expenses in our GAAP financial statements for which we have not expended cash. Moreover, had we developed the products acquired, the amortization of intangible assets, and the expenses of uncompleted research and development would have been expensed in prior periods. Accordingly, we analyze the performance of our operations in each period without regard to such expenses.

(iii) Fair value adjustments of acquired inventory and related tax effect.  As part of business combination accounting for acquired inventory, we increase the value of acquired inventory to effectively eliminate any accounting gross profit except for a portion attributed to any manufacturing effort to be completed post-acquisition and any incremental selling effort.  Such adjustments do not reflect costs we would otherwise have expended to manufacture such inventory on our own.  Therefore, we analyze the performance of our operations in each period without regard to such expenses.  Similarly, we exclude the income tax effect of this item when evaluating our operating results.

(iv) Acquisition-related costs.  Acquisition-related costs include transaction costs and integration-related costs, including severance payments that were made by RMI prior to its acquisition by us, which severance payments might be construed to be undertaken for our benefit and therefore required to be recorded as our expense under GAAP.  We consider these charges unrelated to our core operating performance. In addition, acquisitions result in non-continuing operating expenses, which would not otherwise have been incurred by us in the normal course of our business operations. For example, we have incurred deferred compensation charges related to assumed options and transition and integration costs such as retention bonuses and acquisition-related milestone payments to employees of the acquired entity.

(v) Interest income on RMI bridge loan.  We entered into an interest-bearing bridge loan with RMI in connection with our agreement to purchase the company.  We completed the acquisition of RMI during the quarter ended December 31, 2009, and eliminated the bridge loan in our consolidated financial position.  As the arrangement represented a temporary financing arrangement between the two parties as part of the acquisition, we considered the interest income earned to be unrelated to the performance of our business.

• Other Items. We exclude certain other items that are the result of either unique or unplanned events including the following, when applicable: (i) debt issuance costs write off in conjunction with early repayment of term notes owing to a bank syndication; (ii) adjustments to certain tax reserves relating to an intercompany license agreement; and (iii) deferred tax asset valuation allowance on a portion of the Company’s California research and development credit carryforward. The early repayment of term notes and adjustments to certain tax reserves relating to an intercompany license agreement were unplanned and reflect changes to original estimates.  The establishment of deferred tax asset valuation allowance on a portion of the Company’s California research and development credit carryforward arose as a result in a change in the law.  We believe that providing financial information without these items, in addition to our GAAP operating results, provides our management and users of our financial statements with better clarity regarding the on-going performance and future liquidity of our business.

The calculation of non-GAAP net income per share is adjusted for the following item:

• Non-GAAP net income per share is calculated by dividing non-GAAP net income by non-GAAP diluted weighted average shares. For purposes of calculating non-GAAP net income per share, the GAAP anti-dilutive weighted average shares outstanding is included after adjustments to exclude the benefits of stock-based compensation costs attributable to future services and not yet recognized in the financial statements. Under the GAAP treasury stock method, these stock-based compensation costs are treated as proceeds assumed to be used to repurchase shares. Since our non-GAAP net income does not reflect the effects of stock-based compensation costs, management believes these amounts should not be applied to the repurchase of shares in calculating non-GAAP net income per share.

We expect to continue to incur expenses similar to some of the non-GAAP adjustments described above, and exclusion of these items from our non-GAAP financial measures should not be construed as an inference that these costs are unusual, infrequent or non-recurring.  For example:

• Non-GAAP financial measures do not account for stock-based compensation expense related to equity awards granted to our employees. Our stock incentive plans are an important component of our employee incentive compensation arrangements and are reflected as expense in our GAAP results.

• While amortization of purchased intangible assets does not directly affect our current cash position, such expenses represent the estimated decline in value of technology and other intangible assets we have acquired over their respective expected economic lives.  We have excluded the expense associated with this decline in value  from non-GAAP financial measures, and therefore the non-GAAP financial measures do not reflect the costs of acquired intangible assets that supplement our research and development efforts.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits.

The following exhibit is furnished with this document:

Exhibits	Description
99.1	Press Release dated February 2, 2010

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	NetLogic Microsystems, Inc.
Date: February 2, 2010	By:	/s/ Michael T. Tate
		Michael T. Tate Vice President and Chief Financial Officer

EXHIBIT INDEX

Exhibits	Description
99.1	Press Release dated February 2, 2010

EX-99.1

Exhibit 99.1

Investor Relations Contact:

Leslie Green

Green Communications Consulting, LLC

(650) 312-9060

leslie@greencommunicationsllc.com

NetLogic Microsystems Announces Fourth Quarter 2009 Financial Results

• Q4 FY 2009 Net Revenues: $­69.5 million

• Fiscal Year 2009 Net Revenues: $­174.7 million

• Q4 FY 2009 GAAP Net Loss: $37.2 million; $1.43 per share (diluted)

• Fiscal Year 2009 GAAP Net Loss: $­47.2 million; $2.04 per share (diluted)

• Q4 FY 2009 Non-GAAP Net Income: $17.5 million; $0.59 per share (diluted)

• Fiscal Year 2009 Non-GAAP Net Income: $43.6 million; $1.73 per share (diluted)

MOUNTAIN VIEW, Calif. – February 2, 2010 – NetLogic Microsystems, Inc. (NASDAQ: NETL), a worldwide leader in high performance intelligent semiconductor solutions for next-generation Internet networks, today announced financial results for its fourth quarter ended December 31, 2009.

Revenue for the fourth quarter of 2009 was $69.5 million, a 64.3% sequential increase from $42.3 million for the third quarter of 2009 and a 125% increase from $30.9 million for the fourth quarter of 2008.

Revenue for fiscal year 2009 was $174.7 million, a 24.8% increase from $139.9 million for fiscal year 2008.

Fourth quarter 2009 net loss, determined in accordance with generally accepted accounting principles (GAAP), was $37.2 million or $1.43 per diluted share. By comparison, GAAP net loss was $1.1 million or $0.05 per diluted share for the fourth quarter of 2008.  GAAP net loss for fourth quarter 2009 included stock-based compensation expense, changes in contingent earn-out liability, amortization of intangible assets, fair value inventory adjustments, acquisition-related costs, interest income on a $15.0 million bridge loan to RMI Corporation, debt issuance cost write-off, tax effect of inventory fair value adjustments and adjustment charges related to certain tax reserves relating to an intercompany license agreement.  Excluding these items, non-GAAP net income for the fourth quarter of 2009 was $17.5 million or $0.59 per diluted share, compared with $0.31 per diluted share for the fourth quarter of 2008.

Fiscal year 2009 GAAP net loss was $47.2 million or $2.04 per diluted share. By comparison, GAAP net income was $3.6 million or $0.16 per diluted share for fiscal year 2008.  GAAP net loss for fiscal year 2009 included stock-based compensation expense, changes in contingent earn-out liability, amortization of intangible assets, fair value inventory adjustments, acquisition-related costs, interest income on a $15.0 million bridge loan to RMI Corporation, debt issuance cost write-off, establishment of deferred tax asset valuation allowance on a portion of the Company’s California research and development credit carryforward, tax effect of inventory fair value adjustments and adjustment charges related to certain tax reserves relating to an intercompany license agreement.  Excluding these items, non-GAAP net income for fiscal year 2009 was $43.6 million or $1.73 per diluted share, compared with $1.51 per diluted share for fiscal year 2008.

Cash and cash equivalents totaled $44.3 million as of December 31, 2009.  In December, we raised $29.7 million in cash from issuing 700,400 common shares and repaid all outstanding balances under a credit facility with a syndication of banks.

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NetLogic Microsystems, Inc. Announces Fourth Quarter 2009 Results

February 2, 2010

Page 2 of 8

Management Qualitative Comments

“2009 was truly a transformative year for the company,” said Ron Jankov, president and CEO.  “Outstanding engineering achievement in our knowledge-based processor and physical layer solutions allowed us to achieve record numbers of design wins, unprecedented competitive positioning and a further extension of our technology leadership.  In addition, 2009 marked a major step in the company’s growth with our successful merger with RMI Corporation, a technology leader and true innovator in the rapidly emerging high-end multi-core processor market and the ultra-low power embedded processor market.   The integration of our companies is proceeding very smoothly and we are excited about the opportunities that the merger has presented for us to integrate our best-in-class physical layer products, knowledge-based processors and multi-core processors into highly-advanced platform-level solutions.  This capability is a significant competitive advantage and will further strengthen our customers’ ability to develop next-generation equipment to support the expected exponential growth in converged IP traffic.”

 

Recent Highlights

• The company announced the NL11K processor, the world’s first knowledge-based processor with high-speed serial interface, and a member of its sixth-generation knowledge-based processor family.  The integration of high-speed serial interface delivers 225Gbps of raw chip-to-chip interconnect bandwidth.  This represents a 340 percent increase in I/O bandwidth-per-pin to enable significantly higher system performance, higher system density and lower system costs for next-generation systems to enable significantly richer services for LTE, IPTV and IPv6 services.  In addition, the NL11K processor features an enhanced knowledge-based processing core capable of achieving 1.6 billion decisions per second.

• NetLogic Microsystems was awarded its 400th United States patent. Its portfolio includes over 600 worldwide patent issuances and pending filings. These achievements mark a significant milestone in the company's history of being at the forefront of technological and innovation leadership in high-performance semiconductor solutions that perform highly differentiated tasks for advanced 3G/4G mobile wireless infrastructure, data center, enterprise, metro Ethernet, edge and core infrastructure networks.

• The company took part in the Consumer Electronics Show 2010, demonstrating several new products in its Alchemy® family of ultra low-power embedded processors.  The company also announced that it was recently awarded several design wins with leading customers, including Samsung Electronics, SHARP Electronics and Tinnos.

• The company received the "Most Respected Emerging Public Semiconductor Company Award" for 2009 from the Global Semiconductor Alliance (GSA). This prestigious award recognized NetLogic Microsystems for its vision, strategy, leadership and success in the semiconductor industry among its peers of public semiconductor companies with annual revenues of up to $500 million.

• The company continues to expand its physical layer product portfolio and recently announced production availability of its new NLP1220 dual-port FibreChannel PHY device. This device offers best-in-class power consumption and latency to customers developing next-generation data center switches and connected storage devices. It was selected by Fujitsu Technology Solutions during the fourth quarter for Fujitsu’s next-generation data center blade solutions.

• The company’s Au1300® processor, the latest member of its ultra low-power Alchemy processor family, has been selected by LG Electronics for LG’s high-performance automotive infotainment solutions. LG’s market-leading infotainment solutions include built-in audio/video navigation (AVN) for dashboard and rear-seat entertainment (RSE) systems.

• NetLogic Microsystems completed its merger with RMI Corporation, a leading provider of high-performance and low-power multi-core, multi-threaded processors. The merger enables NetLogic Microsystems to further expand into the high-performance "data-in-flight" processing market. RMI's cutting-edge XLPTM, XLR® and XLS® Multi-Core, Multi-Threaded Processors will complement NetLogic Microsystems' existing portfolio of knowledge-based processors, content processors, network search engines and 10-100 Gigabit Ethernet PHY products.

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NetLogic Microsystems, Inc. Announces Fourth Quarter 2009 Results

February 2, 2010

Page 3 of 8

Conference Call

NetLogic Microsystems will hold its fourth quarter 2009 financial results conference call today at 1:30 p.m. Pacific time.  To listen to the conference call, dial (866) 202-0886 ten minutes prior to the start of the call, using the passcode 13125832.  International callers, dial (617) 213-8841.  A taped replay will be made available approximately two hours after the conclusion of the call and will remain available for one week.  To access the replay, dial (888) 286-8010 and enter passcode 12270603.  International callers dial (617) 801-6888.

The conference call will be available via a live webcast on the investor relations section of NetLogic Microsystems’ web site at http://www.netlogicmicro.com.  Access the web site 15 minutes prior to the start of the call to download and install any necessary audio software.  An archived webcast replay will be available on the web site for three months.

About NetLogic Microsystems

NetLogic Microsystems, Inc. (NASDAQ: NETL) is a worldwide leader in high-performance intelligent semiconductor solutions that are powering next-generation Internet networks.  NetLogic Microsystems’ best-in-class products perform highly differentiated tasks of accelerating complex network traffic to significantly enhance the performance and functionality of advanced 3G/4G mobile wireless infrastructure, data center, enterprise, metro Ethernet, edge and core infrastructure networks.  NetLogic Microsystems’ market-leading product portfolio includes high-performance multi-core processors, knowledge-based processors, content processors, network search engines, ultra low-power embedded processors and high-speed 10/40/100 Gigabit Ethernet PHY solutions.  These products are designed into high-performance systems such as switches, routers, wireless base stations, security appliances, networked storage appliances, service gateways and connected media devices offered by leading original equipment manufacturers (OEMs).  NetLogic Microsystems is headquartered in Mountain View, California, and has offices and design centers throughout North America, Asia and Europe.  For more information about products offered by NetLogic Microsystems, call +1-650-961-6676 or visit the NetLogic Microsystems Web site at http://www.netlogicmicro.com.

NetLogic Microsystems, the NetLogic Microsystems logo and XLP are trademarks of NetLogic Microsystems, Inc. Alchemy, Au1300, XLR and XLS are registered trademarks of NetLogic Microsystems, Inc. All other trademarks are the properties of their respective owners.

“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995: Statements in this press release regarding NetLogic Microsystems’ business which are not historical facts may be “forward-looking statements” that involve risks and uncertainties. Forward-looking statements are based on certain assumptions and expectations of future events that are subject to risks and uncertainties. Actual results and trends may differ materially from historical results or those projected in any such forward-looking statements depending on a variety of factors. These factors include, but are not limited to, customer acceptance and demand for our products, the volume of sales to our principal product customers, the timing of our receipt of customer orders during the quarter, manufacturing yields for our products, the timing of manufacture and delivery of product by our foundry suppliers, potential warranty claims and product defects, the length of our sales cycles, our average selling prices, our ability to successfully develop and sell new products, the effects of any business acquisitions that we might make, the strength of the OEM networking equipment market and the cyclical nature of that market and the semiconductor industry. For a discussion of such risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see “Risk Factors” in the Company’s reports on Forms 10-K and 10-Q, as well as other reports that NetLogic Microsystems files from time to time with the Securities and Exchange Commissionwhich are available at http://www.sec.gov. All forward-looking statements are qualified in their entirety by this cautionary statement, and NetLogic Microsystems undertakes no obligation to update publicly any forward-looking statement for any reason, except as required by law, even as new information becomes available or other events occur in the future.

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NetLogic Microsystems, Inc. Announces Fourth Quarter 2009 Results

February 2, 2010

Page 4 of 8

NETLOGIC MICROSYSTEMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)

(UNAUDITED)

	Three months ended						Twelve months ended
	December 31, 2009			December 31, 2008			December 31, 2009			December 31, 2008
Revenue	$	69,524		$	30,893		$	174,689		$	139,927
Cost of revenue*		50,222			13,449			99,251			61,616
Gross profit		19,302			17,444			75,438			78,311
Operating expenses:
Research and development*		31,210			13,415			73,631			51,607
Selling, general and administrative*		22,019			6,663			43,931			26,567
Change in contingent earn-out liability		2,008			-			2,008			-
Acquisition-related costs		2,652			-			5,412			-
Total operating expenses		57,889			20,078			124,982			78,174
Income (loss) from operations		(38,587	)		(2,634	)		(49,544	)		137
Interest and other income, net		(901	)		355			(678	)		1,503
Income (loss) before income taxes		(39,488	)		(2,279	)		(50,222	)		1,640
Benefit from income taxes		(2,252	)		(1,141	)		(3,060	)		(1,937	)
Net income (loss)	$	(37,236	)	$	(1,138	)	$	(47,162	)	$	3,577
Net income (loss) per share - Basic	$	(1.43	)	$	(0.05	)	$	(2.04	)	$	0.17
Net income(loss) per share - Diluted	$	(1.43	)	$	(0.05	)	$	(2.04	)	$	0.16
Shares used in calculation - Basic		26,124			21,703			23,091			21,472
Shares used in calculation - Diluted		26,124			21,703			23,091			22,314

* Includes the following amounts of stock-based compensation and related payroll taxes (in thousands):

	Three months ended				Twelve months ended
	December 31, 2009		December 31, 2008		December 31, 2009		December 31, 2008
Cost of revenue	$	153	$	193	$	672	$	1,030
Research and development		12,430		2,940		21,775		9,474
Selling, general and administrative		11,815		1,802		18,721		5,988
Total	$	24,398	$	4,935	$	41,168	$	16,492

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NetLogic Microsystems, Inc. Announces Fourth Quarter 2009 Results

February 2, 2010

Page 5 of 8

Non-GAAP Financial Information

In addition to disclosing financial results calculated in accordance with U.S. generally accepted accounting principles (GAAP), this announcement of operating results contains non-GAAP financial measures that exclude the income statement effects of stock-based compensation and related payroll taxes, changes in contingent earn-out liability, amortization of intangible assets, fair value adjustments of acquired inventory, acquisition-related costs, interest income on a bridge loan to RMI Corporation, debt issuance cost write-off, deferred tax asset valuation allowance on a portion of the Company’s California research and development credit carryforward, the tax effect of inventory fair value adjustments and adjustment charges related to certain tax reserves relating to an intercompany license agreement, and the effects of excluding stock-based compensation upon the number of diluted shares used in calculating non-GAAP earnings per share.

We have excluded stock-based compensation expense and changes in contingent earn-out liability in calculating these non-GAAP financial measures.  These expenses are non-cash in nature and rely on valuations based on future events such as the market price of our common stock and revenue generated from products acquired in the RMI acquisition during the first 12 months following the close that are difficult to predict and are affected by market factors that are largely not within the control of management. We have excluded amortization of intangibles, fair value adjustments related to acquired inventory, acquisition-related costs, interest income on RMI bridge note, debt issuance cost write-off, deferred tax asset valuation allowance on a portion of the Company’s California research and development credit carryforward, tax effect of inventory fair value adjustments, adjustment charges related to certain tax reserves relating to an intercompany license agreement because we do not consider them to be related to our core operating performance.

We use the non-GAAP financial measures that exclude these items to make strategic decisions, forecast future results and evaluate the Company’s current performance. We believe that the presentation of non-GAAP financial measures that exclude these items is useful to investors because we do not consider these charges either part of the day-to-day business or reflective of the core operational activities of the Company that are within the control of management or that are used to evaluate management’s operating performance.

The non-GAAP financial measures disclosed by the Company should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and the financial results calculated in accordance with GAAP and reconciliations to those financial statements should be carefully evaluated. The non-GAAP financial measures used by the Company may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies. The Company has provided reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures. For additional information regarding these non-GAAP financial measures, and management’s explanation of why it considers such measures to be useful, refer to the Form 8-K dated February 2, 2010 that the Company has submitted to the Securities and Exchange Commission.

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NetLogic Microsystems, Inc. Announces Fourth Quarter 2009 Results

February 2, 2010

Page 6 of 8

 

NETLOGIC MICROSYSTEMS, INC.

RECONCILIATION OF GAAP NET INCOME (LOSS) TO NON-GAAP NET INCOME

(IN THOUSANDS)

(UNAUDITED)

	Three months ended						Twelve months ended
	December 31, 2009			December 31, 2008			December 31, 2009			December 31, 2008
GAAP net income (loss)	$	(37,236	)	$	(1,138	)	$	(47,162	)	$	3,577
Reconciling items:
Stock-based compensation and related payroll taxes		24,398			4,935			41,168			16,492
Changes in contingent earn-out liability		2,008			-			2,008			-
Amortization of intangible assets		8,851			3,325			20,624			13,300
Fair value adjustment related to the acquired inventory		18,097			47			20,359			1,470
Acquisition-related costs		2,652			-			5,412			-
Debt issuance cost written off		524			-			524			-
Interest income on RMI bridge note		(125	)		-			(625	)		-
Tax effect of inventory fair value adjustment		(5,349	)		-			(5,349	)		-
Adjustments to certain tax reserves related to an intercompany license agreement		3,646			-			3,646			-
Establishment of deferred tax asset valuation allowance on a portion of the Company's California research and development credit carryforward		-			-			2,988			-
Non-GAAP net income	$	17,466		$	7,169		$	43,593		$	34,839

NETLOGIC MICROSYSTEMS, INC.

RECONCILIATION OF GAAP DILUTED NET INCOME (LOSS) PER SHARE TO

NON-GAAP DILUTED NET INCOME PER SHARE

(UNAUDITED)

	Three months ended						Twelve months ended
	December 31, 2009			December 31, 2008			December 31, 2009			December 31, 2008
GAAP net income (loss) per share - Diluted	$	(1.43	)	$	(0.05	)	$	(2.04	)	$	0.16
Reconciling items:
Stock-based compensation and related payroll taxes		0.83			0.21			1.63			0.72
Changes in contingent earn-out liability		0.07			-			0.08			-
Amortization of intangible assets		0.30			0.14			0.82			0.58
Fair value adjustment related to the acquired inventory		0.62			0.00			0.81			0.06
Acquisition-related costs		0.09			-			0.21			-
Debt issuance cost written off		0.02			-			0.02			-
Interest income on RMI bridge note		(0.00	)		-			(0.02	)		-
Tax effect of inventory fair value adjustment		(0.18	)		-			(0.21	)		-
Adjustments to certain tax reserves related to an intercompany license agreement		0.12			-			0.14			-
Establishment of deferred tax asset valuation allowance on a portion of the Company's California research and development credit carryforward		-			-			0.12			-
Difference in shares count between diluted GAAP and diluted non-GAAP calculation		0.16			0.00			0.17			(0.01	)
Non-GAAP net income per share - Diluted	$	0.59		$	0.31		$	1.73		$	1.51

- More -

NetLogic Microsystems, Inc. Announces Fourth Quarter 2009 Results

February 2, 2010

Page 7 of 8

NETLOGIC MICROSYSTEMS, INC.

RECONCILIATION OF THE SHARES USED FOR GAAP DILUTED

NET INCOME (LOSS) PER SHARE CALCULATION TO THE SHARES USED FOR

NON-GAAP DILUTED NET INCOME PER SHARE CALCULATION

(IN THOUSANDS)

(UNAUDITED)

	Three months ended				Twelve months ended
	December 31, 2009		December 31, 2008		December 31, 2009		December 31, 2008
Shares used in calculation - Diluted (GAAP)		26,124		21,703		23,091		22,314
The effect of removing stock-based compensation expense under FAS 123(R) for Non-GAAP presentation purpose		1,439		842		908		735
The effect of dilutive potential common shares due to reporting non-GAAP net income		1,798		507		1,213		-
Shares used in calculation - Diluted (Non-GAAP)		29,361		23,052		25,212		23,049

NETLOGIC MICROSYSTEMS, INC.

RECONCILIATION OF GAAP GROSS MARGIN TO NON-GAAP GROSS MARGIN

(IN THOUSANDS, EXCEPT PERCENTAGES)

(UNAUDITED)

	Three months ended								Twelve months ended
	December 31, 2009				December 31, 2008				December 31, 2009				December 31, 2008
Total GAAP gross margin	$	19,302	27.8	%	$	17,444	56.5	%	$	75,438	43.2	%	$	78,311	56.0	%
Reconciling items:
Stock-based compensation		153	0.2	%		193	0.6	%		672	0.4	%		1,030	0.7	%
Amortization of intangible assets		8,127	11.7	%		2,980	9.6	%		18,865	10.8	%		11,920	8.5	%
Fair value adjustment related to acquired inventory		18,097	26.0	%		47	0.2	%		20,359	11.7	%		1,470	1.1	%
Total Non-GAAP gross margin	$	45,679	65.7	%	$	20,664	66.9	%	$	115,334	66.0	%	$	92,731	66.3	%

- More -

NetLogic Microsystems, Inc. Announces Fourth Quarter 2009 Results

February 2, 2010

Page 8 of 8

NETLOGIC MICROSYSTEMS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS)

(UNAUDITED)

	December 31, 2009			December 31, 2008
ASSETS
Current assets:
Cash and cash equivalents	$	44,278		$	83,474
Short-term investments		-			13,067
Accounts receivables, net		25,137			8,382
Inventories		45,113			13,707
Deferred income taxes		13,157			3,217
Prepaid expenses and other current assets		8,638			1,937
Total current assets		136,323			123,784
Property and equipment, net		13,278			5,513
Goodwill		112,918			68,712
Intangible asset, net		223,345			39,538
Other assets		46,247			8,224
Total assets	$	532,111		$	245,771
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable	$	17,937		$	7,618
Accrued liabilities		34,165			25,920
Contingent earn-out liability		11,727			-
Deferred margin		2,667			1,638
Software licenses and other obligations, current		3,037			755
Total current liabilities		69,533			35,931
Software licenses and other obligations, long-term		2,409			464
Other liabilities		34,214			9,109
Total liabilities		106,156			45,504
Stockholders' equity
Preferred stock		-			-
Common stock		287			219
Additional paid-in capital		548,811			276,042
Accumulated other comprehensive loss		-			(13	)
Accumulated deficit		(123,143	)		(75,981	)
Total stockholders' equity		425,955			200,267
Total liabilities and stockholders' equity	$	532,111		$	245,771

CONTACT: Green Communications Consulting, LLC

Leslie Green, 650-312-9060 (Investor Relations)

leslie@greencommunicationsllc.com

SOURCE: NetLogic Microsystems, Inc.