Atheros Communications, Inc. (ATHR) reported revenues of $214.7 million in the first quarter of 2010, up 16% sequentially and more than double of $87.9 million in the year-ago quarter.

California-based Atheros Communications is a leader in the designing of chipsets used in WLAN devices.

The results also beat management’s revenue guidance of $195 – $205 million. Atheros continues to target key markets – home networking and mobile connectivity for growth in 2010. Management stated that the company experienced broad-based strength across PC OEMs and networking channels including strong momentum from newly acquired Power Line Communications (PLC) business.

Sales from the PLC business came in slightly ahead of the management’s guidance of $20 million.

Gross margin came in at 49.5% compared to 50.2% in the previous quarter and 48.1% in the first quarter of 2009. This excludes the effect of stock-based compensation, amortization of acquired intangible assets and acquisition-related charges, the realized gain on sale or the impairment of long-term investments and the tax impact of these excluded items. Including stock-based compensation expense, gross margin came in at 49.4%.

The sequential decline in gross margin was due to a sequential decrease in consumer revenue, which was partially offset by the addition of the PLC product line and favorable product mix for the wireless LAN business.

Operating margin came in at 21.4% compared to 23.4% in the fourth quarter of 2009 and 3.2% in the first quarter of 2009. Operating expenses were $60.3 million, up 21.2% sequentially and above the high-end of the guided range of $57 – $59 million. The increased operating expenses in the first quarter resulted primarily from the addition of the PLC team, additional head count and increased travel and trade show related expenses.

Net income came in at $40.7 million or 57 cents per share compared to $41.2 million or 62 cents in the fourth quarter of 2009 and $3.9 million or 6 cents per share in the first quarter of 2009. This beat management’s guidance of 52 cents. Including stock-based compensation expense, earnings per share (EPS) came in at 38 cents, easily beating the Zacks Consensus Estimate of 36 cents.

During the first quarter, Atheros generated $18.9 million of cash from operations and used $1.5 million in capital expenditures. The company ended the quarter with cash, cash equivalents and marketable securities of $443.6 million, up $41.4 million from the end of the previous quarter. The company had no debt at the end of the quarter.

Going forward, management expects business from networking and consumer channels to drive growth in the second quarter. Within the networking channel, retail is expected to be the key growth driver as the company continues to benefit from gain in market share. In the consumer channel, a large portion of the expected increase in revenues is expected to come from sales of its mobile wireless LAN products to handset customers.

Revenues are projected between $230 million and $240 million. Gross margin is expected at 50%, plus or minus 50 basis points. EPS is forecasted around 62 cents – 67 cents.

Shares of Atheros increased 5.63% to close at $42.00 in after-market trading. In regular trading, shares dipped 1.25% to close at $39.76.

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