Cavium reported Q4 2012 revenue of $66.4 million, an 8.7% sequential increase from the $61.1 million reported in the third quarter of 2012. There was a net loss (GAAP) of $78.8 million, or $(1.56) per diluted share compared to $8.1 million, or $(0.16) per diluted share in the third quarter of 2012. Gross margins were 62.3% in the fourth quarter of 2012 compared to 59.4% in the third quarter of 2012.
Cavium established a full valuation allowance against its US net deferred tax assets, which resulted in a one-time, non-cash charge of $43.5 million in the fourth quarter of 2012. Had Cavium not established the valuation allowance, it would have recognized a tax benefit of $2.1 million. This tax benefit along with the $43.5 million valuation allowance, produced a net tax expense of $41.4 million in the fourth quarter of 2012. The decision to establish the valuation allowance was based on an assessment made at year-end that considered factors such as 2012 actual results as well as projected US income, and does not preclude Cavium from using its loss carry-forwards or other deferred tax assets in the future.
Cavium recently restructured its Software and Services group. As a result of performing an annual goodwill impairment test in the fourth quarter of 2012, and the impact of the Software and Services group restructuring, Cavium determined that Software and Services goodwill and certain intangible assets were impaired and recorded a $33.3 million, non-cash, goodwill and intangible asset charge in the fourth quarter of 2012.