SC TO-C

   As filed with the Securities and Exchange Commission on October 18, 2001


--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                               -----------------

                                  SCHEDULE TO
                                 (Rule 13e-4)

           TENDER OFFER STATEMENT UNDER SECTION 14(d)(1) OR 13(e)(1)
                    OF THE SECURITIES EXCHANGE ACT OF 1934

                               -----------------

                      Applied Micro Circuits Corporation
        (Name of Subject Company (Issuer) and Filing Person (Offeror))

                               -----------------

          Options to purchase Common Stock, par value $.01 per share,
       with an exercise price equal to or greater than $20.00 per share
                        (Title of Class of Securities)

                               -----------------

                                  03822W 10 9
        (CUSIP Number of Class of Securities (Underlying Common Stock))

                               -----------------

                              William E. Bendush
              Senior Vice President, Finance and Administration,
                          and Chief Financial Officer
                      Applied Micro Circuits Corporation
                              6290 Sequence Drive
                          San Diego, California 92121
                                (858) 450-9333
(Name, Address and Telephone Number of Person Authorized to Receive Notices and
                  Communications on Behalf of Filing Person)

                                   Copy to:
                             D. Bradley Peck, Esq.
                              Cooley Godward LLP
                              4401 Eastgate Mall
                          San Diego, California 92121
                                (858) 550-6000

                           CALCULATION OF FILING FEE

                Transaction Valuation    Amount of Filing Fee(1)
                   Not applicable            Not applicable
(1)A filing fee is not required as the filing relates solely to preliminary
   communications made before the commencement of a tender offer.

[_]Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
   and identify the filing with which the offsetting fee was previously paid.
   Identify the previous filing by registration statement number, or the Form
   or Schedule and the date of its filing.

          Amount Previously Paid:  Not           Filing party: Not applicable
          applicable
          Form or Registration No.: Not          Date filed:   Not applicable
          applicable

[X]Check the box if the filing relates solely to preliminary communications
   made before the commencement of a tender offer.

Check the appropriate boxes below to designate any transactions to which the
statement relates:

    [_]third party tender offer subject to Rule 14d-1.

    [X]issuer tender offer subject to Rule 13e-4.

    [_]going-private transaction subject to Rule 13e-3.

    [_]amendment to Schedule 13D under Rule 13d-2.

Check the following box if the filing is a final amendment reporting the
  results of the tender offer: [_]


--------------------------------------------------------------------------------

--------------------------------------------------------------------------------



Items 1-11, 13.

   Not applicable.

Item 12. Exhibits.

  
99.1 Press Release dated October 18, 2001.

99.2 E-Mail dated October 18, 2001 from David M. Rickey.

99.3 Offer to Exchange Outstanding Options to Purchase Common Stock (Preliminary--Subject to
     Completion).



                                      1



                               INDEX TO EXHIBITS



Exhibit
Number  Description
------  -----------
     
 99.1   Press Release dated October 18, 2001.

 99.2   E-Mail dated October 18, 2001 from David M. Rickey.

 99.3   Offer to Exchange Outstanding Options to Purchase Common Stock (Preliminary--Subject to
        Completion).


                                      1

EX-99.1

                                                                    Exhibit 99.1

  APPLIED MICRO CIRCUITS CORPORATION ANNOUNCES STOCK OPTION EXCHANGE PROGRAM

   SAN DIEGO, Calif--October 18, 2001--Applied Micro Circuits Corporation
[NASDAQ: AMCC] today announced that it will be offering a voluntary stock
option exchange program to its employees, officers and board members.

   Under the program, which is expected to commence before the end of October
2001, participants will be able to tender for cancellation stock options that
have an exercise price equal to or greater than $20 per share for replacement
options to be issued on a date which is at least six months plus one day from
the date of cancellation of the tendered options. The exercise price of the
replacement options will be equal to 100 percent of the market price of AMCC
stock on the grant date of these options. The terms and conditions of the
replacement options, including the vesting schedules, will be substantially the
same as the terms and conditions of the cancelled options.

   "Our most important assets are our employees. Equity, in the form of
options, has been a major employee motivator and as such, a significant
contributor to our success in the past," Dave Rickey, Chairman and Chief
Executive Officer said. "In light of the decline in the price of our common
stock, we recognize that the exercise prices of the majority of outstanding
options to purchase our common stock, whether or not they are currently
exercisable, are higher than the price of our common stock. We believe these
options are less valuable as an incentive to retain and motivate employees. By
making this offer to exchange options, we intend to provide our employees with
the benefit of holding options that over time may have a greater potential to
increase in value, and thereby create better incentives for our employees to
remain with us and contribute to the attainment of our future business and
financial objectives and the creation of value for all of our stockholders."

   As of October 4, 2001, options to purchase approximately 59 million shares
of AMCC common stock were outstanding under the Company's stock option
programs. Options to purchase approximately 39 million of these shares are
expected to be eligible for the program.

   APPLIED MICRO CIRCUITS CORPORATION HAS NOT COMMENCED THE OFFER TO EXCHANGE
THAT IS REFERRED TO IN THIS COMMUNICATION. UPON THE COMMENCEMENT OF THE OFFER
TO EXCHANGE, AMCC WILL FILE WITH THE SECURITIES AND EXCHANGE COMMISSION A
COMPLETED SCHEDULE T/O AND RELATED EXHIBITS AND DOCUMENTS, INCLUDING THE OFFER
TO EXCHANGE. ALL AMCC OPTIONHOLDERS ELIGIBLE TO PARTICIPATE IN THE OFFER TO
EXCHANGE ARE STRONGLY ENCOURAGED TO READ THE SCHEDULE T/O AND RELATED EXHIBITS
AND DOCUMENTS, INCLUDING THE OFFER TO EXCHANGE, WHEN THESE BECOME AVAILABLE.
THESE DOCUMENTS WILL CONTAIN IMPORTANT INFORMATION ABOUT THE OFFER TO EXCHANGE.
THE SCHEDULE T/O AND RELATED EXHIBITS AND DOCUMENTS WILL BE AVAILABLE WITHOUT
CHARGE AT THE SECURITIES AND EXCHANGE COMMISSION WEBSITE AT WWW.SEC.GOV AND
WILL BE AVAILABLE WITHOUT CHARGE FROM AMCC TO ALL AMCC OPTIONHOLDERS ELIGIBLE
TO PARTICIPATE IN THE OFFER TO EXCHANGE.

AMCC Overview

   AMCC designs, develops, manufactures and markets high-performance,
high-bandwidth silicon solutions for the world's optical networks. AMCC
utilizes a combination of high-frequency analog, mixed-signal and digital
design expertise coupled with system-level knowledge and multiple silicon
process technologies to offer integrated circuit products that enable the
transport of voice and data over fiber optic networks. The company's system
solution portfolio includes switch fabric, traffic management, network
processor, framer/mapper, PHY



and PMD devices that address the high-performance needs of the evolving
intelligent optical network. AMCC's corporate headquarters and wafer
fabrication facilities are located in San Diego. Sales and engineering offices
are located throughout the world. For further information regarding AMCC,
please visit our web site at http://www.amcc.com or call our shareholder
information line at (888) 982-AMCC (2622).

   This news release contains forward-looking statements, including statements
regarding the stock option exchange program, that are subject to certain risks
and uncertainties, including, but not limited to, those associated with
unpredictability and volatility of the market price of the Company's common
stock between the cancellation of existing options and the grant of replacement
options under the program, delays in the anticipated commencement date of the
program, changes in the accounting treatment of the program, and corporate
developments affecting the Company between the cancellation of existing options
and the grant of replacement options under the program, as well as the "Risk
Factors" set forth in the Company's Annual Report on Form 10-K for the year
ended March 31, 2001 and the most recent Quarterly Report on Form 10-Q, and the
Company's other filings with the Securities and Exchange Commission. Actual
results could differ materially, as a result of such factors, from those set
forth in the forward-looking statements.

                                      2

EX-99.2

                                                                    Exhibit 99.2

To all AMCC Employees:

   Today AMCC announced our plan to implement a voluntary Stock Option Exchange
Program, which we anticipate will commence later this month. The commencement
of this Program will be an opportunity for all eligible employees who hold
stock options to exchange stock options with an exercise price equal to or
greater than $20.00 per share for replacement options covering the same number
of shares.

   In light of the decline in the price of our common stock, AMCC's management
recognizes that many of your outstanding options have exercise prices
significantly higher than the price at which our stock is trading today. As a
result, this has reduced the potential value of your options and our equity
compensation program. The design of this Program may provide you with the
benefit of options that over time may have greater potential to increase in
value.

   This voluntary Program is not a stock option re-pricing. A re-pricing would
force the Company to take a significant charge to earnings against any future
appreciation on the repriced options. This Program is very similar to programs
offered by several of our customers and competitors to their employees.

   Beginning on Monday, October 22, a preliminary version of the Offer to
Exchange relating to the Program will be available on the AMCC intranet located
at the following link: http://cww/Stock/. Although this document is preliminary
and subject to change before the commencement of the Program, you should review
it carefully as it will provide you with detailed information as to how the
Program will work. Choosing to participate in the Program when it commences
will be a decision that you need to make based on your personal financial
situation and goals. Before making this decision, you should review the final
version of the Offer to Exchange in detail.

   Our Stock Administration Department will be holding a series of meetings
throughout the company (and video or audio presentations around the world)
beginning next Monday to further explain the Program and address your
questions. I encourage you to attend these meetings and hold your questions
until that time.

   The following is a schedule outlining the times, dates and locations of
these meetings:

   Monday, October 22:

       7:00-8:00 am in Oberlin cafeteria

       10:00-11:00 am in Sequence cafeteria (available via teleconference in
       Irvine, Andover, New Hampshire and Chicago)

       2:00-3:00 pm in Sequence cafeteria (available via teleconference in
       Minneapolis and Ft. Collins)

   Tuesday, October 23:

       6:30-7:30 am in Oberlin cafeteria

       8:00-9:00 am in Sequence cafeteria (available via teleconference in
       Pennsylvania, New Jersey, and Texas sales offices)

       1:30-2:30 pm in Sunnyvale (available via teleconference and/or video
       feed in Raleigh)

       3:00-4:00 pm in Oberlin cafeteria

       6:00-7:00 pm in Sequence cafeteria (available via teleconference in all
       Asian sales offices)

                                      1



   Wednesday, October 24:

       6:00-7:00 am (available via teleconference in Ottawa, UK and Europe
       sales offices and the Israeli Design Center)

       10:00-11:00 am in Sequence cafeteria (available via teleconference in
       miscellaneous locations if necessary)

   Thursday, October 25:

       6:00-7:00 am in Sequence cafeteria

       6:00-7:00 pm in Sequence cafeteria

   We hope that you will find this Program meaningful and equitable. Thank you
for your contributions to the Company's future success!

                                          Sincerely,
                                          Dave

   WE HAVE NOT COMMENCED THE OFFER TO EXCHANGE THAT IS REFERRED TO IN THIS
COMMUNICATION. UPON THE COMMENCEMENT OF THE OFFER TO EXCHANGE, WE WILL FILE
WITH THE SECURITIES AND EXCHANGE COMMISSION A COMPLETED SCHEDULE T/O AND
RELATED EXHIBITS AND DOCUMENTS, INCLUDING THE OFFER TO EXCHANGE. ALL AMCC
OPTIONHOLDERS ELIGIBLE TO PARTICIPATE IN THE OFFER TO EXCHANGE ARE STRONGLY
ENCOURAGED TO READ THE SCHEDULE T/O AND RELATED EXHIBITS AND DOCUMENTS,
INCLUDING THE OFFER TO EXCHANGE, WHEN THEY BECOME AVAILABLE. THESE DOCUMENTS
WILL CONTAIN IMPORTANT INFORMATION ABOUT THE OFFER TO EXCHANGE. THE SCHEDULE
T/O AND RELATED EXHIBITS AND DOCUMENTS WILL BE AVAILABLE WITHOUT CHARGE AT THE
SECURITIES AND EXCHANGE COMMISSION WEBSITE AT WWW.SEC.GOV AND WILL BE AVAILABLE
WITHOUT CHARGE FROM US TO ALL AMCC OPTIONHOLDERS ELIGIBLE TO PARTICIPATE IN THE
OFFER TO EXCHANGE.

                                      2

EX-99.3

                                                                    Exhibit 99.3

                      PRELIMINARY--SUBJECT TO COMPLETION

   WE HAVE NOT COMMENCED THE OFFER TO EXCHANGE THAT IS REFERRED TO IN THIS
COMMUNICATION. UPON THE COMMENCEMENT OF THE OFFER TO EXCHANGE, WE WILL FILE
WITH THE SECURITIES AND EXCHANGE COMMISSION A COMPLETED SCHEDULE T/O AND
RELATED EXHIBITS AND DOCUMENTS, INCLUDING THE OFFER TO EXCHANGE. ALL AMCC
OPTIONHOLDERS ELIGIBLE TO PARTICIPATE IN THE OFFER TO EXCHANGE ARE STRONGLY
ENCOURAGED TO READ THE SCHEDULE T/O AND RELATED EXHIBITS AND DOCUMENTS,
INCLUDING THE OFFER TO EXCHANGE, WHEN THEY BECOME AVAILABLE. THESE DOCUMENTS
WILL CONTAIN IMPORTANT INFORMATION ABOUT THE OFFER TO EXCHANGE. THE SCHEDULE
T/O AND RELATED EXHIBITS AND DOCUMENTS WILL BE AVAILABLE WITHOUT CHARGE AT THE
SECURITIES AND EXCHANGE COMMISSION WEBSITE AT WWW.SEC.GOV AND WILL BE AVAILABLE
WITHOUT CHARGE FROM US TO ALL AMCC OPTIONHOLDERS ELIGIBLE TO PARTICIPATE IN THE
OFFER TO EXCHANGE.

                      APPLIED MICRO CIRCUITS CORPORATION
                              6290 SEQUENCE DRIVE
                              SAN DIEGO, CA 92121
                                (858) 450-9333

                               OFFER TO EXCHANGE
                              OUTSTANDING OPTIONS
                           TO PURCHASE COMMON STOCK

                               October    , 2001




                      PRELIMINARY--SUBJECT TO COMPLETION


                      APPLIED MICRO CIRCUITS CORPORATION

                     OFFER TO EXCHANGE OUTSTANDING OPTIONS

          THE OFFER EXPIRES AT 5:00 P.M., U.S. PACIFIC STANDARD TIME,
                ON NOVEMBER  , 2001, UNLESS WE EXTEND THE OFFER

   We are offering our employees, including our executive officers, and members
of our Board of Directors the opportunity to exchange all outstanding options
to purchase shares of our common stock that have an exercise price that is
equal to or greater than $20.00 per share (Eligible Option Grants) for
replacement options to purchase shares of our common stock (Replacement
Options) (Offer). If you wish to accept this Offer, you must complete an
election form agreeing to exchange your Eligible Option Grants for Replacement
Options. In addition, if you wish to accept this Offer, you must exchange all
of your options that were granted in the six-month period prior to the date on
which this Offer is first provided to you (the Commencement Date)--even if the
exercise price of some of those options is less than $20.00 per share. This
Offer is currently expected to expire at 5:00 p.m., U.S. Pacific Standard Time,
on November  , 2001, unless we extend the Offer to a later date (the Expiration
Date). In other words:

  .  You may exchange one or more of outstanding options that have an exercise
     price that is equal to or greater than $20.00 per share. Your election to
     exchange one or more of your outstanding options is entirely voluntary and
     may not be withdrawn or changed after the stated time on the Expiration
     Date.

  .  If you elect to exchange outstanding options that have an exercise price
     that is equal to or greater than $20.00 per share, then you must also
     exchange all of your options that were granted in the six-month period
     prior to the Commencement Date--even if the exercise price of some of
     those options is less than $20.00 per share.

The options granted in the six-month period prior to the Commencement Date that
are cancelled due to your participation in the Offer will be replaced by the
same number of Replacement Options, subject to the conditions set forth below
in this Offer.

   The Replacement Options will be granted on May  , 2002, or a later date if
the Expiration Date is extended, provided that if there are no reported sales
of our common stock on such date, then the Replacement Option Grant Date will
be the next day following such date on which there is a reported sale
(Replacement Option Grant Date), and will have an exercise price equal to the
Fair Market Value of our common stock on the Replacement Option Grant Date. The
Fair Market Value will be the closing price of our common stock as reported on
Nasdaq on the Replacement Option Grant Date. The number of shares subject to
the Replacement Options will equal the number of shares subject to the Eligible
Option Grants you exchanged, subject to adjustment.

   We are making this offer upon the terms, and subject to the conditions,
described in this Offer to Exchange (and attachments hereto) and in the related
cover letter and attached Summary Term Sheet and Questions and Answers (which
together, as they may be amended from time to time, constitute the Offer).
Without limiting the preceding sentence, this Offer is subject to conditions
that we describe in Section 6 of the Offer to Exchange.

   ALTHOUGH OUR BOARD OF DIRECTORS HAS APPROVED THIS OFFER, NEITHER WE NOR OUR
BOARD OF DIRECTORS MAKES ANY RECOMMENDATION AS TO WHETHER OR NOT YOU SHOULD
TENDER YOUR ELIGIBLE OPTION GRANTS FOR EXCHANGE. YOU MUST MAKE YOUR OWN
DECISION WHETHER TO TENDER YOUR ELIGIBLE OPTION GRANTS.

                                      i



                      PRELIMINARY--SUBJECT TO COMPLETION


   Shares of our common stock are quoted on Nasdaq under the symbol "AMCC". On
October  , 2001 the closing price of our common stock as reported on Nasdaq was
$    per share. We recommend that you obtain current market quotations for our
common stock before deciding whether to elect to exchange your Eligible Option
Grants.

   If you have any questions regarding the Offer, please consult the Summary
Term Sheet and Questions and Answers. If the Summary Term Sheet or the
Questions and Answers do not answer your questions, or if you need assistance
completing the related documentation, please contact Stock Administration at
(858) 535-3462 or stockadm@amcc.com.

   THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION (SEC), NOR HAS THE SEC PASSED UPON THE FAIRNESS OR MERITS
OF SUCH TRANSACTION OR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION
CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.

                                   IMPORTANT

   Your election to exchange one or more of your Eligible Option Grants is
voluntary. If you decide to participate in this Offer, you must complete the
Election Form found on our intranet web site at http://cww/Stock/ and deliver
it in accordance with its instructions before 5:00 p.m. U.S. Pacific Standard
Time on the Expiration Date (currently November  , 2001), or at a later date if
we extend the Offer. If you do not deliver the Election Form by the stated time
on the Expiration Date, you will be deemed to have rejected the Offer. Delivery
will be deemed made only when actually received by us. No late deliveries will
be accepted. Please also note that, even if you timely deliver your Election
Form, we are required by applicable tax laws to retain the right to choose
whether or not to accept your Eligible Option Grants for exchange. Accordingly,
your Eligible Option Grants (and the related stock option agreements) will be
automatically cancelled if, and only if, we accept your Eligible Option Grants
for exchange.

   THE ELECTION FORM WILL NOT BE MADE AVAILABLE UNTIL WE HAVE COMMENCED THE
OFFER TO EXCHANGE THAT IS REFERRED TO IN THIS COMMUNICATION.

   We cannot guarantee that the Replacement Options will have a lower exercise
price than the Eligible Option Grants. However, our Board of Directors believes
that the Offer may create a better chance for some participants to obtain value
from their options and our stock option program in the short term. The Board of
Directors recognizes that the decision to accept or reject the Offer is an
individual one that should be based on a variety of factors. You should consult
your personal advisors if you have questions about your financial and/or tax
situation. The information about this Offer is limited to this document, the
attached Summary Term Sheet and Questions and Answers and the Tender Offer
Statement on Schedule T/O.

   WE HAVE NOT AUTHORIZED ANY PERSON TO MAKE ANY RECOMMENDATION ON OUR BEHALF
AS TO WHETHER OR NOT YOU SHOULD TENDER YOUR ELIGIBLE OPTION GRANTS PURSUANT TO
THE OFFER. WE HAVE NOT AUTHORIZED ANYONE TO GIVE YOU ANY INFORMATION OR TO MAKE
ANY REPRESENTATION IN CONNECTION WITH THIS OFFER OTHER THAN THE INFORMATION AND
REPRESENTATIONS CONTAINED IN THIS DOCUMENT, THE ATTACHED SUMMARY TERM SHEET AND
QUESTIONS AND ANSWERS AND THE TENDER OFFER STATEMENT ON SCHEDULE T/O. IF ANYONE
MAKES ANY RECOMMENDATION OR REPRESENTATION TO YOU OR GIVES YOU ANY INFORMATION,
YOU MUST NOT RELY UPON THAT RECOMMENDATION, REPRESENTATION OR INFORMATION AS
HAVING BEEN AUTHORIZED BY US.


                                      ii



                      PRELIMINARY--SUBJECT TO COMPLETION


                                   GLOSSARY

   Commencement Date means the date that we first provide to our employees and
members of our Board of Directors the opportunity to participate in this Offer
and the means to exchange Eligible Option Grants.

   Company Option Plans means our 1992 Stock Option Plan, our 2000 Equity
Incentive Plan, our 1997 Directors' Stock Option Plan, our 1998 Stock Incentive
Plan (fka the Cimaron Communications Corporation 1998 Stock Incentive Plan),
the MMC Networks, Inc. 1997 Stock Plan, the YuniNetworks, Inc. 1999 Equity
Incentive Plan, and the SiLutia, Inc. 1999 Stock Option Plan. We have
additional option plans in effect today but, because all options granted under
those plans have exercise prices less than $20.00 and no options have been
granted in the last six months, those plans are not included in this
definition.

   Eligible Option Grants means all outstanding options to purchase shares of
our common stock that have an exercise price that is equal to or greater than
$20.00 per share. If you do exchange outstanding options that have an exercise
price that is equal to or greater than $20.00 per share, then the options
granted in the six-month period prior to the Commencement Date must also be
exchanged, even if those shares were granted at an exercise price below $20.00
per share. These options are also included in the definition of Eligible Option
Grants.

   Employed and employment includes service as a member of our Board of
Directors and service as an intern (for those interns who have previously
received Eligible Option Grants).

   Expiration Date means the time that this Offer will expire, which is
currently set to be at 5:00 p.m., U.S. Pacific Standard Time on November  ,
2001, unless we extend the Offer to a later date.

   Fair Market Value means the closing price of our common stock as reported on
Nasdaq on the Replacement Option Grant Date.

   Nasdaq means The Nasdaq Stock Market, Inc.'s National Market System.

   Non-exempt Employee means an employee that is entitled to receive overtime
pay.

   Offer means this offer to exchange Eligible Option Grants for Replacement
Options.

   Replacement Grant Plans means our 1992 Stock Option Plan, our 2000 Equity
Incentive Plan and, with respect to employees outside the United States, the
relevant sub-plans under the 2000 Equity Incentive Plan if applicable. All
Replacement Options will be issued under one of the Replacement Grant Plans.

   Replacement Options means options to purchase shares of our common stock
that will be issued in exchange for the Eligible Option Grants.

   Replacement Option Grant Date means the date that is six months and one day
after the Expiration Date; provided, however, that if no sales of our common
stock are reported on such date, then the Replacement Option Grant Date shall
be the next day following such date on which there is a reported sale.

   SEC means the United States Securities and Exchange Commission.

   Schedule T/O means the Tender Offer Statement filed by us with the SEC in
connection with this Offer to Exchange, including any amendments thereto.

   Subject to adjustment means that the number of shares to be granted under
your Replacement Options will be changed to give effect to any stock splits,
stock dividends, recapitalizations or similar transaction that may occur
between the Expiration Date and the Replacement Option Grant Date.

                                      iii



                      PRELIMINARY--SUBJECT TO COMPLETION


                              SUMMARY TERM SHEET

   The following is a summary of the material terms of this Offer. We urge you
to read carefully the remainder of this Offer to Exchange, the Questions and
Answers and the Schedule T/O, because the information in this summary is not
complete and additional important information is contained in the remainder of
this Offer to Exchange and the Schedule T/O. We have included cross-references
to the relevant sections of this Offer to Exchange where you can find a more
complete description of the topics discussed in this summary.

  .  Offer. We are offering our employees, including our executive officers,
     and members of our Board of Directors the opportunity to exchange Eligible
     Option Grants for Replacement Options. Eligible Option Grants are
     outstanding options with an exercise price equal to or greater than $20.00
     per share. (See Section 1)

  .  Voluntary Participation; Exchange. Your participation in this Offer is
     voluntary. You may exchange one or more of your Eligible Option Grants,
     but if you elect to exchange any Eligible Option Grant, you also must
     exchange all other options granted to you during the six-month period
     prior to the Commencement Date, even if the exercise price of those
     options is less than $20.00 per share. These options are also referred to
     as Eligible Option Grants. (See Section 1)

  .  Replacement Options.

     Number of Shares. The number of shares subject to the Replacement Options
     will equal the number of shares subject to the Eligible Option Grants
     exchanged, subject to adjustment. (See Section 8)

     Term. Each Replacement Option will have the same term as, and expire no
     later than, the cancelled Eligible Option Grant that it replaced. For
     example, if you elect to cancel an Eligible Option Grant which, by its
     terms, would have expired no later than November 10, 2009, then your
     Replacement Option will also expire no later than November 10, 2009. (See
     Section 8)

     Vesting and Exercisability. The vesting schedule of the Eligible Option
     Grants will carry over to the relevant Replacement Options; that is, you
     will receive vesting credit under each Replacement Option equal to the
     vesting under the corresponding Eligible Option Grant that is exchanged.
     If you are a Non-exempt Employee, then you will not be able to exercise
     your Replacement Options for at least six months after the Replacement
     Option Grant Date. (See Sections 5 and 8)

     Exercise Price. The Replacement Options will have an exercise price equal
     to the Fair Market Value of our common stock on the Replacement Option
     Grant Date. (See Sections 5 and 8)

     Nonqualified Stock Options. No Replacement Options will be treated as
     incentive stock options under U.S. tax law. (See Section 12)

  .  Timing. We commenced this Offer on October  , 2001. The Expiration Date of
     this Offer is currently November  , 2001, but we may extend this Offer to
     a later date. The Replacement Option Grant Date will be May  , 2002, or a
     later date if this Offer is extended, provided that if there are no
     reported sales of our common stock on such date, then the Replacement
     Option Grant Date will be the next day following such date on which there
     is a reported sale. (See Section 1)

  .  Eligibility. If for any reason you are not employed by us or one of our
     subsidiaries on the Expiration Date, you will not be eligible to
     participate in this Offer. If you are employed by us or one of our
     subsidiaries on the Expiration Date, but you do not continue to be
     employed by us or one of our subsidiaries through the Replacement Option
     Grant Date, you will not be eligible to receive Replacement Options and
     your cancelled options will not be reinstated. Eligible Option Grants held
     by our executive officers and members of our Board of Directors may be
     exchanged in this Offer. (See Sections 8 and 9)

                                      iv



                      PRELIMINARY--SUBJECT TO COMPLETION


  .  Election. To make your election to accept this Offer, you must deliver an
     Election Form before 5:00 p.m., U.S. Pacific Standard Time, on the
     Expiration Date in accordance with the procedures described in this Offer
     to Exchange. Delivery will be deemed made only when actually received by
     us. No late deliveries will be accepted. You may change or withdraw your
     election at any time prior to 5:00 p.m., U.S. Pacific Standard Time, on
     the Expiration Date by following similar procedures. You may not withdraw
     or change your election after the stated time on the Expiration Date. (See
     Sections 3 and 4)

     THE ELECTION FORM WILL NOT BE MADE AVAILABLE UNTIL WE HAVE COMMENCED THE
     OFFER TO EXCHANGE THAT IS REFERRED TO IN THIS COMMUNICATION.

  .  Conditions to this Offer. This Offer is subject to a number of conditions.
     If any of the conditions to which this Offer is subject occurs, we may
     terminate or amend this Offer, or we may postpone or forego our acceptance
     of any Eligible Option Grants for exchange. (See Section 6)

  .  Trading Price for Our Common Stock. Shares of our common stock are traded
     on Nasdaq under the symbol "AMCC". We recommend that you obtain current
     market quotations for our common stock before deciding whether to elect to
     exchange your Eligible Option Grants. We cannot guarantee that the
     Replacement Options will have a lower exercise price than the Eligible
     Option Grants. (See Section 7)

  .  U.S. Federal Tax Consequences. If you are an employee residing in the
     United States, you will not be subject to any current U.S. income tax if
     you elect to exchange your Eligible Option Grants for Replacement Options.
     The grant of Replacement Options will not be recognized as taxable income.
     Please note that the Replacement Options will not qualify as incentive
     stock options. (See Section 12) If you are an employee residing outside
     the United States, please see Schedule B for more details.

  .  Amendment and Termination. As long as we comply with applicable laws, we
     may amend or terminate this Offer in any way. We will notify you if we
     amend or terminate this Offer. We may be required to extend this Offer in
     the event we materially change the terms of this Offer. (See Section 13)

                                      v



                      PRELIMINARY--SUBJECT TO COMPLETION


                                   THE OFFER

1. NUMBER OF OPTIONS; EXPIRATION DATE.

   We are offering to exchange Replacement Options for Eligible Option Grants
held by our employees, including our executive officers, and members of our
Board of Directors. Eligible Option Grants are all outstanding options that
were granted under our 1992 Stock Option Plan, our 2000 Equity Incentive Plan,
our 1997 Directors' Stock Option Plan, our 1998 Equity Incentive Plan (fka the
Cimaron Communications Corporation 1998 Stock Incentive Plan), the MMC
Networks, Inc. 1997 Stock Plan, the YuniNetworks, Inc. 1999 Equity Incentive
Plan, and the SiLutia, Inc. 1999 Stock Option Plan (Company Option Plans) and
that have an exercise price that is equal to or greater than $20.00 per share
of common stock. As of October 4, 2001, 59,432,522 shares of our common stock
were covered by options outstanding under the Company Option Plans, of which
39,405,357 shares were covered by Eligible Option Grants.

   Your participation in this Offer is voluntary. You may elect to exchange one
or more of your Eligible Option Grants; but you may not exchange less than all
shares subject to a particular Eligible Option Grant. However, if you elect to
exchange any Eligible Option Grant, you must exchange all options granted to
you in the six-month period prior to the Commencement Date, even if the
exercise price of such options is less than $20.00 per share. For example,
based on a Commencement Date of October  , 2001, to participate in this Offer,
you must exchange all of your options that were granted on or after April  ,
2001, even if the exercise price of some of those options is less than $20.00
per share. These options are also included in the definition of Eligible Option
Grants. Our Offer is subject to the terms and conditions described in this
Offer and the attached Summary Term Sheet and Questions and Answers. We will
only accept Eligible Option Grants that are properly exchanged and not validly
withdrawn in accordance with Section 5 of this Offer before the Offer expires
on the Expiration Date.

   The Replacement Options will be granted on May  , 2002 (or a later date if
the Offer is extended) and will have an exercise price equal to the Fair Market
Value of our common stock on the Replacement Option Grant Date. If, however, on
the Replacement Option Grant Date you are on a leave of absence that is not
protected by statute, then the Replacement Options will be granted on the date,
if any, that you return to regular employment with us or one of our
subsidiaries. The Fair Market Value will be the closing price of our common
stock as reported on Nasdaq on the Replacement Option Grant Date. The number of
shares subject to your Replacement Options will equal the number of shares
subject to each Eligible Option Grant that you exchange and any options granted
in the six-month period prior to the Commencement Date that are cancelled
because of your election to exchange Eligible Option Grants. The number of
shares subject to the Replacement Options will be adjusted for any stock
splits, stock dividends, recapitalizations or similar transactions that may
occur between the Expiration Date and the Replacement Option Grant Date.

   IF, FOR ANY REASON (INCLUDING DEATH), YOU ARE NOT EMPLOYED BY US OR ONE OF
OUR SUBSIDIARIES FROM THE EXPIRATION DATE THROUGH THE REPLACEMENT OPTION GRANT
DATE, YOU WILL NOT RECEIVE ANY REPLACEMENT OPTIONS OR ANY OTHER CONSIDERATION
IN EXCHANGE FOR YOUR ELIGIBLE OPTION GRANTS THAT HAVE BEEN EXCHANGED. IF YOUR
EMPLOYMENT WITH US OR ONE OF OUR SUBSIDIARIES TERMINATES AFTER YOU TENDERED
YOUR OPTIONS BUT PRIOR TO THE EXPIRATION DATE, YOU ARE NOT ELIGIBLE TO
PARTICIPATE IN THE OFFER. IF THE OPTIONS THAT YOU TENDERED FOR EXCHANGE HAVE AN
EXERCISE PRICE THAT IS LESS THAN $20.00 PER SHARE, THEY ARE NOT ELIGIBLE TO BE
EXCHANGED IN THE OFFER UNLESS THEY ARE OPTIONS THAT MUST BE EXCHANGED PURSUANT
TO THE SECOND PARAGRAPH OF THIS SECTION 1. PARTICIPATION IN THIS OFFER DOES NOT
CONFER UPON YOU THE RIGHT TO REMAIN EMPLOYED BY US OR ANY OF OUR SUBSIDIARIES.

                                      1



                      PRELIMINARY--SUBJECT TO COMPLETION


   IF YOU ARE AN EMPLOYEE RESIDING IN THE UNITED STATES, THEN YOUR EMPLOYMENT
WITH US IS "AT-WILL" AND MAY BE TERMINATED BY US OR BY YOU AT ANY TIME,
INCLUDING PRIOR TO THE REPLACEMENT OPTION GRANT DATE, FOR ANY REASON, WITH OR
WITHOUT CAUSE.

   All Replacement Options will be issued under our 1992 Stock Option Plan, our
2000 Equity Incentive Plan or, for employees outside the United States,
relevant sub-plans under the 2000 Equity Incentive Plan, pursuant to
replacement option agreements between you and us. If executive officers and
members of our Board of Directors exchange any Eligible Option Grants under the
1992 Stock Option Plan, the 1997 Directors' Stock Option Plan or the 2000
Equity Incentive Plan, then the Replacement Options will be granted under the
1992 Stock Option Plan. If non-executive officer employees exchange any
Eligible Option Grants under the 1992 Stock Option Plan, then the Replacement
Options will be granted under the 2000 Equity Incentive Plan (except for
certain employees outside the United States, whose Replacement Options may be
granted under the relevant sub-plans under the 2000 Equity Incentive Plan). If
you exchange any Eligible Option Grants under the 2000 Equity Incentive Plan,
our 1998 Equity Incentive Plan (fka the Cimaron Communications Corporation 1998
Stock Incentive Plan), the MMC Networks, Inc. 1997 Stock Plan, the
YuniNetworks, Inc. 1999 Equity Incentive Plan, or the SiLutia, Inc. 1999 Stock
Option Plan, then your Replacement Options will be granted under the 2000
Equity Incentive Plan (except for employees outside the United States, whose
Replacement Options will be granted under the relevant sub-plans under the 2000
Equity Incentive Plan). No Replacement Options will be treated as incentive
stock options under U.S. tax law.

   The Expiration Date of this Offer means 5:00 p.m., U.S. Pacific Standard
Time, on November  , 2001, unless we, in our discretion, extend the Offer. If
we extend the Offer, the term Expiration Date will refer to the latest time and
date at which the Offer expires. See Section 13 for a description of our rights
to extend, delay, terminate and amend the Offer.

   We will publish a notice if we decide to amend this Offer and take any of
the following actions:

  .  increase or decrease what we will give you in exchange for your Eligible
     Option Grants;

  .  increase or decrease the number of Eligible Option Grants to be exchanged
     in the Offer; or

  .  extend or terminate the Offer.

   If the Offer is scheduled to expire within ten (10) business days from the
date we notify you of such an increase or decrease, we also intend to extend
the Offer for a period of ten (10) business days after the date the notice is
published.

   A business day means any day other than a Saturday, Sunday or U.S. federal
holiday and consists of the time period from 12:01 a.m. through 12:00 midnight.

2. PURPOSE OF THE OFFER.

   Many of our outstanding options, whether or not they are currently
exercisable, have exercise prices that are significantly higher than the
current market price of our common stock. For this reason, we believe these
options are not attractive as an incentive to retain and motivate employees,
and are unlikely to be exercised in the foreseeable future. By making this
Offer we intend to provide our employees with the benefit of holding options
that over time may have a greater potential to increase in value, and thereby
create better incentives for our employees to remain with us and contribute to
the attainment of our business and financial objectives and the creation of
value for all of our stockholders.

   The Board of Directors has approved this Offer. We cannot guarantee that the
Replacement Options will have a lower exercise price than the Eligible Option
Grants, and we make no representations as to our future

                                      2



                      PRELIMINARY--SUBJECT TO COMPLETION

stock price. However, the Board of Directors believes that the Offer may create
a better chance for participating employees to obtain value from their options
and our stock option program. The Board of Directors recognizes that the
decision to accept or reject the Offer is an individual one that should be
based on a variety of factors, and you should consult with your personal
advisors if you have questions about your financial and/or tax situation.

   We regularly evaluate various strategic and business development
opportunities, including licensing agreements, marketing arrangements, joint
ventures, acquisitions and dispositions. We intend to continue to selectively
pursue alliances and acquisitions that would allow us to gain access to new
customers and technologies, penetrate new geographic markets and enter new
product markets. Except as otherwise disclosed in this Offer or in our filings
with the SEC, we presently have no plans or proposals that relate to or would
result in:

    (a)any extraordinary corporate transaction, such as a merger,
       reorganization or liquidation, involving us or any of our subsidiaries;

    (b)any purchase, sale or transfer of a material amount of our assets or the
       assets of any of our subsidiaries;

    (c)any material change in our present dividend rate or policy, or our
       indebtedness or capitalization;

    (d)any change in our management, including a change to the material terms
       of employment of any executive officer;

    (e)any change in our present Board of Directors, including a change in the
       number or term of directors;

    (f)any other material change in our corporate structure or business;

    (g)our common stock not being authorized for quotation in an automated
       quotation system operated by a national securities association;

    (h)our common stock becoming eligible for termination of registration
       pursuant to Section 12(g)(4) of the Securities Exchange Act;

    (i)the suspension of our obligation to file reports pursuant to Section
       15(d) of the Securities Exchange Act;

    (j)the acquisition by any person of any material amount of our securities
       or the disposition of any material amount of securities (other than
       pursuant to our previously-announced stock repurchase program); or

    (k)any change in our Certificate of Incorporation or Bylaws, or any actions
       which may impede the acquisition of control of us by any person.

   Neither we nor our Board of Directors makes any recommendation as to whether
you should exchange your Eligible Option Grants, nor have we authorized any
person to make any such recommendation. You are urged to evaluate carefully all
of the information in this Offer and to consult your own legal, investment
and/or tax advisors. You must make your own decision whether to exchange your
Eligible Option Grants.

3. PROCEDURES.

   Making Your Election. To make your election to accept or reject this Offer,
you must make your election and deliver the Election Form in accordance with
its instructions before 5:00 p.m., U.S. Pacific Standard Time, on the
Expiration Date. The Election Form is found on our intranet web site located at
http://cww/Stock/. If you cannot use this web site, please contact Stock
Administration at (858) 535-3462 or stockadm@amcc.com. You do not need to
return your stock option agreements for your Eligible Option Grants to
effectively elect to accept the Offer as they will be automatically cancelled
if we accept your Eligible Option Grants for exchange. You will be required to
return your stock option agreements only upon our request.

                                      3



                      PRELIMINARY--SUBJECT TO COMPLETION


   THE ELECTION FORM WILL NOT BE MADE AVAILABLE UNTIL WE HAVE COMMENCED THE
OFFER TO EXCHANGE THAT IS REFERRED TO IN THIS COMMUNICATION.

   The delivery of Election Forms, Notices of Withdrawal and any other required
documents are at the sole risk of the option holder. Delivery will be deemed
made only when actually received by us. No late deliveries will be accepted.

   Determination of Validity; Rejection of Eligible Option Grants; Waiver of
Defects; No Obligation to Give Notice of Defects. We will determine, in our
discretion, all questions as to the number of shares subject to Eligible Option
Grants and the validity, form, eligibility (including time of receipt) and
acceptance of Election Forms. Neither we nor any other person is obligated to
give notice of any defects or irregularities in any Election Form or otherwise
in the exchange of any Eligible Option Grants, and no one will be liable for
failing to give such notice. Our determination of these matters will be final
and binding on all parties. We may reject any or all Election Forms or Eligible
Option Grants that are exchanged to the extent that we determine they were not
properly executed or delivered or to the extent that we determine it is
unlawful to accept the Eligible Option Grants that are exchanged. Additionally,
we are required by applicable tax laws to retain the right to choose whether or
not to accept your Eligible Option Grants for exchange. Accordingly, your
Eligible Option Grants (and the related stock option agreements) will be
automatically cancelled if, and only if, we accept your Eligible Option Grants
for exchange, provided that such Eligible Option Grants are properly and timely
exchanged and are not validly withdrawn. We may waive any of the conditions of
the Offer or any defect or irregularity in any Election Form with respect to
any particular Eligible Option Grants or any particular option holder. No
Eligible Option Grants will be accepted for exchange until all defects or
irregularities have been cured to our satisfaction by the option holder
exchanging the Eligible Option Grants, or waived by us, prior to the Expiration
Date.

   Our Acceptance Constitutes an Agreement. If you elect to exchange your
Eligible Option Grants and you exchange your Eligible Option Grants according
to the procedures described above, you will have accepted the Offer. Our
acceptance of Eligible Option Grants that are properly exchanged will form a
binding agreement between us and you on the terms and subject to the conditions
of this Offer.

   Subject to our rights to extend, terminate and amend the Offer, we currently
expect that we will accept on the Expiration Date of the Offer all Eligible
Option Grants for which an Election Form has properly been delivered and which
have not thereafter been validly withdrawn.

4. CHANGE IN ELECTION.

   You may only change your election by following the procedures described in
this Section 4. You may change your election at any time before 5:00 p.m., U.S.
Pacific Standard Time, on the Expiration Date.

   To change your election, you must either deliver a Notice of Withdrawal or
re-deliver the Election Form, each in accordance with its instructions, before
5:00 p.m., U.S. Pacific Standard Time, on the Expiration Date. Each of these
documents is located on our intranet web site at http://cww/Stock/. The last
Notice of Withdrawal or Election Form delivered by you prior to 5:00 p.m., U.S.
Pacific Standard Time, on the Expiration Date will be treated by us as your
final election with respect to the Offer.

   The delivery of Election Forms, Notices of Withdrawal and any other required
documents are at the sole risk of the option holder. Delivery will be deemed
made only when actually received by us. No late deliveries will be accepted.

                                      4



                      PRELIMINARY--SUBJECT TO COMPLETION


5. ACCEPTANCE OF ELIGIBLE OPTION GRANTS FOR EXCHANGE AND CANCELLATION AND
   ISSUANCE OF REPLACEMENT OPTIONS.

   On the terms and subject to the conditions of this Offer, we currently
expect that on the Expiration Date, we will accept the Eligible Option Grants
for exchange and cancel all Eligible Option Grants properly exchanged and not
validly withdrawn before the Expiration Date in accordance with this Offer. The
Replacement Options will be granted on May  , 2002, or at a later date if the
Offer is extended, with vesting of the Replacement Options carrying over from
each respective Eligible Option Grant that is exchanged. If, however, on the
Replacement Option Grant Date, you are on a leave of absence that is not
protected by statute, then the Replacement Options will be granted on the date,
if any, that you return to regular employment with us or one of our
subsidiaries.

   The number of shares subject to your Replacement Option will equal the
number of shares subject to each Eligible Option Grant that you exchange plus
any options granted in the six-month period prior to the Commencement Date that
are cancelled because of your election to exchange Eligible Option Grants. The
number of shares subject to the Replacement Options will be adjusted for any
stock splits, stock dividends, recapitalizations or similar transactions that
may occur between the Expiration Date and the Replacement Option Grant Date. A
listing of all of your Eligible Option Grants and the options granted in the
six-month period prior to the Commencement Date can be viewed online by
accessing your Salomon Smith Barney stock option account at
http://www.benefitaccess.com/ or by contacting AMCC Stock Administration at
stockadm@amcc.com and requesting a personnel option status report. If you are
not employed by us or one of our subsidiaries on the Expiration Date, then you
are not eligible to participate in this Offer. If you are an employee of ours
or one of our subsidiaries as of the Expiration Date but are not employed
continuously by us or one of our subsidiaries through the Replacement Option
Grant Date, you will not be eligible to receive Replacement Options.

   We will notify you as promptly as practicable if we reject your election to
exchange your Eligible Option Grants. If you are not notified of a rejection,
you may assume that on the Expiration Date your properly executed and delivered
Election Form has been accepted. After you deliver an Election Form, you will
receive an email confirmation that will confirm your election and state the
number of Replacement Options that we will grant to you on the Replacement
Option Grant Date. Similarly, after you deliver a Notice of Withdrawal, you
will receive an email confirmation that will confirm your election to withdraw
your Eligible Option Grants from the Offer.

6. CONDITIONS OF THE OFFER.

   We will not be required to accept any Eligible Option Grants that you elect
to exchange, and we may terminate or amend the Offer, or postpone our
acceptance and cancellation of any Eligible Option Grants that you elect to
exchange, in each case at any time on or before the Expiration Date, if we
determine that any of the following events has occurred and, in our reasonable
judgment, such event makes it inadvisable for us to proceed with the Offer or
to accept and cancel Eligible Option Grants that you elect to exchange:

  .  any change or changes occur in the applicable accounting rules that cause
     the Offer to subject us to adverse accounting treatment.

  .  any action or proceeding by any government agency, authority or tribunal
     or any other person, domestic or foreign, is threatened or pending before
     any court, authority, agency or tribunal that directly or indirectly
     challenges the making of the Offer, the acquisition of some or all of the
     Eligible Option Grants, the issuance of Replacement Options, or otherwise
     relates to the Offer or that, in our reasonable judgment, could materially
     and adversely affect our business, condition (financial or otherwise),
     income, operations or prospects or materially impair the benefits we
     believe we will receive from the Offer; any action is threatened, pending
     or taken, or any approval is withheld, by any court or any authority,
     agency, tribunal or any person that, in our reasonable judgment, would or
     might directly or indirectly:

                                      5



                      PRELIMINARY--SUBJECT TO COMPLETION


      (a)make it illegal for us to accept some or all of the Eligible Option
         Grants or to issue some or all of the Replacement Options or otherwise
         restrict or prohibit consummation of the Offer or otherwise relates to
         the Offer;

      (b)delay or restrict our ability, or render us unable, to accept the
         Eligible Option Grants for exchange and cancellation or to issue
         Replacement Options for some or all of the exchanged Eligible Option
         Grants;

      (c)materially impair the benefits we believe we will receive from the
         Offer; or

      (d)materially and adversely affect our business, condition (financial or
         other), income, operations or prospects.

  .  there is:

      (a)any general suspension of trading in, or limitation on prices for,
         securities on any national securities exchange or in the
         over-the-counter market; or

      (b)the declaration of a banking moratorium or any suspension of payments
         in respect of banks in the United States, whether or not mandatory.

  .  another person publicly makes or proposes a tender or exchange offer for
     some or all of our common stock, or an offer to merge with or acquire us,
     or we learn that:

      (a)any person, entity or group, within the meaning of Section 13(d)(3) of
         the Securities Exchange Act, has acquired or proposes to acquire
         beneficial ownership of more than 5% of the outstanding shares of our
         common stock, or any new group shall have been formed that
         beneficially owns more than 5% of the outstanding shares of our common
         stock, other than any such person, entity or group that has filed a
         Schedule 13D or Schedule 13G with the SEC on or before the Expiration
         Date;

      (b)any such person, entity or group that has filed a Schedule 13D or
         Schedule 13G with the SEC on or before the Expiration Date has
         acquired or proposed to acquire beneficial ownership of an additional
         1% or more of the outstanding shares of our Common Stock; or

      (c)any person, entity or group shall have filed a Notification and Report
         Form under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 or
         made a public announcement that it intends to acquire us or any of our
         assets or securities.

  .  any change or changes occur in our business, condition (financial or
     other), assets, income, operations, prospects or stock ownership that, in
     our reasonable judgment, is or may be material to us.

   The conditions to the Offer are for our benefit. We may assert them in our
discretion before the Expiration Date and we may waive them at any time and
from time to time before the Expiration Date, whether or not we waive any other
condition to the Offer.

   Our failure to exercise any of these rights is not a waiver of any of these
rights. The waiver of any of these rights with respect to particular facts and
circumstances is not a waiver with respect to any other facts and
circumstances. Any determination we make concerning the events described in
this Section 6 will be final and binding upon everyone.

   Additionally, we are required by applicable tax laws to retain the right to
choose whether or not to accept your Eligible Option Grants for exchange.
Accordingly, your Eligible Option Grants (and the related stock option
agreements) will be automatically cancelled if, and only if, we accept your
Eligible Option Grants for exchange, provided that such Eligible Option Grants
are properly and timely exchanged and are not validly withdrawn.

                                      6



                      PRELIMINARY--SUBJECT TO COMPLETION


   Also, if your employment with us or one of our subsidiaries terminates,
whether voluntarily, involuntarily or for any other reason (including death),
before your Replacement Options are granted, you will not receive any
Replacement Options or have a right to any stock options that were previously
cancelled. If your employment with us is terminated as part of any announced
reduction in force, you will fall within this category. THEREFORE, IF YOU ARE
NOT EMPLOYED BY US OR ONE OF OUR SUBSIDIARIES FROM THE EXPIRATION DATE THROUGH
THE REPLACEMENT OPTION GRANT DATE, YOU WILL NOT RECEIVE ANY REPLACEMENT OPTIONS
OR ANY OTHER CONSIDERATION IN EXCHANGE FOR YOUR ELIGIBLE OPTION GRANTS THAT
HAVE BEEN ACCEPTED FOR EXCHANGE AND CANCELLED.

   IF YOU ARE AN EMPLOYEE RESIDING IN THE UNITED STATES, THEN YOUR EMPLOYMENT
WITH US IS "AT-WILL" AND MAY BE TERMINATED BY US OR BY YOU AT ANY TIME,
INCLUDING PRIOR TO THE REPLACEMENT OPTION GRANT DATE, FOR ANY REASON, WITH OR
WITHOUT CAUSE.

7. PRICE RANGE OF COMMON STOCK.

   The Eligible Option Grants to be exchanged pursuant to this Offer are not
publicly traded. However, upon exercise of an Eligible Option Grant that we
grant, the option holder will become an owner of our common stock. Our common
stock is quoted on Nasdaq under the symbol "AMCC." The following table shows,
for the periods indicated, the high and low sales prices per share of our
common stock as reported on Nasdaq. All share prices reflect our two-for-one
stock splits effective in September 1999, March 2000 and October 2000.



                 Quarter ended                    High    Low
-----------------------------------------------  ------- ------
                                                   
Fiscal Year 2002
   December 31, 2001 (through October   , 2001). $       $
   September 30, 2001........................... $ 19.69 $ 6.23
   June 30, 2001................................ $ 33.10 $11.25

Fiscal Year 2001
   March 31, 2001............................... $ 88.25 $16.13
   December 31, 2000............................ $109.25 $45.88
   September 30, 2000........................... $109.75 $47.75
   June 30, 2000................................ $ 74.63 $32.75

Fiscal Year 2000
   March 31, 2000............................... $ 79.44 $25.27
   December 31, 1999............................ $ 32.09 $13.59
   September 30, 1999........................... $ 16.75 $ 9.53
   June 30, 1999................................ $ 10.63 $ 5.14

Fiscal Year 1999
   March 31, 1999 (beginning January 4, 1999)... $  5.84 $ 4.12


   As of October   , 2001, the last reported sale price of our common stock, as
reported by Nasdaq, was $   per share.

   We cannot guarantee that the Replacement Options will have a lower exercise
price than the Eligible Option Grants. We recommend that you obtain current
market quotations for our common stock before deciding whether to elect to
exchange your Eligible Option Grants.

8. SOURCE AND AMOUNT OF CONSIDERATION; TERMS OF REPLACEMENT OPTIONS.

   Consideration. The number of shares subject to your Replacement Options will
equal the number of shares subject to each Eligible Option Grant that you
exchange. The number of shares subject to the Replacement

                                      7



                      PRELIMINARY--SUBJECT TO COMPLETION

Options will be adjusted for any stock splits, stock dividends,
recapitalizations or similar transactions that may occur between the Expiration
Date and the Replacement Option Grant Date.

   Each Replacement Option generally will vest at the same rate and over the
same period of time as the cancelled Eligible Option Grant that it replaced.
Each Replacement Option Grant generally will have the same term as, and expire
no later than, the Eligible Option Grant that it replaced. If, however, you are
a Non-exempt Employee, you will not be able to exercise your Replacement
Options for at least six months after the Replacement Option Grant Date. If you
are a Non-exempt Employee and your service terminates (other than by reason of
your death or disability, as defined in the applicable Replacement Grant Plan)
during the six-month period following the Replacement Option Grant Date then
you may exercise your vested Replacement Options at any time during the
thirty-day period beginning on the day that is six months and one day after the
Replacement Option Grant Date.

   If we receive and accept the exchange of all Eligible Option Grants, we will
grant Replacement Options to purchase a total of approximately 39,405,357
shares of our common stock. As of October 4, 2001, there were approximately
shares of our common stock outstanding. The common stock issuable upon exercise
of the Replacement Options would equal approximately    % of the total shares
of our common stock outstanding as of October 4, 2001.

   Merger or Acquisition. If we merge with or are acquired by another entity
between the Expiration Date and the Replacement Option Grant Date, then the
resulting entity will be bound to grant the Replacement Options under the same
terms and subject to the same conditions as described in this Offer; however,
the type of security and the number of shares subject to each Replacement
Option would be determined by the acquisition agreement between us and the
acquiror based on the same principles applied to the handling of the options to
acquire our common stock that are outstanding at the time of the acquisition.
As a result of the ratio in which our common stock may convert into an
acquiror's common stock in an acquisition transaction, you may receive options
for more or fewer shares of the acquiror's stock than the number of shares
subject to the Eligible Option Grants that you exchange.

9. INTERESTS OF DIRECTORS AND OFFICERS; TRANSACTIONS AND ARRANGEMENTS INVOLVING
   THE ELIGIBLE OPTION GRANTS.

   A list of our directors and executive officers is attached to this Offer to
Exchange as Schedule A. As of October 4, 2001, our executive officers and
non-employee directors (17 persons) as a group held options outstanding under
the Company Option Plans to purchase a total of 18,355,732 shares of our common
stock. This covered approximately 30.9% of the shares subject to all options
outstanding under the Company Option Plans. In addition, as of October 4, 2001,
our executive officers and non-employee directors as a group held Eligible
Option Grants to purchase a total of 12,237,376 shares of our common stock.
This covered approximately 31.1% of the shares subject to all Eligible Option
Grants. All of the Eligible Option Grants held by executive officers and
members of our Board of Directors are eligible to be exchanged in this Offer.

   During the past 60 days, we have not issued any Eligible Option Grants and
no Eligible Option Grants have been exercised. Neither we, nor, to the best of
our knowledge, any member of our Board of Directors or any of our executive
officers or those of our subsidiaries, nor any affiliates of ours, engaged in
transactions involving Eligible Option Grants during the past 60 days. In
addition, except as otherwise described above, neither we nor, to our
knowledge, any of our executive officers or members of our Board of Directors
are a party to any agreement, arrangement or understanding with respect to any
of our securities, including but not limited to, any agreement, arrangement or
understanding concerning the transfer or the voting of any of our securities,
joint ventures, loan or option arrangements (other than loan agreements
containing standard default and similar provisions regarding pledged shares of
common stock), puts or calls, guarantees of loans, guarantees against loss or
the giving or withholding of proxies, consents or authorizations.


                                      8



                      PRELIMINARY--SUBJECT TO COMPLETION


10. STATUS OF ELIGIBLE OPTION GRANTS ACQUIRED BY US IN THE OFFER.

   Many of our option holders hold options with exercise prices significantly
higher than the current market price of our common stock. We believe it is in
our best interest to offer these option holders an opportunity to more
effectively participate in the potential growth in our stock price. We could
accomplish this goal by repricing some existing options, which would enable
option holders to immediately receive replacement options with a lower exercise
price. However, the repriced options would be subject to variable accounting,
which could require us to record additional compensation expense each quarter
until the repriced options were exercised, cancelled or expired.

   We believe that we can accomplish our goals of providing option holders with
the benefit of choosing whether they want to receive options that over time may
have greater potential to increase in value than the Eligible Option Grants
held by the option holders, without incurring additional current or future
compensation expense because:

  .  we will not grant any Replacement Options until a day that is at least six
     months and one day after the date that we accept and cancel Eligible
     Option Grants (including option grants issued in the six-month period
     prior to the Commencement Date that will be exchanged because of your
     election to exchange Eligible Option Grants) tendered for exchange;

  .  the exercise price of Replacement Options will be the Fair Market Value of
     our common stock on the Replacement Option Grant Date, which is expected
     to be May  , 2002, or a later date if we extend the Offer. The Fair Market
     Value will be the closing price of our common stock as reported on Nasdaq
     on the Replacement Option Grant Date;

  .  we will require any option holder who tenders any Eligible Option Grants
     in the Offer to tender all options that he or she received during the
     six-month period prior to the Commencement Date which, based on a
     Commencement Date of October  , 2001, includes all options granted on or
     after April  , 2001 (even if the exercise price of such options is less
     than $20.00 per share); and

  .  in order to avoid any potential compensation expense, we will not grant
     any options to an option holder who tendered Eligible Option Grants in the
     Offer until the Replacement Option Grant Date.

   Eligible Option Grants (including option grants issued in the six-month
period prior to the Commencement Date that will be exchanged because of your
election to cancel Eligible Option Grants) that have been granted under the
Company Option Plans and that we acquire in connection with the Offer will be
cancelled and the shares of common stock that may be purchased under those
Eligible Option Grants granted pursuant to our 1992 Stock Option Plan, our 2000
Equity Incentive Plan and our 1997 Directors' Stock Option Plan will be
returned to the pool of shares available for grants of new awards or options
under such plans without further stockholder action, except as required by
applicable law or Nasdaq rules or any other securities quotation system or any
stock exchange on which our common stock is then quoted or listed.

11. LEGAL MATTERS; REGULATORY APPROVALS.

   We are not aware of any license or regulatory permit that appears to be
material to our business that might be adversely affected by the Offer, or of
any approval or other action by any government or regulatory authority or
agency that is required for the acquisition or ownership of the Eligible Option
Grants as described in the Offer. If any other approval or action should be
required, we presently intend to seek such approval or take such action. This
could require us to delay the acceptance of any Eligible Option Grants that you
elect to exchange. We cannot assure you that we would be able to obtain any
required approval or take any other required action. Our failure to obtain any
required approval or take any required action might result in harm to our
business. Our obligation under the Offer to accept exchanged Eligible Option
Grants and to issue Replacement Options is subject to conditions, including the
conditions described in Section 6.

                                      9



                      PRELIMINARY--SUBJECT TO COMPLETION


12. MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES.

   The following is a general summary of the material U.S. federal income tax
consequences of the exchange of Eligible Option Grants under the Offer. This
discussion is based on the Internal Revenue Code, its legislative history,
Treasury Regulations and administrative and judicial interpretations as of the
date of the Offer, all of which may change, possibly on a retroactive basis.
This summary does not discuss all of the tax consequences that may be relevant
to you in light of your particular circumstances, nor is it intended to apply
in all respects to all categories of option holders. In addition, this
discussion does not address any aspect of foreign, state or local income
taxation or any other form of taxation that may be applicable to an option
holder. If you are an employee residing outside the United States, the
discussion in this Section 12 generally will not apply to you. Please see
Schedule B for more details regarding the tax treatment of the exchange in your
country.

   We believe that the exchange will be treated as a non-taxable exchange. If
you exchange outstanding incentive or nonqualified stock options for
Replacement Options, you will not be required to recognize income for U.S.
federal income tax purposes at the time of the exchange.

   At the Replacement Option Grant Date, you will not be required to recognize
additional income for U.S. federal income tax purposes. The grant of
Replacement Options is not recognized as taxable income in the United States.

   U.S.Federal Income Tax Consequences of Incentive Stock Options. You will not
be subject to any current U.S. income tax if you elect to exchange your
incentive stock options in exchange for Replacement Options.

   If you exchange your incentive stock options and we accept your incentive
stock options, any Replacement Options you are granted will not qualify as
incentive stock options. The exchange and cancellation of your incentive stock
options will not give rise to any U.S. tax consequences. However, with respect
to all of your Replacement Options, you will be subject to different tax
treatment than if you held incentive stock options.

   We do not believe that our Offer to you will change any of the terms of your
Eligible Option Grants if you do not accept the Offer. However, if you choose
not to accept this Offer, it is possible that the U.S. Internal Revenue Service
would decide that the right to exchange your incentive stock options under this
Offer is a modification of your incentive stock options. A successful assertion
by the U.S. Internal Revenue Service that your incentive stock options are
modified could extend the holding period of the incentive stock options to
qualify for favorable tax treatment and cause a portion of your incentive stock
options to be treated as nonqualified stock options.

   Under current U.S. law, you should not have realized taxable income when the
incentive stock options were granted to you under the Company Option Plans. In
addition, you generally will not realize taxable income when you exercise an
incentive stock option. However, your alternative minimum taxable income will
be increased by the amount that the aggregate fair market value of the shares
you may purchase under the incentive stock option (which is generally
determined as of the date you exercise the option) exceeds the aggregate
exercise price of the incentive stock option. Except in certain circumstances
that are described in the Company Option Plans and in your option agreement,
such as your death or disability, if an option is exercised more than three
months after your employment is terminated, the option will not be treated as
an incentive stock option and is subject to taxation under the rules applicable
to nonqualified stock options that are discussed below.

   If you sell common stock that you acquired by exercising an incentive stock
option, the tax consequences of the sale depend on whether the disposition is
qualifying or disqualifying. The disposition of the common stock is qualifying
if it is made after the later of: (a) more than two years from the date the
incentive stock option was granted or (b) more than one year after the date the
incentive stock option was exercised.


                                      10



                      PRELIMINARY--SUBJECT TO COMPLETION

   If the disposition of the common stock you received when you exercised
incentive stock options is qualifying, any excess of the sale price over the
exercise price of the option will be treated as long-term capital gain taxable
to you at the time of the sale. If the disposition is not qualifying, which we
refer to as a disqualifying disposition, the excess of the fair market value of
the common stock on the date the option was exercised over the exercise price
will be taxable ordinary income to you at the time of the sale. However, if the
difference between the sale price and the option exercise price is less than
the amount in the preceding sentence, this lesser amount is ordinary income to
you. Any amount in excess of the ordinary income amount will be long term
capital gain or short-term capital gain, depending on whether or not the common
stock was sold more than one year after the option was exercised.

   If you pay the exercise price of an incentive stock option by returning
shares of common stock with a fair market value equal to part or all of the
exercise price, the exchange of shares will be treated as a nontaxable
exchange, unless you acquired the shares being returned when you exercised an
incentive stock option and had not satisfied the special holding period
requirements summarized above. The tax basis of the common stock returned to
pay the exercise price will be treated as having a substituted tax basis for an
equivalent number of shares of common stock received, and the new shares will
be treated as having been held for the same amount of time as you had held the
returned shares. The difference between the aggregate exercise price and the
aggregate fair market value of the common stock you receive when you exercised
the option will be treated for U.S. tax purposes as if you had paid the
exercise price for the incentive stock option in cash. If you exercise your
incentive stock options by surrendering incentive stock option shares for which
the holding periods have not been met, such surrender is taxed as a
disqualifying disposition.

   If you sell common stock you received when you exercised an incentive stock
option in a qualifying disposition, we will not be entitled to a deduction
equal to the gain you realize when you completed that sale. However, if you
sell, in a disqualifying disposition, common stock you received when you
exercised an incentive stock option, we will be entitled to a deduction equal
to the amount of compensation income taxable to you.

   U.S.Federal Income Tax Consequences of Nonqualified Stock Options. Under
current U.S. law, you will not realize taxable income upon the grant of a
nonqualified stock option. However, when you exercise the option, the
difference between the exercise price of the option and the fair market value
of the shares subject to the option on the date of exercise will be treated as
taxable compensation income to you and, if you are an employee, then you will
be subject to withholding of income and U.S. employment taxes at that time. We
will be entitled to a deduction equal to the amount of compensation income
taxable to you if we comply with applicable withholding requirements.

   If you exchange shares in payment of part or all of the exercise price of a
nonqualified stock option, no gain or loss will be recognized with respect to
the shares exchanged, regardless of whether the shares were acquired pursuant
to the exercise of an incentive stock option, and you will be treated as
receiving an equivalent number of shares pursuant to the exercise of the option
in a nontaxable exchange. The tax basis of the shares exchanged will be treated
as the substituted tax basis for an equivalent number of shares received, and
the new shares will be treated as having been held for the same holding period
as the holding period that expired with respect to the transferred shares. The
difference between the aggregate exercise price and the aggregate fair market
value of the shares received pursuant to the exercise of the option will be
taxed as ordinary income, just as if you had paid the exercise price in cash.

   The subsequent sale of the shares acquired pursuant to the exercise of a
nonqualified stock option generally will give rise to capital gain or loss
equal to the difference between the sale price and the sum of the exercise
price paid for the shares plus the ordinary income recognized with respect to
the shares, and these capital gains or losses will be treated as long term
capital gains or losses if you held the shares for more than one year following
exercise of the option.

   We recommend that you consult your own tax advisor with respect to the
federal, state, local and foreign tax consequences of participating in the
Offer.

                                      11



                      PRELIMINARY--SUBJECT TO COMPLETION

13. EXTENSION OF THE OFFER; TERMINATION; AMENDMENT.

   We may at any time, and from time to time, extend the period of time during
which the Offer is open and delay accepting any Eligible Option Grants tendered
for exchange by announcing the extension and/or giving oral or written notice
of the extension to the option holders.

   Prior to the Expiration Date, we may postpone accepting and canceling any
Eligible Option Grants or terminate or amend the Offer if any of the conditions
specified in Section 6 occur. In order to postpone accepting or canceling, we
must announce the postponement and give oral or written notice of the
postponement to the option holders. Our right to delay accepting and canceling
Eligible Option Grants may be limited by Rule 13e-4(f)(5) under the Securities
Exchange Act, which requires that we pay the consideration offered or return
the surrendered options promptly after we terminate or withdraw the Offer.

   As long as we comply with any applicable laws, we may amend the Offer in any
way, including decreasing or increasing the consideration offered in the Offer
to option holders or by decreasing or increasing the number of Eligible Option
Grants to be exchanged or surrendered in the Offer.

   We may amend the Offer at any time by announcing an amendment. If we extend
the length of time during which the Offer is open, notice of the amendment must
be issued no later than 6:00 a.m., U.S. Pacific Standard Time, on the next
business day after the last previously scheduled or announced Expiration Date.
Any announcement relating to the Offer will be sent promptly to option holders
in a manner reasonably designed to inform option holders of the change.

   If we materially change the terms of the Offer or the information about the
Offer, or if we waive a material condition of the Offer, we may extend the
Offer to the extent required by Rules 13e-4(d)(2) and 13e-4(e)(3) under the
Securities Exchange Act. Under these rules, the minimum period an Offer must
remain open following material changes in the terms of the Offer or information
about the Offer, other than a change in price or a change in percentage of
securities sought, will depend on the facts and circumstances. We will publish
a notice if we decide to take any of the following actions:

  .  increase or decrease what we will give you in exchange for your Eligible
     Option Grants; or

  .  increase or decrease the number of Eligible Option Grants to be exchanged
     in the Offer.

   If the Offer is scheduled to expire within ten (10) business days from the
date we notify you of such an increase or decrease, we intend to extend the
Offer for a period of ten business days after the date the notice is published.

14. FEES AND EXPENSES.

   We will not pay any fees or commissions to any broker, dealer or other
person asking holders of Eligible Option Grants to exchange such Eligible
Option Grants pursuant to this Offer.

15. INFORMATION ABOUT US.

   OVERVIEW

   Applied Micro Circuits Corporation (AMCC) was incorporated and commenced
operations in California in 1979. AMCC was reincorporated in Delaware in 1987.
Our principal executive offices are located at 6290 Sequence Drive, San Diego,
California, 92121, and our telephone number is (858) 450-9333. Our web site is
located at www.amcc.com. The information on our web site is not a part of this
Offer.

   We design, develop, manufacture and market high-performance, high-bandwidth
silicon solutions for the world's optical networks. We utilize a combination of
high-frequency analog, mixed-signal and digital design expertise coupled with
system-level knowledge and multiple silicon process technologies to offer
integrated circuit products that enable the transport of voice and data over
fiber optic networks. Our system solution portfolio includes PMD, PHY,
framer/mapper, network processor, traffic management and switch fabric devices
that address the high-performance needs of the evolving intelligent optical
network.

                                      12



                      PRELIMINARY--SUBJECT TO COMPLETION

   SELECTED FINANCIAL DATA

   Set forth below is a selected summary of our financial information. The
financial data as of March 31, 2001 and for the years ended March 31, 2001 and
2000 are derived from our audited consolidated financial statements included in
our Annual Report on Form 10-K for the year ended March 31, 2001. The financial
data as of September 30, 2001 and for the six months ended September 30, 2001
and 2000 are derived from our unaudited consolidated financial statements for
the quarter ended September 30, 2001. This financial data should be read
together with the Management's Discussion and Analysis of Financial Condition
and Results of Operations and our consolidated financial statements and related
notes included in our Annual Report on Form 10-K for the year ended March 31,
2001 and our Quarterly Report on Form 10-Q for the quarter ended September 30,
2001.

                                      13



                      PRELIMINARY--SUBJECT TO COMPLETION




                                                                      Year ended        Six months ended
                                                                       March 31,          September 30,
                                                                  ------------------  --------------------
                                                                                   
                                                                    2000      2001      2000       2001
                                                                  -------- ---------  -------- -----------
Consolidated Statements of Operations Data:                         (in thousands, except per share data)
Net revenues..................................................... $172,352 $ 435,543  $171,195 $    82,508
Cost of revenues(1)..............................................   50,218   163,166    43,846      81,425
                                                                  -------- ---------  -------- -----------
Gross profit.....................................................  122,134   272,377   127,349       1,083
Operating expenses:
   Research and development(1)...................................   32,527   105,225    34,057      78,823
   Selling, general and administrative(1)........................   28,035    69,232    25,233      39,792
   Stock-based compensation(1)...................................      452    79,730       744      73,586
   Amortization of goodwill and purchased intangibles............       --   308,835    10,847     192,887
   Acquired in-process research and development..................       --   202,100    25,400          --
   Goodwill impairment charge....................................       --        --        --   3,101,817
   Restructuring costs...........................................       --        --        --      11,177
                                                                  -------- ---------  -------- -----------
      Total operating expenses...................................   61,014   765,122    96,281   3,498,082
                                                                  -------- ---------  -------- -----------
Operating income (loss)..........................................   61,120  (492,745)   31,068  (3,496,999)
Interest income (expense), net...................................   12,872    55,449    25,742      13,050
                                                                  -------- ---------  -------- -----------
Income (loss) before income taxes................................   73,992  (437,296)   56,810  (3,483,949)
Income tax expense (benefit).....................................   25,367    (1,081)   29,800     (49,826)
                                                                  -------- ---------  -------- -----------
Net income (loss)................................................ $ 48,625 $(436,215) $ 27,010 $(3,434,123)
                                                                  ======== =========  ======== ===========
Basic earnings (loss) per share:
   Earnings (loss) per share..................................... $   0.23 $   (1.63) $   0.11 $    (11.49)
                                                                  ======== =========  ======== ===========
   Shares used in calculating basic earnings (loss) per share....  215,640   267,363   245,375     298,892
                                                                  ======== =========  ======== ===========
Diluted earnings (loss) per share:...............................
   Earnings (loss) per share..................................... $   0.20 $   (1.63) $   0.10 $    (11.49)
                                                                  ======== =========  ======== ===========
   Shares used in calculating diluted earnings (loss) per share..  238,304   267,363   268,480     298,892
                                                                  ======== =========  ======== ===========


                                                       
                                                          As of
                                                  ---------------------
                                                  March 31,  September
                                                     2001     30, 2001
                                                  ---------- ----------
                                                  (in thousands, except
                                                     per share data)
Consolidated Balance Sheet Data:
Cash, cash equivalents and short term investments $1,132,093 $1,117,243
Working capital..................................  1,208,226  1,122,533
Total assets.....................................  5,453,278  2,025,102
Long-term debt and capital leases................      3,530      2,927
Total stockholders' equity.......................  5,238,101  1,868,320
Book value per share(2)..........................                  6.26


--------
(1)For presentation purposes, the functional line items exclude stock-based
   compensation charges related to acquired companies as follows (in
   thousands):


                                     Year ended   Six months ended
                                      March 31,    September 30,
                                    ------------- ----------------
                                              
                                    2000   2001   2000     2001
                                    ----- -------  -----  -------
                                            (in thousands)
Cost of revenues................... $  -- $ 2,820 $  --   $ 2,454
Research and development...........   288  41,303   586    36,735
Selling, general and administrative   164  35,607   158    34,397
                                    ----- -------  -----  -------
                                    $ 452 $79,730 $ 744   $73,586
                                    ===== =======  =====  =======

(2)Book value per share is completed by dividing total stockholders' equity by
   the number of shares of common stock outstanding at September 30, 2001.

                                      14



                      PRELIMINARY--SUBJECT TO COMPLETION


   RATIO OF EARNINGS TO FIXED CHARGES



                                                                           Six months ended
                                                    Year ended March 31,    September 30,
                                                    -------------------  -------------------
                                                                     
                                                      2000       2001     2000       2001
                                                    --------  ---------  ------- -----------
                                                                 (in thousands)

Earnings:
   Earnings (loss) before income taxes............. $ 73,992  $(437,296) $56,810 $(3,483,949)
   Add: Fixed charges, net of capitalized interest.    1.151      2,087      587       1,425
                                                    --------  ---------  ------- -----------
                                                    $122,134  $(435,209) $27,349 $(3,482,524)
Fixed charges:
   Interest expense................................ $    634  $     403  $   348 $        62
   Interest portion of rental expense..............      517      1,684      239       1,363
                                                    --------  ---------  ------- -----------
                                                    $  1,151  $   2,087  $   587 $     1,425
Ratio of earnings to fixed charges.................     65.3         --     97.8          --


   For the purpose of calculating the ratio of earnings to fixed charges,
earnings are defined as consolidated income from continuing operations before
income taxes plus fixed charges. Fixed charges are the sum of interest on all
indebtedness, and estimated interest within rental expense. We have no
amortization of debt issuance costs, minority interests in any of our
subsidiaries, preference securities, equity method investments or capitalized
interest. Earnings were inadequate to cover fixed charges by $3.5 billion and
$435 million for the six months ended September 30, 2001, and for the year
ended March 31, 2001, respectively.

   The financial information included in our Annual Report on Form 10-K for the
fiscal year ended March 31, 2001 and our Quarterly Report on Form 10-Q for the
quarter ended September 30, 2001 is incorporated by reference and may be
inspected at, and copies may be obtained from, the same places and in the same
manner as set forth under Section 16--Additional Information.

16. ADDITIONAL INFORMATION.

   With respect to the Offer, we have filed a Tender Offer Statement on
Schedule T/O with the SEC, of which this Offer to Exchange is a part. This
Offer to Exchange does not contain all of the information contained in the
Schedule T/O and the exhibits to the Schedule T/O. We recommend that you review
the Schedule T/O, including its exhibits, before making a decision on whether
to tender your options.

   We recommend that you review the following materials that we have filed with
the SEC before making a decision on whether to exchange your options:

    (a)our Annual Report on Form 10-K for the fiscal year ended March 31, 2001;

    (b)our Quarterly Report on Form 10-Q for the quarter ended June 30, 2001;

    (c)our Quarterly Report on Form 10-Q for the quarter ended September 30,
       2001;

    (d)our Current Report on Form 8-K filed September 18, 2001; and

    (e)the description of our common stock contained in our Registration
       Statement on Form 8-A filed with the SEC on October 10, 1997, including
       any amendments or reports filed for the purpose of updating such
       description.

                                      15



                      PRELIMINARY--SUBJECT TO COMPLETION


   The SEC file number for these filings is 000-23193. These filings, our other
annual, quarterly and current reports, our proxy statements and our other SEC
filings may be examined, and copies may be obtained, at the following SEC
public reference rooms:

              450 Fifth Street, N.W.    500 West Madison Street
              Room 1024                 Suite 1400
              Washington, D.C. 20549    Chicago, Illinois 60661

   You may obtain information on the operation of the public reference rooms by
calling the SEC at 1-800-SEC-0330.

   Our SEC filings are also available to the public on the SEC's Internet site
at http://www.sec.gov.

   Our common stock is quoted on the Nasdaq National Market under the symbol
"AMCC", and our SEC filings can be read at the following Nasdaq address:

                               Nasdaq Operations
                              1735 K Street, N.W.
                            Washington, D.C. 20006

   We will also provide without charge to each holder of Eligible Option
Grants, upon their written or oral request, a copy of this Offer to Exchange or
any or all of the documents to which we have referred you, other than exhibits
to those documents (unless the exhibits are specifically incorporated by
reference into the documents). Requests should be directed to:

                      Applied Micro Circuits Corporation
                              Investor Relations
                              6290 Sequence Drive
                              San Diego, CA 92121

or by telephoning us at (858) 450-9333 between the hours of 9:00 a.m. and 5:00
p.m., San Diego, California, local time.

   As you read the documents listed in this Section 16, you may find some
inconsistencies in information from one document to another. Should you find
inconsistencies between the documents, or between a document and this Offer,
you should rely on the statements made in the most recent document.

   The information about us contained in this Offer to Exchange should be read
together with the information contained in the documents to which we have
referred you.

17. MISCELLANEOUS.

   This Offer and our SEC reports referred to above include forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. However, the safe harbors
of Section 27A of the Securities Act and 21E of the Securities Exchange Act do
not apply to statements made in connection with this Offer. These
forward-looking statements involve risks and uncertainties, including those
described in our Quarterly Report on Form 10-Q for the quarter ended September
30, 2001. We encourage you to review the risk factors contained in our Annual
Report on Form 10-K for the fiscal year ended March 31, 2001 and our Quarterly
Report on Form 10-Q for the quarter ended September 30, 2001 before you decide
whether to participate in the Offer.

                                      16



                      PRELIMINARY--SUBJECT TO COMPLETION


   If at any time we become aware of any jurisdiction where the making of this
Offer violates the law, we will make a good faith effort to comply with the
law. If we cannot comply with the law, the Offer will not be made to, nor will
exchanges be accepted from or on behalf of, the option holders residing in that
jurisdiction.

   Our Board of Directors recognizes that the decision to accept or reject this
Offer is an individual one that should be based on a variety of factors and you
should consult your personal advisors if you have questions about your
financial or tax situation. The information about this Offer from us is limited
to this document, the attached Summary Term Sheet and Questions and Answers and
the Tender Offer Statement on Schedule T/O.

   WE HAVE NOT AUTHORIZED ANY PERSON TO MAKE ANY RECOMMENDATION ON OUR BEHALF
AS TO WHETHER OR NOT YOU SHOULD TENDER YOUR OPTIONS PURSUANT TO THE OFFER. WE
HAVE NOT AUTHORIZED ANYONE TO GIVE YOU ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THE OFFER OTHER THAN THE INFORMATION AND
REPRESENTATIONS CONTAINED IN THIS DOCUMENT, THE ATTACHED SUMMARY TERM SHEET AND
QUESTIONS AND ANSWERS AND THE TENDER OFFER STATEMENT ON SCHEDULE T/O. IF ANYONE
MAKES ANY RECOMMENDATION OR REPRESENTATION TO YOU OR GIVES YOU ANY INFORMATION,
YOU MUST NOT RELY UPON THAT RECOMMENDATION, REPRESENTATION OR INFORMATION AS
HAVING BEEN AUTHORIZED BY US.

                                      17



                      PRELIMINARY--SUBJECT TO COMPLETION


                                  SCHEDULE A

                      INFORMATION ABOUT OUR DIRECTORS AND
                              EXECUTIVE OFFICERS

   Our directors and executive officers and their positions and offices as of
October  , 2001, are set forth in the following table:



Name                     Age Position and Offices Held
----                     --- -------------------------
                       
William K. Bowes, Jr.... 75  Director
Franklin P. Johnson..... 72  Director
L. Wayne Price.......... 40  Director
S. Atiq Raza............ 51  Director
Arthur B. Stabenow...... 62  Director
Harvey P. White......... 67  Director
David M. Rickey......... 45  Director, Chairman of the Board and Chief Executive
                             Officer
Douglas C. Spreng....... 57  Director, President and Chief Operating Officer
Roger A. Smullen, Sr.... 65  Director, Vice Chairman of the Board
William E. Bendush...... 52  Senior Vice President, Chief Financial Officer,
                             Secretary and Treasurer
Brent E. Little......... 38  Senior Vice President of Marketing
Ramakrishna R. Sudireddy 34  Senior Vice President of Framer Layer Division
Thomas L. Tullie........ 37  Senior Vice President of Sales
Gregory A. Winner....... 45  Senior Vice President of Engineering
Jeffrey J. Cashen....... 40  Vice President of Switching and Network Processing
                             Division
Timothy M. Heenan....... 42  Vice President of Operations
Stephen M. Smith........ 43  Vice President and Controller


   The address of each director and executive officer is: Applied Micro
Circuits Corporation, 6290 Sequence Drive, San Diego, California 92121.

                                      A-1



                      PRELIMINARY--SUBJECT TO COMPLETION


                                  SCHEDULE B

                ADDENDA FOR EMPLOYEES RESIDING OUTSIDE THE U.S.

   We believe that you will not be subject to additional tax solely by virtue
of your participation in the Offer and your tender of Eligible Option Grants
for Replacement Options. However, the tax legislation in most of the countries
outside of the United States does not specifically address the tax consequences
of the tender of Eligible Option Grants for Replacement Options. Consequently,
although it appears that you will not be subject to any additional tax
liability if you participate in the Offer, we cannot be certain of this result.
It is possible that you may be subject to tax on the value of the Replacement
Options upon grant or on some other basis or that you may lose the ability to
claim preferential tax treatment in connection with your Replacement Options.
We therefore strongly recommend that you consult with your tax advisor as to
the tax consequences of participating in the Offer.

   If you are eligible for this Offer because you are an employee of AMCC or
one of our subsidiaries living or working in the United States, Canada, China,
France, Germany, Israel, Japan, or the United Kingdom but are also subject to
the tax laws in another country, you should be aware that there may be other
tax and social insurance consequences which may apply to you. You should be
certain to consult your own tax advisors to discuss these consequences.

                                      B-1



                      PRELIMINARY--SUBJECT TO COMPLETION

                       ADDENDUM FOR EMPLOYEES IN CANADA

Securities Information

   Any Replacement Options which may be granted to you pursuant to the terms of
the Offer may be conditional on obtaining necessary securities regulatory
approvals or exemptions from the applicable securities regulatory authorities.
Although we do not anticipate any difficulty in obtaining necessary approvals
or exemptions, it is possible that such Replacement Options will not be granted
until such approvals or exemptions are obtained and may be subject to certain
conditions imposed by the securities regulatory authorities.

Tax Information

   The following is a general summary of the material tax consequences of the
exchange of your Eligible Option Grants and the grant of Replacement Options
under the Offer for tax residents in Canada. This discussion is based on
Canadian tax law as of the date of the Offer, which is subject to change,
possibly on a retroactive basis. The information may be out of date at the time
you exercise your Replacement Options or sell the shares you acquire upon
exercise. This summary is general in nature and does not discuss all of the tax
consequences that may be relevant to you in light of your particular
circumstances, nor is it intended to be applicable in all respects to all
categories of option holders. We advise all option holders considering
replacing their Eligible Option Grants to meet with their own tax advisors. If
you are a citizen or resident of another country, the information contained in
this summary may not be applicable to you. You are advised to seek appropriate
professional advice as to how the tax or other laws in your country apply to
your specific situation.

Option Replacement

   We do not believe that there will be a tax liability in connection with the
tender of your Eligible Option Grant in exchange for Replacement Options.
However, the manner in which the Canada Customs and Revenue Agency will treat
this transaction is not certain. It is possible that: (i) a tax-neutral
rollover would be available; (ii) the value of the Replacement Options would be
required to be included in your income; or (iii) the Eligible Option Grants
would be considered to be repriced options, resulting in the loss of the
preferential 50% tax deduction and stock option tax deferral treatment
ordinarily available upon the exercise of options.

   For the purposes of this Addendum, it is assumed that the Replacement
Options will meet the conditions to qualify for favorable tax treatment under
Canadian tax law. For this reason, the exercise price of any Replacement
Options granted to you pursuant to this Offer will be the fair market value of
the underlying shares on the Replacement Option Grant Date.

Grant

   Subject to the above, we do not believe that you will be subject to tax when
the Replacement Options are granted to you.

Exercise

   Subject to the deferral provisions discussed below, you will recognize
taxable income upon the exercise of the Replacement Options. The taxable income
is the difference (or "spread") between the fair market value of the shares on
the date of exercise and the exercise price. However, for income tax purposes,
you can deduct one-half of this spread and you will be subject to income tax on
the remaining one-half of the spread at your applicable marginal income tax
rate. You also may be subject to social security taxes on the spread to the
extent your maximum social tax contribution limit has not been reached.

                                      B-2



                      PRELIMINARY--SUBJECT TO COMPLETION


   You may defer the taxation on the spread until the earlier of the time that
you sell the shares purchased on exercise, die or become a non-resident of
Canada. In order to be eligible for this deferral, you must file an election
with your employer by January 15 of the year following the year in which shares
are acquired upon exercise of your Replacement Options.

   You can defer taxation on the spread only up to the first C$100,000
(approximately US$63,820 as of the date of the Offer) worth of options that
vest in any one year. For the purpose of calculating this limit, the value of
an option equals the fair market value of the shares subject to the option at
the time the option was granted.

Sale of Shares

   If you acquire shares upon exercise, you will be subject to tax when you
subsequently sell the shares. The taxable amount will generally be one-half of
the difference between the sale price and the fair market value of the shares
on the date of exercise (less any brokerage fees). Income tax will be assessed
on the taxable income at your marginal income tax rate.

   One-half of any loss arising on the sale of the shares (including any
brokerage fees) may be deducted from any taxable capital gain for the year, the
previous three taxation years, or any subsequent taxation year.

   Any amount on which taxation was deferred at exercise will become taxable at
the time the shares are sold.

Dividends

   If you acquire shares upon exercise, you may be entitled to receive
dividends. You will be subject to income tax at your marginal rate on any
dividends paid on our stock. You will generally be entitled to a foreign tax
credit equal to the amount of the dividend for United States federal tax
withheld at source.

Withholding and Reporting

   A T4 Form will be filed with the Canada Customs and Revenue Agency and a
copy delivered to you prior to the last day of February in the year following
the year in which you exercise your Replacement Options. The T4 Form will
indicate the amount of the benefit and any amount subject to the 50% deduction.
You must report the stock option income, capital gains, dividend receipts, and
any deductions, if applicable, in your annual income tax return. Your employer
will not withhold taxes on these amounts and you are required to pay any
additional amounts owing by you. For every year you have a balance of deferred
stock option benefits outstanding you must file a Form T1212 with the Canada
Customs and Revenue Agency together with your annual tax return.

   Please consult a tax advisor to determine the tax considerations and tax
consequences relevant to your participation in the Offer.

                                      B-3



                      PRELIMINARY--SUBJECT TO COMPLETION


           ADDENDUM FOR EMPLOYEES IN THE PEOPLE'S REPUBLIC OF CHINA

   In order to elect to exchange your Eligible Option Grants, you must print
the election form, sign and fax it to Stock Administration at (001) (858)
535-3502 prior to the November  , 2001, 5:00 p.m. U.S. Pacific Standard Time
deadline for your election to be valid.

Tax Information

   The following is a general summary of the material tax consequences of the
exchange of your Eligible Option Grants and the grant of Replacement Options
under the Offer for tax residents in the People's Republic of China. This
discussion is based on Chinese tax law as of the date of the Offer, which is
subject to change, possibly on a retroactive basis. The information may be out
of date at the time you exercise your Replacement Options or sell the shares
you acquire upon exercise. This summary is general in nature and does not
discuss all of the tax consequences that may be relevant to you in light of
your particular circumstances, nor is it intended to be applicable in all
respects to all categories of option holders. We advise all option holders
considering replacing their Eligible Option Grants to meet with their own tax
advisors. If you are a citizen or resident of another country, the information
contained in this summary may not be applicable to you. You are advised to seek
appropriate professional advice as to how the tax or other laws in your country
apply to your specific situation.

Option Exchange

   We do not believe that there will be a tax liability in connection with the
tender of your Eligible Option Grants in exchange for Replacement Options;
however, this is not completely certain.

Grant

   You will not be subject to tax when the Replacement Options are granted to
you.

Exercise and Sale of Shares

   Due to exchange control and securities law restrictions in China, any
Replacement Options granted to you will be subject to the following terms and
conditions. You will be able to exercise the Replacement Options granted to you
only by using the full cashless exercise method whereby the options are
exercised without remitting any cash. You will not be entitled to receive and
hold shares of our stock when you exercise your Replacement Options. Under the
cashless exercise method of exercise, the broker will immediately sell all of
the shares that you are entitled to purchase. You will receive the cash
proceeds from the sale, minus the exercise price and any taxes, withholding
obligations, commissions and brokers' fees associated with the transaction.

   When you exercise your Replacement Options, you will be subject to income
tax on the difference (or "spread") between the fair market value of the shares
on the date of exercise and the exercise price. The spread will be treated as
additional salary or wages from your employer. Individual income tax is due on
a monthly basis. If you are a Chinese national, you will be entitled to a
standard tax deduction of Renminbi 800 (approximately US$97 as of the date of
the Offer) per month, and if you are an expatriate, you will be entitled to a
standard tax deduction of Renminbi 4,000 (approximately US$484 as of the date
of the Offer) per month.

   You also may be subject to social insurance contributions on the spread. It
is, however, not entirely certain if option benefits are subject to social
insurance contributions. You should check with your employer to see which
position your employer takes.

Withholding and Reporting

   We expect that you will comply fully with your tax and other obligations in
connection with the receipt of your Replacement Options, including paying
individual income tax, social insurance contributions and stamp

                                      B-4



                      PRELIMINARY--SUBJECT TO COMPLETION

duties, if applicable. You also understand that we may be required to make
deductions from the amounts payable to you as a withholding agent under
individual income tax and social insurance legislation.

Exchange Control Restrictions

   Exchange control restrictions may restrict or limit your ability to withdraw
and/or convert funds received upon the exercise of your Replacement Options.
This issue should be examined prior to exercise as you may be able to take
steps to mitigate these restrictions.

   Please consult a tax advisor to determine the tax considerations and tax
consequences relevant to your participation in the Offer.

                                      B-5



                      PRELIMINARY--SUBJECT TO COMPLETION


                       ADDENDUM FOR EMPLOYEES IN FRANCE

Information Regarding Method of Exercise

   In order to elect to exchange your Eligible Option Grants, you must print
the election form, sign and fax it to Stock Administration at (001) (858)
535-3502 prior to the November  , 2001, 5:00 p.m. U.S. Pacific Standard Time
deadline for your election to be valid.

Tax Information

   The following is a general summary of the material tax consequences of the
exchange of your Eligible Option Grants and the grant of Replacement Options
under the Offer for tax residents in France. This discussion is based on French
tax law as of the date of the Offer, which is subject to change, possibly on a
retroactive basis. The information may be out of date at the time you exercise
your Replacement Options or sell the shares you acquire upon exercise. This
summary is general in nature and does not discuss all of the tax consequences
that may be relevant to you in light of your particular circumstances, nor is
it intended to be applicable in all respects to all categories of option
holders. We advise all option holders considering replacing their Eligible
Option Grants to meet with their own tax advisors. If you are a citizen or
resident of another country, the information contained in this summary may not
be applicable to you. You are advised to seek appropriate professional advice
as to how the tax or other laws in your country apply to your specific
situation.

Option Replacement

   We do not believe that there will be a tax liability in connection with the
tender of your Eligible Option Grants in exchange for Replacement Options.

   However, to take advantage of the favorable income tax and social tax
treatment of options that meet the requirements for qualified options under
French tax law, all of the Replacement Options granted to you will be qualified
options granted pursuant to the terms of our Addendum to the 2000 Equity
Incentive Plan (a copy of which will be made available to you upon your
request). The terms that apply to your Replacement Options may be different
than the terms that apply to your Eligible Option Grants, particularly if your
Eligible Option Grants were not qualified options.

   The Replacement Options will be subject to the same vesting schedule and
have the same vesting commencement date as the Eligible Option Grants they
replace. However, in order to comply with the French tax law applicable to
qualified options, your ability to exercise the Replacement Options will be
restricted until the fourth anniversary of the Replacement Option Grant Date.

   We reserve the right to structure the terms of the Replacement Options
differently, but under no circumstances will you be allowed to sell any shares
acquired upon exercise of your Replacement Options before the fourth
anniversary of the Replacement Option Grant Date. In addition, the Replacement
Options may be subject to other terms and conditions necessary to comply with
the French tax law applicable to qualified options.

   Please note that recent amendments to the qualified option requirements
provide that we may not grant qualified options during certain closed periods.
The closed periods are as follows:

  .  Ten quotation days preceding and following the disclosure of our
     consolidated financial statements or annual statements.

  .  From the date that our Board of Directors has received/becomes aware of
     information which could, if it were disclosed to the public, significantly
     impact the quotation of our stock, until ten days after the date such
     information is disclosed to the public. This closed period must be
     evaluated on a case-by-case basis.

   In case the Replacement Option Grant Date falls within such a closed period,
we will have to delay the grant of your Replacement Options until the first day
after the end of the closed period.

                                      B-6



                      PRELIMINARY--SUBJECT TO COMPLETION


   You may wish to take these matters into consideration when deciding whether
to tender Eligible Option Grants.

   The tax information below applies to French-qualified options only. If you
hold non-qualified options, the tax treatment for your options is different.

Grant

   You will not be subject to tax when the Replacement Options are granted to
you.

Exercise

   You will not be subject to tax when you exercise your Replacement Options to
purchase shares.

Sale of Shares

   When you sell the shares acquired upon exercise of your Replacement Options
within two years after the later of (1) the expiration of the four-year holding
period; and (2) the acquisition of shares upon exercise of your Replacement
Options, you will be taxed on the difference between the fair market value of
the underlying shares at exercise and the exercise price (i.e., the spread) at
an overall rate of 40% (i.e., 30% income tax plus 10% social tax), provided the
amount of the spread does not exceed FRF 1 million (approximately US$138,700 as
of the date of the Offer). You may elect to be taxed at your normal progressive
income tax rate if it is lower than 30%. For the amount of the spread exceeding
FRF 1 million (if any), you will be taxed at an overall rate of 50% (i.e., 40%
income tax plus 10% social tax). You may not elect to be taxed at your normal
progressive income tax rate with regard to this amount.

   The difference between the fair market value of the shares at exercise and
the sale price is taxed at a rate of 26%, unless the aggregate amount of
proceeds from the sale of stock is less than a certain amount, set annually
(currently FF50,000 (approximately US$6,935 as of the date of the Offer)) in
which case no additional taxes will be due.

   If you hold the shares for an additional two years after the later of (1)
the expiration of the four-year holding period; and (2) the acquisition of
shares upon exercise of your Replacement Options, you will be taxed on the
spread at a rate of 26%, provided the amount of spread does not exceed FRF 1
million. For the amount of the spread exceeding FRF 1 million (if any), you
will be taxed at an overall rate of 40% (i.e., 30% income tax plus 10% social
tax). You may not elect to be taxed at your normal progressive income tax rate
with regard to this amount.

   The difference between the fair market value of the shares at exercise and
the sale price is also taxed at a rate of 26%, unless the aggregate amount of
proceeds from the sale of stock is less than a certain amount, set annually
(currently FF50,000 (approximately US$6,935 as of the date of the Offer)) in
which case no additional taxes will be due.

Dividends

   If you exercise your Replacement Options to purchase shares, you may be
entitled to receive dividends. Any dividends paid on our stock will be subject
to tax in France and withholding tax in the United States. You may be entitled
to receive a tax credit against the French tax payable equal to the United
States federal tax withheld at source.

                                      B-7



                      PRELIMINARY--SUBJECT TO COMPLETION


Withholding and Reporting

   Your employer must send to you, no later than February 15 of the year
following the year of exercise of the Replacement Option, an individual
statement providing the following information:

  .  its corporate purpose, the place of location of its principal
     establishment and, if different, the place of location of its registered
     office;

  .  the date on which the Replacement Option was granted and the date of
     exercise of the Replacement Option;

  .  the number of shares acquired and the exercise price; and

  .  the excess amount, if any, of the discount at the time of grant based on
     the restriction for French-qualified options (i.e., if the discount
     granted to the grantee exceeds 5% of the average trading price for the 20
     trading days prior to the date of grant).

   At the same time, your employer must also send duplicates of the individual
statements to the tax office (Direction des Services fiscaux) with which it
files its tax return.

   To benefit from the favorable tax regime (i.e., deferral of taxation at
exercise), you must attach the above individual statement delivered by your
employer to your annual French income tax return for the year in which the
Replacement Option was exercised (e.g., for the exercise of the Replacement
Option in 2006, you would have to attach the individual statement to the income
tax return for the income earned in 2006 which you file with the French tax
authorities in 2007).

   Upon the sale of the shares (and provided that the four-year holding period
is met), you will have to report both the spread and the capital gains realized
upon sale on your income tax return for the year in which the underlying shares
were sold.

Exchange Control Information

   You may hold shares purchased upon exercise of your Replacement Options
outside of France provided that you declare all foreign accounts (both those
currently open and those closed during the tax year) on a specific form in your
income tax return. You must also declare to the customs and excise authorities
any cash or securities you import or export without the use of a financial
institution when the value of cash or securities is equal to or exceeds
FF50,000.

   Please consult a tax advisor to determine the tax considerations and tax
consequences relevant to your participation in the Offer.


                                      B-8



                      PRELIMINARY--SUBJECT TO COMPLETION


                       ADDENDUM FOR EMPLOYEES IN GERMANY

Tax Information

   The following is a general summary of the material tax consequences of the
exchange of your Eligible Option Grants and the grant of Replacement Options
under the Offer for tax residents in Germany. This discussion is based on
German tax law as of the date of the Offer, which is subject to change,
possibly on a retroactive basis. The information may be out of date at the time
you exercise your Replacement Options or sell the shares you acquire upon
exercise. This summary is general in nature and does not discuss all of the tax
consequences that may be relevant to you in light of your particular
circumstances, nor is it intended to be applicable in all respects to all
categories of option holders. We advise all option holders considering
replacing their Eligible Option Grants to meet with their own tax advisors. If
you are a citizen or resident of another country, the information contained in
this summary may not be applicable to you. You are advised to seek appropriate
professional advice as to how the tax or other laws in your country apply to
your specific situation.

Option Replacement

   We do not believe that there will be a tax liability in connection with the
tender of your Eligible Option Grants for the Replacement Options.

Grant

   You will not be subject to tax when the Replacement Options are granted to
you.

Exercise

   When you exercise your Replacement Options, you will be subject to ordinary
income tax on the difference (or "spread") between the fair market value of the
shares on the date of exercise and the exercise price. The spread also may be
subject to social insurance contributions if and to the extent your income in
the month during which you exercise your Replacement Options is below the
relevant social security contribution limits.

Sale of Shares

   Any additional gain from the subsequent sale of the shares is not taxable
provided: (1) you have owned the shares for more than twelve months; (2) you
have not, within the last five years, held more than 10% of our stated capital;
and (3) the shares are not held as a business asset. (Effective January 1,
2002, the 10% limit will be lowered to 1% such that in order to satisfy the
foregoing conditions, you cannot have held 1% or more of our stated capital.)
If tax is due, it is payable on the difference between what you receive from
the sale and your adjusted base cost. (Effective January 1, 2002, only 50% of
such gain will be subject to tax.) Your adjusted base cost is based on the
exercise price, plus any tax benefit you were deemed to have earned because of
the exercise and on which you already paid tax at exercise.

Dividends

   If you exercise your Replacement Options and purchase shares, you may be
entitled to receive dividends. Any dividends paid on our stock will be subject
to tax in Germany and withholding tax in the United States. However, only 50%
of the value of the dividend distributed is subject to tax in Germany. You must
report such dividends on your annual tax return. You may deduct 50% of the U.S.
federal withholding tax withheld on your German tax return.

                                      B-9



                      PRELIMINARY--SUBJECT TO COMPLETION


Withholding and Reporting

   Under current laws, withholding and reporting for income tax and social
insurance contributions are required when you exercise your Replacement
Options. Your employer will withhold income tax and social insurance
contributions (if any) from your wages at the time you exercise your
Replacement Options. You will be responsible for paying any difference between
the actual tax liability and the amount withheld.

Exchange Control Information

   You must report cross-border payments in excess of EURO12,500 monthly
(approximately US$11,053 as of the date of the Offer). This reporting is
normally accomplished through the German bank involved in the transaction, but
you are responsible for making sure the report is filed. In addition, you must
report any receivables or payables or debts in foreign currency exceeding an
amount of DM3,000,000 (approximately US$1,915,300 as of the date of the Offer)
on a monthly basis. Finally, you must report on an annual basis your
participation in our stated capital in the unlikely event that it exceeds 10%
of the total of the voting capital.

   Please consult a tax advisor to determine the tax considerations and tax
consequences relevant to your participation in the Offer.

                                     B-10



                      PRELIMINARY--SUBJECT TO COMPLETION


                       ADDENDUM FOR EMPLOYEES IN ISRAEL

Securities Information

   The Replacement Options which will be granted to you pursuant to the terms
of the Offer may be subject to a securities filing with the Israeli Securities
Authority ("ISA"). The grant of the Replacement Options may be made conditional
upon completing any necessary filings with and obtaining the required approvals
by the ISA. Alternatively, the grant of the Replacement Options may be delayed
until such time as the necessary filings have been completed and the required
approvals by the ISA have been obtained. A delay of the grant could affect the
exercise price of the Replacement Options.

Tax Information

   The following is a general summary of the material tax consequences of the
exchange of your Eligible Option Grants and the grant of Replacement Options
under the Offer for tax residents in Israel. This discussion is based on
Israeli tax law as of the date of the Offer, which is subject to change,
possibly on a retroactive basis. The information may be out of date at the time
you exercise your Replacement Options or sell the shares you acquire upon
exercise. This summary is general in nature and does not discuss all of the tax
consequences that may be relevant to you in light of your particular
circumstances, nor is it intended to be applicable in all respects to all
categories of option holders. We advise all option holders considering
replacing their Eligible Option Grants to meet with their own tax advisors. If
you are a citizen or resident of another country, the information contained in
this summary may not be applicable to you. You are advised to seek appropriate
professional advice as to how the tax or other laws in your country apply to
your specific situation.

Option Exchange

   We do not believe that there will be a tax liability in connection with the
tender of your Eligible Option Grants for the Replacement Options.

   However, to take advantage of the tax deferral that is available for options
granted in accordance with the requirements of Section 102 of the Israeli
Income Tax Ordinance, we intend that all of your Replacement Options will be
granted under a Section 102 qualified stock option plan. This means that the
terms of your Replacement Option are different than the Eligible Option Grant
that it replaced. The Replacement Options still will be subject to the same
vesting schedule and have the same vesting commencement date as the Eligible
Option Grants. However, in order to comply with the requirements of Section
102, the Replacement Options (or the shares subject to the Replacement Options)
have to be held by an approved trustee for two years from the Replacement
Option Grant Date. Therefore, you may not sell the shares acquired upon
exercise of the Replacement Options for two years from the Replacement Option
Grant Date.

   You may wish to take these matters into consideration when deciding whether
to tender your Eligible Option Grants.

Grant

   You will not be subject to tax when the Replacement Options are granted to
you.

Exercise

  For Section 102 qualified options

   You will not be subject to tax when you exercise your Replacement Options to
purchase shares. The taxation will be deferred until the earlier of (1) the
date you sell the shares acquired upon exercise of your Replacement Options, or
(2) the date the shares are released by the trustee.

                                     B-11



                      PRELIMINARY--SUBJECT TO COMPLETION


  For non-qualified options

   You will be subject to income tax when you exercise your Replacement Options
on the difference (or "spread") between the fair market value of the shares on
the date of exercise and the exercise price. The spread may also be subject to
national insurance and health insurance contributions if and to the extent your
income in the month during which you exercise your Replacement Options is below
the relevant social insurance contribution limits.

Sale of Shares

  For Section 102 qualified options

   You will be subject to income tax on the difference between the sale price
and the exercise price (with an adjustment of inflation) when you sell the
shares acquired upon exercise of your Replacement Options or when the shares
are released by the trustee. The difference may also be subject to national
insurance and health insurance contributions if and to the extent your income
in the month during which you sell the shares or the shares are released by the
trustee is below the relevant social insurance contribution limits.

  For non-qualified options

   When you sell your shares acquired upon exercise of your Replacement
Options, you will be subject to tax at a flat rate of 35%. You will be taxed on
the gain realized on the sale of the shares, i.e., the difference between the
sale price and the fair market value of the shares on the date of exercise.

Dividends

   If you exercise your Replacement Options and purchase shares, you may be
entitled to receive dividends. Any dividends paid on our stock will be subject
to tax at 35% if the proceeds are received in Israel. You are entitled to
credit U.S. withholding tax paid on the dividend against your Israeli tax
liability under the Israel-U.S. Double Tax Treaty.

Withholding and Reporting

  For Section 102 options

   The trustee will withhold income tax, national insurance and health
insurance contributions due on the gain when you sell the shares or when the
shares are released by the trustee.

  For non-qualified options

   Your employer is required to withhold income tax, national insurance and
health insurance contributions (if any) on the spread when you exercise your
Replacement Options. You will be responsible for paying any difference between
the actual tax liability and the amount withheld.

   Please consult a tax advisor to determine the tax considerations and tax
consequences relevant to your participation in the Offer.

                                     B-12



                      PRELIMINARY--SUBJECT TO COMPLETION


                        ADDENDUM FOR EMPLOYEES IN JAPAN

Securities Information

   The Replacement Options which will be granted to you pursuant to the terms
of the Offer may be subject to a securities filing with the Ministry of Finance
(MoF). The grant of the Replacement Options may be made conditional upon
completing any necessary filings with and obtaining the necessary approvals by
the MoF. Alternatively, the grant of the Replacement Options may be delayed
until such time as the necessary filings have been completed and the required
approvals by the MoF have been obtained. A delay of the grant could affect the
exercise price of the Replacement Options.

Tax Information

   The following is a general summary of the material tax consequences of the
exchange of your Eligible Option Grants and the grant of Replacement Options
under the Offer for tax residents in Japan. This discussion is based on
Japanese tax law as of the date of the Offer, which is subject to change,
possibly on a retroactive basis. The information may be out of date at the time
you exercise your Replacement Options or sell the shares you acquire upon
exercise. This summary is general in nature and does not discuss all of the tax
consequences that may be relevant to you in light of your particular
circumstances, nor is it intended to be applicable in all respects to all
categories of option holders. We advise all option holders considering
replacing their Eligible Option Grants to meet with their own tax advisors. If
you are a citizen or resident of another country, the information contained in
this summary may not be applicable to you. You are advised to seek appropriate
professional advice as to how the tax or other laws in your country apply to
your specific situation.

Option Exchange

   We do not believe that there will be a tax liability in connection with the
tender of your Eligible Option Grants in exchange for Replacement Options;
however, this is not completely certain.

Grant

   You will not be subject to tax when the Replacement Options are granted to
you.

Exercise

   When you exercise your Replacement Options, you will be subject to income
tax on the difference between the fair market value of the shares on the date
of exercise and the exercise price. Your income will likely be treated as
"remuneration income" and will be taxed at your marginal tax rate.

Sale of Shares

   When you sell your shares acquired upon exercise of your Replacement
Options, you will be subject to tax on any additional gain realized at a flat
rate of 26% (i.e., 20% national income tax and a 6% local inhabitants tax).

   If you sell your shares through an authorized stockbroker or bank in Japan
and submit an election return form, you may elect to have the broker withhold
1.05% of the total amount received (not the gain) from selling your shares. If
you make this election, only a deemed gain of 5.25% is subject to the 20%
national income tax; the 6% local inhabitants tax would not apply. Please note
that, although under the 2000 tax legislation this 1.05% taxation method was
scheduled to be abolished as of April 1, 2001, abolishment has been postponed
until March 31, 2003.

                                     B-13



                      PRELIMINARY--SUBJECT TO COMPLETION


Dividends

   If you exercise your Replacement Options to purchase shares, you may be
entitled to receive dividends. If the dividend payments are made through a
Japanese paying agent, Japanese withholding tax will be imposed on the dividend
amount net of the foreign withholding tax which will be payable in the United
States.

   A foreign tax credit and domestic withholding tax credit will be allowed if
you are a Japanese resident taxpayer and if you choose the aggregate taxation
method (Sogo Kazei) on such dividend income.

   If you choose the separate taxation method (Bunri Kazei), no tax credits
will be allowed.

Withholding and Reporting

   Although income from the exercise of stock options is classified as
remuneration income for individual income tax purposes, your employer is not,
as a rule, required to withhold income tax or social security contributions
when you exercise your Replacement Options, as long as the employer is not
directly involved in the operation (i.e., payment of income) or costs of the
stock option plan under which the Replacement Options are granted to you. It is
your responsibility to report and pay any taxes resulting from the grant of
Replacement Options by filing your income tax return (Kakutei Shinkokusho). The
income tax return must be filed and the tax paid between February 16 and March
15 of the year following the year in which the income was earned.

Exchange Control Information

   If you intend to acquire shares whose value exceeds (Yen)100,000,000
(approximately US$825,040 as of the date of the Offer) in a single transaction,
you must file a report with the MoF through the Bank of Japan within 20 days
from the purchase of the shares (provided, however, if you acquire such shares
through a securities company in Japan, such requirement will not be imposed).
Please note that the reporting requirements vary depending on whether or not
the relevant payment is made through a bank in Japan.

   Please consult a tax advisor to determine the tax considerations and tax
consequences relevant to your participation in the Offer.

                                     B-14



                      PRELIMINARY--SUBJECT TO COMPLETION

                 ADDENDUM FOR EMPLOYEES IN THE UNITED KINGDOM

Tax Information

   The following is a general summary of the material tax consequences of the
exchange of your Eligible Option Grants and the grant of Replacement Options
under the Offer for tax residents in the United Kingdom. This discussion is
based on United Kingdom tax law as of the date of the Offer, which is subject
to change, possibly on a retroactive basis. The information may be out of date
at the time you exercise your Replacement Options or sell the shares you
acquire upon exercise. This summary is general in nature and does not discuss
all of the tax consequences that may be relevant to you in light of your
particular circumstances, nor is it intended to be applicable in all respects
to all categories of option holders. We advise all option holders considering
replacing their Eligible Option Grants to meet with their own tax advisors. If
you are a citizen or resident of another country, the information contained in
this summary may not be applicable to you. You are advised to seek appropriate
professional advice as to how the tax or other laws in your country apply to
your specific situation.

Option Replacement

   We do not believe that there will be a tax liability in connection with the
tender of your Eligible Option Grants in exchange for Replacement Options.

Grant

   You will not be subject to tax when the Replacement Options are granted to
you.

Exercise

   Any Replacement Options granted to you will be granted under a non-approved
stock option scheme. Consequently, you will be subject to income tax when you
exercise your Replacement Options on the difference (or "spread") between the
fair market value of the underlying shares on the date of exercise and the
exercise price.

   In accordance with rules promulgated by the U.K. Inland Revenue, employers
and employees are required to pay National Insurance Contributions (NICs) based
on the employees' earnings, including the spread between the fair market value
of the shares on the date of exercise and the exercise price of options granted
after April 5, 1999. New legislation has been enacted which allows an employer
to transfer the employer's NIC liability to employees in connection with the
exercise, assignment, release or cancellation of options by entering into an
agreement with each employee providing that the employee will assume the
employer's NIC liability in such circumstances.

   If you choose to exchange your Eligible Option Grants for Replacement
Options pursuant to the terms of the Offer, the employee's NICs will be payable
on the spread on the date of exercise of your Replacement Options, even if your
Eligible Option Grants had not been subject to NICs (i.e., because they were
made on or before April 5, 1999). You will be subject to the employee's NICs
only if your earnings do not already exceed the maximum limit for NIC purposes.
The maximum limit is (Pounds)29,900 per year for the U.K. tax year April 6,
2001 to April 5, 2002.

   In addition, you will be required to agree to absorb the employer's NIC
liability. The employer's NIC liability currently is equal to 11.9% of the
spread upon the exercise of your Replacement Options. You will be required to
enter into a joint election with your employer to be submitted to the Inland
Revenue which will provide that you will pay any NIC liability arising on the
exercise of the Replacement Options which may be granted to you. You may not be
entitled to retain any Replacement Options that may be granted to you if you do
not enter into the joint election once it is approved by the Inland Revenue.

                                     B-15



                      PRELIMINARY--SUBJECT TO COMPLETION


   You may wish to take this into consideration when deciding whether to tender
your Eligible Option Grants. It is our understanding that you will be entitled
to deduct any NIC payments you make for purposes of calculating the amount of
the spread subject to income tax on the exercise of the Replacement Options.

Sale of Shares

   When you sell your shares acquired upon exercise of the Replacement Options,
you will be subject to capital gains tax. The tax is due on any increase in the
value of the shares between the date on which you exercise your Replacement
Options and the date on which you sell the shares acquired upon exercise of
such options. Any capital gains tax you may owe is subject to an annual
personal exemption (currently (Pounds)7,500 (approximately US$10,890 as of the
date of the Offer) for the U.K. tax year April 6, 2001 to April 5, 2002) and to
tapering relief calculated with reference to the period of time during which
you held the shares following the exercise of your Replacement Options.

Dividends

   If you acquire shares upon exercise, you may be entitled to receive
dividends. Any dividends paid on our stock will be subject to income tax in the
U.K. and withholding tax in the U.S. You may be entitled to a foreign tax
credit for United States federal tax withheld at source. You must report any
dividends you receive on your annual U.K. tax return.

Withholding and Reporting

   Your employer is required to arrange for the payment of income tax and NICs
on the spread at exercise or to withhold funds on account of income tax and
NICs on the spread at exercise from the payroll, the proceeds of exercise and
sale, or otherwise, and to remit such amounts to the U.K. Inland Revenue on
your behalf. Your employer will also report the details of any option grant and
exercise on its annual U.K. Inland Revenue tax return.

   In addition to your employer's reporting obligations, you must report
details of any liabilities arising from the exercise of your Replacement
Options and from the sale or disposal of shares, together with details of
dividend income, to the Inland Revenue on your personal U.K. Inland Revenue tax
return.

   You will be responsible for paying any taxes owed as a result of the sale of
the shares or the receipt of any dividends.

   Please consult a tax advisor to determine the tax considerations and tax
consequences relevant to your participation in the Offer.

                                     B-16



                      PRELIMINARY--SUBJECT TO COMPLETION

WE HAVE NOT COMMENCED THE OFFER TO EXCHANGE THAT IS REFERRED TO IN THIS
COMMUNICATION. UPON THE COMMENCEMENT OF THE OFFER TO EXCHANGE, WE WILL FILE
WITH THE SECURITIES AND EXCHANGE COMMISSION A COMPLETED SCHEDULE T/O AND
RELATED EXHIBITS AND DOCUMENTS, INCLUDING THE OFFER TO EXCHANGE. ALL AMCC
OPTIONHOLDERS ELIGIBLE TO PARTICIPATE IN THE OFFER TO EXCHANGE ARE STRONGLY
ENCOURAGED TO READ THE SCHEDULE T/O AND RELATED EXHIBITS AND DOCUMENTS,
INCLUDING THE OFFER TO EXCHANGE, WHEN THEY BECOME AVAILABLE. THESE DOCUMENTS
WILL CONTAIN IMPORTANT INFORMATION ABOUT THE OFFER TO EXCHANGE. THE SCHEDULE
T/O AND RELATED EXHIBITS AND DOCUMENTS WILL BE AVAILABLE WITHOUT CHARGE AT THE
SECURITIES AND EXCHANGE COMMISSION WEBSITE AT WWW.SEC.GOV AND WILL BE AVAILABLE
WITHOUT CHARGE FROM US TO ALL AMCC OPTIONHOLDERS ELIGIBLE TO PARTICIPATE IN THE
OFFER TO EXCHANGE.

                         STOCK OPTION EXCHANGE PROGRAM

                             QUESTIONS AND ANSWERS

   These Questions and Answers relate to our offer to exchange all outstanding
options to purchase shares of our common stock that have an exercise price that
is equal to or greater than $20.00 per share. They are to be read in
conjunction with the Offer to Exchange of which they are a part.

Q1  What is the Stock Option Exchange Program?

A1  Our Stock Option Exchange Program (also referred to in these materials as
    the Offer) is a voluntary program permitting eligible employees and members
    of our Board of Directors to cancel certain stock options that have an
    exercise price that is equal to or greater than $20.00 per share (Eligible
    Option Grants) and exchange them for replacement options covering the same
    number of shares, subject to adjustment (Replacement Options). The
    Replacement Options will be granted on May  , 2002, or a later date if we
    extend the Expiration Date of the Offer, provided that if there are no
    reported sales of our common stock on such date, then the Replacement
    Option Grant Date will be the next day following such date on which there
    is a reported sale (Replacement Option Grant Date), and will have an
    exercise price equal to the Fair Market Value of our common stock on the
    Replacement Option Grant Date. The Fair Market Value will be the closing
    price of our common stock as reported on Nasdaq on the Replacement Option
    Grant Date.

    Your participation in this Offer is voluntary; you may either keep your
    current Eligible Option Grants at their current exercise price or cancel
    those Eligible Option Grants in exchange for a Replacement Option covering
    the same number of shares as the Eligible Option Grants you exchanged,
    subject to adjustment.

Q2  Why is the Stock Option Exchange Program being offered?

A2  In light of the decline in the price of our common stock, we recognize that
    the exercise prices of the majority of outstanding options to purchase our
    common stock, whether or not they are currently exercisable, are higher
    than the price of our common stock as reported on Nasdaq. We believe these
    options are not attractive as an incentive to retain and motivate
    employees, and are unlikely to be exercised in the foreseeable future. By
    making this Offer we intend to provide our employees with the benefit of
    holding options that over time may have a greater potential to increase in
    value, and thereby create better incentives for our employees to remain
    with us and contribute to the attainment of our business and financial
    objectives and the creation of value for all of our stockholders.

Q3  Why are we offering a Stock Option Exchange Program now instead of six
    months ago?

A3  The equity markets have been extremely volatile in the past year and a half
    and as a result it would be impossible for the Company to attempt to time
    the market to ascertain when and what will be favorable

                                      1



                      PRELIMINARY--SUBJECT TO COMPLETION

    stock option grant prices. However, the Company has been and is regularly
    assessing its equity compensation program. As a result, we feel that now
    more than ever, given our current stock price in relation to the exercise
    prices of the majority of outstanding options to purchase our common stock,
    the opportunity for realizing value is limited with your existing options.

Q4  Is this a repricing?

A4  No. This is not a stock option repricing. Under stock option repricing, an
    employee's current options are immediately repriced.

Q5  Why don't you just reprice my options, as I have seen done at other
    companies?

A5  In 1998, the Financial Accounting Standards Board adopted unfavorable
    accounting treatment for companies that reprice options. If we were to
    simply reprice options, we must take a charge against earnings on future
    appreciation of the repriced options. In addition, our 1992 Stock Option
    Plan does not allow repricing without stockholder approval.

Q6  Why can't I just be granted additional options?

A6  We strive to balance the need for a competitive compensation package for
    our employees with the interests of our stockholders. Because of the large
    number of options that we currently have outstanding, a large grant of new
    options could potentially have a dilutive effect on our earnings per share.

Q7  What options may I exchange as part of this program?

A7  As described more fully below, we are offering to exchange certain stock
    options that are currently outstanding under our 1992 Stock Option Plan,
    our 2000 Equity Incentive Plan, our 1997 Directors' Stock Option Plan, our
    1998 Equity Incentive Plan (fka the Cimaron Communications Corporation 1998
    Stock Incentive Plan), the MMC Networks, Inc. 1997 Stock Plan, the
    YuniNetworks, Inc. 1999 Equity Incentive Plan, and the SiLutia, Inc. 1999
    Stock Option Plan (Company Option Plans).

    Any option with an exercise price equal to or greater than $20.00 per share
    that is outstanding on the Expiration Date of the Offer, which is currently
    expected to be November  , 2001, or a later date if we extend the Offer,
    will be eligible for exchange.

    If you attempt to exchange an option having an exercise price of less than
    $20.00 per share (other than options that you must exchange pursuant to the
    next sentence), that option will not be an Eligible Option Grant and any
    election you may have made to exchange that option will not be accepted by
    us. If you elect to exchange an option with an exercise price equal to or
    greater than $20.00 per share, then you must also exchange all of your
    options that were granted in the six-month period prior to the Commencement
    Date--even if the exercise price of some of those options is less than
    $20.00 per share.

      For example:

      Commencement Date = October  , 2001

      Employee Option History:

      1. Grant received on October 21, 2000 for 3,000 shares at $70.00
      (Optional Cancellation)

      2. Grant received on December 21, 2000 for 2,500 shares at $50.00
      (Optional Cancellation)

      3. Grant received on June 1, 2001 for 1,000 shares at $15.00 (Must be
      Cancelled)

      All options granted on or after April  , 2001--even if the exercise price
      of some of those options is less than $20.00 per share--must be exchanged
      if you wish to participate in the Offer. These options will be replaced
      by the same number of Replacement Options.

                                      2



                      PRELIMINARY--SUBJECT TO COMPLETION


Q8  What options must I exchange as part of this program?

A8  You do not have to exchange any options as part of this program. However,
    if you decide to participate in the Offer and exchange any Eligible Option
    Grants, you must exchange all options granted to you within the six-month
    period preceding the Commencement Date, even if the exercise price of those
    options is less than $20.00. Refer to Q&A 7 above.

Q9  May I tender options that I have already exercised?

A9  The Offer only pertains to options, and does not apply in any way to shares
    purchased, whether upon the exercise of options or otherwise (including
    open market purchases and Employee Stock Purchase Plan purchases of AMCC
    stock), whether or not you have vested in those shares. If you have
    exercised an Eligible Option Grant in its entirety, that option is no
    longer outstanding and is therefore not subject to the Offer. If you have
    exercised an Eligible Option Grant in part, the remaining unexercised
    portion of that option is outstanding and may be tendered for exchange
    pursuant to the Offer. Options for which you have properly submitted an
    exercise notice prior to the date the Offer expires will be considered
    exercised to that extent, whether or not you have received confirmation of
    exercise for the shares purchased.

Q10 Are purchase rights granted under our Employee Stock Purchase Plan eligible
    for exchange under the Stock Option Exchange Program?

A10 No. Neither purchase rights granted under our Employee Stock Purchase Plan
    nor shares of our common stock acquired under our Employee Stock Purchase
    Plan, 401(k) plan or other employee plans are eligible to participate in
    the Offer.

Q11 Are there conditions to the Offer?

A11 Yes. In addition to the condition described in Q&A 8 above, the Offer is
    subject to a number of other conditions, including the conditions described
    in Section 6 of the Offer which you should read carefully. However, the
    Offer is not conditioned on a minimum number of option holders accepting
    the Offer or a minimum number of options being exchanged.

Q12 Are there any eligibility requirements I must satisfy in order to receive
    the Replacement Options?

A12 You must be employed by us or one of our subsidiaries (including interns
    who have previously received Eligible Option Grants) or a member of our
    Board of Directors on the Expiration Date (currently November  , 2001), and
    you must remain continuously employed or be on a leave of absence protected
    by statute through the Replacement Option Grant Date (currently May  ,
    2002). If, on the Replacement Option Grant Date, you are on a leave of
    absence not protected by statute, then the Replacement Options will be
    granted on the date, if any, that you return to regular employment with us
    or one of our subsidiaries. This Offer is not being extended to
    contractors, consultants or temporary service providers.

    If you are not an employee or a member of our Board of Directors on the
    Expiration Date (currently November  , 2001), you will not be eligible to
    exchange any Eligible Option Grants and any election you may have made will
    not be accepted by us. Also, if you do not remain an employee or a member
    of our Board of Directors through the Replacement Option Grant Date
    (currently May  , 2002) and your Eligible Option Grants were cancelled
    under this Offer, you will not be granted Replacement Options and your
    cancelled options will not be reinstated.

    IF YOU ARE AN EMPLOYEE RESIDING IN THE UNITED STATES, THEN YOUR EMPLOYMENT
    WITH US IS "AT-WILL" AND MAY BE TERMINATED BY US OR BY YOU AT ANY TIME,
    INCLUDING PRIOR TO THE REPLACEMENT OPTION GRANT DATE, FOR ANY REASON, WITH
    OR WITHOUT CAUSE.

                                      3



                      PRELIMINARY--SUBJECT TO COMPLETION


Q13 Are all employees and members of our Board of Directors eligible to
    participate in this Offer?

A13 Yes, all of our employees, including our executive officers, members of our
    Board of Directors and the employees of our subsidiaries holding Eligible
    Option Grants are eligible to participate.

Q14 Are employees residing outside the United States eligible to participate?

A14 All current employees, including employees residing outside the United
    States, holding Eligible Option Grants may participate in the Offer.
    Special considerations or conditions may apply to employees residing
    outside the United States. In some countries, the application of local
    rules may have important consequences to those employees. Included in the
    Offer are short summaries of some of the consequences with respect to the
    countries where our non-U.S. employees are residing (see Schedule B to the
    Offer). If you are an employee residing outside the United States, you
    should review these summaries. We also recommend that you consult your
    individual tax, legal and investment advisors.

Q15 Are employees who tender their eligible options and are on a leave of
    absence on the Replacement Option Grant Date eligible to participate?

A15 If you tender your eligible options and they are cancelled in the Offer
    and, on the Replacement Option Grant Date, you are on a leave of absence
    that is protected by statute, then you will be entitled to a Replacement
    Option on the Replacement Option Grant Date (currently May  , 2002). If,
    however, on the Replacement Option Grant Date you are on a leave of absence
    that is not protected by statute, then the Replacement Options will be
    granted on the date, if any, that you return to regular employment with us
    or one of our subsidiaries.

Q16 Are the terms and conditions of the Offer the same for everyone?

A16 No. The terms and conditions are not the same for everyone. Non-exempt
    Employees (i.e., those entitled to receive overtime pay) must wait for six
    months after the Replacement Option Grant Date in order to exercise
    (including exercises made by way of a same-day sale) their Replacement
    Options. If, however, you are a Non-exempt Employee and your service
    terminates (other than by reason of your death or disability as defined in
    the applicable Replacement Grant Plan) during the six-month period
    following the Replacement Option Grant Date, then you may exercise your
    vested Replacement Options at any time during the thirty-day period
    beginning on the day that is six months and one day after the Replacement
    Option Grant Date. In addition, Replacement Options granted to employees of
    our subsidiaries in certain foreign jurisdictions may be subject to
    different terms and conditions than those granted to persons employed in
    the United States. If you are an employee who is employed outside of the
    United States, please see Schedule B to the Offer for more details.

Q17 If I am a Non-exempt Employee, why must I wait at least six months
    following the Replacement Option Grant Date to exercise (including an
    exercise made by way of a same-day sale) my vested Replacement Options?

A17 In order for us to exclude gains from the exercise of stock options from
    your regular rate of pay for purposes of calculating overtime pay, recent
    changes in the law require that new stock option grants, including
    Replacement Option grants, be unexercisable for six months following the
    date of grant.

Q18 How should I decide whether or not to participate?

A18 We understand that this will be a challenging decision for everyone. The
    program does carry considerable risk, and there are no guarantees regarding
    our future stock performance. As a result, the decision to participate must
    be your personal decision, and it will depend largely on your assumptions
    about the future overall economic environment, the performance of the
    Nasdaq, our own stock price, our business and your

                                      4



                      PRELIMINARY--SUBJECT TO COMPLETION

    desire and ability to remain an employee of AMCC until the Replacement
    Option Grant Date (currently May  , 2002). We cannot advise you on the
    decision to participate in the Offer, and we have not authorized anyone to
    make any recommendation on our behalf as to your choices.

Q19 How does the Offer work?

A19 On or before the Expiration Date (currently November  , 2001), you may
    decide to exchange any of your Eligible Option Grants for Replacement
    Options to be granted on the Replacement Option Grant Date. The number of
    shares subject to your Replacement Options will equal the number of shares
    subject to each Eligible Option Grant that you exchanged. The number of
    shares to be granted under your Replacement Options will be adjusted for
    any stock splits, stock dividends, recapitalizations or similar transaction
    that may occur between the Expiration Date and the Replacement Option Grant
    Date.

    If you elect to exchange any of your Eligible Option Grants, you must
    exchange all options granted to you during the six-month period prior to
    the Commencement Date, even if the exercise price of such options is less
    than $20.00 per share. For example, based on a Commencement Date of October
     , 2001, to participate in this Offer, you must exchange all of your
    options that were granted on or after April  , 2001--even if the exercise
    price of some of those options is less than $20.00 per share. The options
    granted in the six-month period prior to the Commencement Date that are
    cancelled due to your participation in the Offer will be replaced by the
    same number of Replacement Options.

Q20 What if my Eligible Option Grants are not currently vested? Can I exchange
    them?

A20 Yes. Your Eligible Option Grants do not need to be vested in order for you
    to participate in the Offer.

Q21 If I elect to exchange my Eligible Option Grants, do I have to exchange all
    of my Eligible Option Grants or can I just exchange some of them?

A21 If you have more than one Eligible Option Grant, then you may exchange any
    or all of them. However, you cannot exchange part of any particular
    Eligible Option Grant and keep the balance; you must exchange all
    unexercised shares that are subject to each particular Eligible Option
    Grant that you tender in this Offer. In all cases, if you exchange any of
    your Eligible Option Grants, you must exchange all options granted to you
    during the six-month period before the Commencement Date, even if the
    exercise price of such options is less than $20.00 per share. Based on a
    Commencement Date of October  , 2001, all options granted to you on or
    after April  , 2001 must be exchanged if you exchange any of your Eligible
    Option Grants. (Refer to Q&A 7 above.)

Q22 Why must I surrender options granted in the last several months (which have
    a fairly low exercise price) if I elect to exchange Eligible Option Grants?

A22 If we allowed you to keep options that were granted within the six-month
    period prior to the Commencement Date, we could be required under
    applicable accounting rules to recognize significant charges in our
    financial statements, which could reduce our reported earnings for each
    fiscal quarter that the recently granted options remained outstanding. This
    could have a negative impact on the performance of our stock price.

Q23 My options are separated between incentive stock options and nonqualified
    stock options because my original grant exceeded the $100,000 limit on
    incentive stock options imposed by U.S. tax laws. Can I cancel one part but
    not the other? (This question is relevant only for employees who are
    residing in the United States.)

A23 No. An option that has been separated into a partial incentive stock option
    and a partial nonqualified stock option is still considered to be a single
    option, and cannot be separated for purposes of this Offer. You should note
    that all Replacement Options will be nonqualified stock options, even if
    issued in exchange for incentive stock options.

                                      5



                      PRELIMINARY--SUBJECT TO COMPLETION


Q24 When will I receive my Replacement Options?

A24 You will be granted your Replacement Options on the Replacement Option
    Grant Date, which is expected to be May  , 2002, or a later date if we
    extend the Offer. We expect to distribute stock option agreements relating
    to the Replacement Options within approximately four to six weeks following
    the Replacement Option Grant Date.

Q25 Why won't I receive my Replacement Options immediately after the Expiration
    Date of the Offer?

A25 In order to avoid adverse accounting consequences that can result from
    stock option exchanges, we cannot grant Replacement Options for at least
    six months and one day after the Expiration Date (currently expected to be
    November  , 2001). Therefore, you will not receive your Replacement Options
    until the Replacement Option Grant Date (again, which is expected to be May
     , 2002, or a later date if we extend the Offer) subject to your employment
    status. Any other options that otherwise would have been granted to you by
    us prior to the Replacement Option Grant Date will also be deferred until
    the Replacement Option Grant Date.

Q26 How will my Replacement Options vest?

A26 Each Replacement Option will be subject to the same vesting schedule and
    have the same vesting commencement date as the Eligible Option Grant it
    replaces.

Q27 Will I be entitled to vesting "credit" during the period beginning on the
    Expiration Date and ending on the Replacement Option Grant Date?

A27 Yes, if you receive a Replacement Option you will receive vesting credit
    under the Replacement Option equal to the vesting under the corresponding
    Eligible Option Grant that is exchanged including during the period
    beginning on the Expiration Date and ending on the Replacement Option Grant
    Date.

Q28 What if I'm to be given an option in connection with a future promotion?

A28 If your promotion occurs prior to the Replacement Option Grant Date and you
    elected to exchange any Eligible Option Grants under this Offer, the
    promotional option will be deferred until the Replacement Option Grant
    Date.

Q29 What if I'm to be given an option in connection with a future patent award?

A29 If your patent award occurs prior to the Replacement Option Grant Date and
    you elected to exchange any Eligible Option Grants under this Offer, the
    patent option will be deferred until the Replacement Option Grant Date.

Q30 What if I'm to be given an option in connection with a future Above and
    Beyond the Call of Duty (ABCD) award?

A30 If your ABCD award occurs prior to the Replacement Option Grant Date and
    you elected to exchange any Eligible Option Grants under this Offer, the
    ABCD option will be deferred until the Replacement Option Grant Date.

Q31 What if my employment is terminated between the Expiration Date and the
    Replacement Option Grant Date?

A31 If you elect to exchange Eligible Option Grants, your election will be
    irrevocable after 5:00 P.M. U.S. Pacific Standard Time on the Expiration
    Date, which is currently expected to be November   , 2001. Therefore, if
    your employment with us or one of our subsidiaries terminates, whether
    voluntarily, involuntarily or for any other reason (including death),
    before your Replacement Options are granted, you

                                      6



                      PRELIMINARY--SUBJECT TO COMPLETION

    will not receive any Replacement Options or have a right to any stock
    options that were previously cancelled. If your employment with us is
    terminated as part of any announced reduction in force, you will fall
    within this category. THEREFORE, IF YOU ARE NOT EMPLOYED BY US OR ONE OF
    OUR SUBSIDIARIES FROM THE EXPIRATION DATE THROUGH THE REPLACEMENT OPTION
    GRANT DATE, YOU WILL NOT RECEIVE ANY REPLACEMENT OPTIONS OR ANY OTHER
    CONSIDERATION IN EXCHANGE FOR YOUR ELIGIBLE OPTION GRANTS THAT HAVE BEEN
    ACCEPTED FOR EXCHANGE AND CANCELLED.

    IF YOU ARE AN EMPLOYEE RESIDING IN THE UNITED STATES, THEN YOUR EMPLOYMENT
    WITH US IS "AT-WILL" AND MAY BE TERMINATED BY US OR BY YOU AT ANY TIME,
    INCLUDING PRIOR TO THE REPLACEMENT OPTION GRANT DATE, FOR ANY REASON, WITH
    OR WITHOUT CAUSE.

Q32 What happens if I tender my eligible options and I am on a leave of absence
    on the Replacement Option Grant Date?

A32 If you tender your eligible options and they are cancelled in the Offer
    and, on the Replacement Option Grant Date, you are on a leave of absence
    that is protected by statute, then you will be entitled to Replacement
    Options on the Replacement Option Grant Date (currently May  , 2002). If,
    however, on the Replacement Option Grant Date you are on a leave of absence
    not protected by statute, then the Replacement Options will be granted on
    the date, if any, that you return to regular employment with us or one of
    our subsidiaries. Stock Administration will mail to each employee on a
    leave of absence as of the Commencement Date a copy of the Offer to
    Exchange, along with an Election Form and Notice of Withdrawal.

Q33 What happens if I tender my Eligible Option Grants and I receive a notice
    of involuntary termination (including, without limitation, redundancy)
    after the Expiration Date of the Offer and prior to the Replacement Option
    Grant Date?

A33 If you tender your Eligible Option Grants and they are cancelled in the
    Offer and, after the Expiration Date of the Offer and prior to the
    Replacement Option Grant Date, you receive a notice of involuntary
    termination (including, without limitation, reduction in force) from AMCC
    or one of its subsidiaries, you are not eligible for Replacement Options
    and your cancelled Eligible Option Grants will not be reinstated.

Q34 Will I have to wait longer to sell common stock under my Replacement
    Options than I would under the Eligible Option Grants that I exchange?

A34 Possibly. If you are a Non-exempt Employee (i.e., you are entitled to
    receive overtime pay), then you may not exercise (including exercises made
    by way of a same-day sale) your Replacement Options for at least six months
    after the Replacement Option Grant Date. Also, if you are a Non-exempt
    Employee and your service terminates (other than by reason of your death or
    disability, as defined in the applicable Replacement Grant Plan) during the
    six-month period following the Replacement Option Grant Date, then you may
    exercise your vested Replacement Options at any time during the thirty-day
    period beginning on the day that is six months and one day after the
    Replacement Option Grant Date. Additionally, employees who are subject to
    our trading window policy may have to wait longer to sell any portion of
    the shares of common stock subject to the Replacement Options. Finally, if
    you are an employee residing outside the United States, you may also have
    to wait longer to exercise your Replacement Options or sell shares of
    common stock subject to the Replacement Options than you would have under
    the Eligible Option Grant. Please see Schedule B for more details. You
    should direct questions about whether you are a Non-exempt Employee to
    Human Resources at (858) 535-6553. If you have questions about our trading
    window policy, you should contact Debra Hart, Investor Relations Manager at
    (858) 535-6566.

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Q35 What is the exercise price for the Replacement Options?

A35 The exercise price of your Replacement Options will be the Fair Market
    Value of our common stock on the Replacement Option Grant Date, which is
    expected to be May   , 2002, or a later date if we extend the Offer. The
    Fair Market Value will be the closing price of our common stock as reported
    on Nasdaq on the Replacement Option Grant Date. We cannot guarantee that
    the Replacement Options will have a lower exercise price than the Eligible
    Option Grants you exchanged, and we make no representations as to our
    future stock price. Therefore, we recommend that you obtain current market
    quotations for our common stock before deciding whether to elect to
    participate in the Offer and exchange your Eligible Option Grants.

Q36 How long is the option term of the Replacement Options?

A36 The Replacement Options granted to you will retain the original option term
    of the eligible option being exchanged. For example, if you elect to cancel
    an Eligible Option Grant which, by its terms, would have expired no later
    than November 10, 2009, then your Replacement Option will expire no later
    than November 10, 2009. The option term concludes on the expiration date of
    the option. Generally, the period of time allotted to our optionees to
    exercise options following the option grant date is ten years if currently
    employed.

Q37 If I exchange my Eligible Option Grants, how many shares will I receive
    under my Replacement Options?

A37 The is a share-for-share Stock Option Exchange Program, so for each share
    subject to the Eligible Option Grants you exchange and for the options
    granted in the six-month period that are exchanged as a result of your
    participation in this Offer, you will receive an option for one share under
    the Replacement Options. However, the number of shares subject to your
    Replacement Options will be adjusted for any stock splits, stock dividends,
    recapitalizations or similar transaction that may occur between the
    Expiration Date and the Replacement Option Grant Date.

Q38 Can I exchange a portion of an unexercised Eligible Option Grant?

A38 No. If you elect to exchange an Eligible Option Grant, you must exchange
    all unexercised options covered by that Eligible Option Grant.

Q39 Can I exchange the remaining portion of an Eligible Option Grant that I
    have partially exercised?

A39 Yes. If you have exercised an Eligible Option Grant in part, the remaining
    unexercised portion of that option is outstanding and may be tendered for
    exchange pursuant to the Offer. Options for which you have properly
    submitted an exercise notice prior to the date the Offer expires will be
    considered exercised to that extent, whether or not you have received
    confirmation of exercise for the shares purchased.

Q40 Am I eligible to receive future grants if I participate in this exchange?

A40 Because of the accounting limitations, if you elect to exchange Eligible
    Option Grants, you are not eligible to receive additional stock option
    grants until after the Replacement Option Grant Date.

Q41 Can you provide me with examples of how an exchange will operate?

A41 Yes. Please note, however, that these examples may not apply if you are an
    employee residing outside the United States.

      Example #1: Assume the following:

        1. Grant received on January 4, 2000 for 1,000 shares at $63.25

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                      PRELIMINARY--SUBJECT TO COMPLETION


        2. Vesting schedule is 1/48 per month--(i.e., 20 shares vest February
           4, 2000, 20 shares vest March 4, 2000, 20 shares vest April 4, 2000
           and 20 shares vest May 4, 2000)

        3. Fair Market Value of our common stock on the Replacement Option
           Grant Date (on or about May   , 2002) will be $20 per share.

        4. No options have been previously exercised.

    Using the assumptions listed above, upon our acceptance of your valid
    election, on November   , 2001, we would cancel your grant dated January 4,
    2000. On the Replacement Option Grant Date, which would be on or after May
     , 2002, we would grant you a new option for 1,000 shares with an exercise
    price of $20 per share, assuming this is the Fair Market Value at the time.
    The vesting schedule for this new option will be the same as for the prior
    option, and therefore you will have cumulatively vested in more than 50%
    (583 shares) of the Replacement Option on May   , 2002.

Q42 How long will this Offer remain open?

A42 Presently, the Offer is scheduled to remain open until 5:00 p.m., U.S.
    Pacific Standard Time, on the Expiration Date, which is currently expected
    to be November   , 2001. We currently have no plans to extend the Offer
    beyond November   , 2001. However, if we do extend the Offer, you will be
    notified of the extension. If we extend the Offer, we will announce the
    extension no later than 6:00 a.m., U.S. Pacific Standard Time, on the next
    business day following the scheduled or announced Expiration Date.

Q43 If the Offer is extended, how does the extension impact the date on which
    my Replacement Options will be granted?

A43 If we extend the Offer, the Replacement Option Grant Date will be extended
    to a day that is at least six months and one day after the extended
    Expiration Date.

   Questions & Answers 44-47 relate only to persons subject to U.S. federal
income taxes and do not cover any state, local or non-U.S. tax consequences. If
you are an employee residing outside the United States, please review the
summaries in Schedule B to the Offer and/or consult your personal tax advisor
to determine the tax and social insurance contributions consequences of this
exchange transaction.

Q44 Will my Replacement Options be incentive stock options or nonqualified
    stock options?

A44 The Replacement Options will be nonqualified stock options only.

Q45 In the U.S., what is the difference in tax treatment between nonqualified
    stock options and incentive stock options?

A45 When you exercise a nonqualified stock option, you will pay U.S. federal,
    state and local income taxes and FICA taxes on the difference between the
    exercise price of the nonqualified stock option and the fair market value
    of the common stock on the day of exercise. For employees, this amount will
    be reported as income on your W-2 for the year in which the exercise
    occurs. Also for employees, withholding amounts must be collected when the
    exercise takes place. When you sell shares that you have acquired by
    exercising a nonqualified stock option, any excess of the sale price over
    the exercise price of the option will be treated as long term capital gain
    or short term capital gain taxable to you at the time of sale, depending on
    whether you held the shares for more than one year.

    You generally will not realize taxable income when you exercise an
    incentive stock option. However, your alternative minimum taxable income
    will be increased by the amount that the aggregate fair market value

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                      PRELIMINARY--SUBJECT TO COMPLETION

    of your shares, which is generally determined as of the date you exercise
    the option, exceeds the aggregate exercise price of the option. When you
    sell your shares that you have acquired by exercising an incentive stock
    option, the tax consequences of the sale depend on whether the disposition
    is "qualifying" or "disqualifying." The disposition of your shares is a
    qualifying disposition if it is made after the later of: (a) more than two
    years from the date the incentive stock option was granted or (b) more than
    one year after the date the incentive stock option was exercised.

    If the disposition of your shares you received when you exercised incentive
    stock options is a qualifying disposition, any excess of the sale price
    over the exercise price of the option will be treated as long term capital
    gain taxable to you at the time of the sale. If the disposition is a
    disqualifying disposition, the excess of the fair market value of your
    shares on the date the option was exercised over the exercise price will be
    taxable ordinary income to you at the time of the sale. However, if the
    difference between the sale price and the option exercise price is less
    than the amount in the preceding sentence, this lesser amount is ordinary
    income to you. Any amount you realize in excess of the ordinary income
    amount will be long-term capital gain or short-term capital gain, depending
    on whether or not you sold your shares more than one year after the option
    was exercised.

Q46 Will I have to pay U.S. taxes if I exchange my Eligible Option Grants in
    the Offer?

A46 We do not believe there are any U.S. tax consequences as a result of your
    participation in the Offer. However, for personalized tax advice you should
    contact your own tax advisor.

Q47 What are the U.S. tax implications for not participating in this Offer?

A47 We do not believe that our Offer to you will change any of the terms of
    your Eligible Option Grants if you do not accept the Offer. However, the
    U.S. Internal Revenue Service may characterize our Offer to you as a
    modification of those Eligible Option Grants that are incentive stock
    options, even if you decline the Offer. A successful assertion by the U.S.
    Internal Revenue Service that your Eligible Option Grants have been
    modified could extend the Eligible Option Grants' holding period to qualify
    for favorable tax treatment and cause a portion of your Eligible Option
    Grants to be treated as nonqualified stock options. If you choose not to
    exchange your Eligible Option Grants and you have been granted incentive
    stock options, we recommend that you consult with your owntax advisor to
    determine the U.S. tax consequences of the exercise of those Eligible
    Option Grants and the sale of the common stock that you will receive upon
    exercise.

Q48 What do I need to do to exchange my Eligible Option Grants?

A48 To exchange your Eligible Option Grants, you must complete and submit the
    Election Form found on our intranet web site located at http://cww/Stock/
    in accordance with its instructions before 5:00 p.m., U.S. Pacific Standard
    Time, on the Expiration Date, which is expected to be November   , 2001.
    Delivery will be deemed made only when actually received by us. No late
    deliveries will be accepted. We may reject any Eligible Option Grant if we
    determine the Election Form is not properly completed or to the extent that
    we determine it would be unlawful to accept the Eligible Option Grants.
    Also, please note that, even if you timely deliver your Election Form, we
    are required by applicable tax laws to retain the right to choose whether
    or not to accept your Eligible Option Grants for exchange. Accordingly,
    your Eligible Option Grants (and the related stock option agreements) will
    be automatically cancelled if, and only if, we accept your Eligible Option
    Grants for exchange.

    THE ELECTION FORM WILL NOT BE MADE AVAILABLE UNTIL WE HAVE COMMENCED THE
    OFFER TO EXCHANGE THAT IS REFERRED TO IN THIS COMMUNICATION.

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                      PRELIMINARY--SUBJECT TO COMPLETION


Q49 What is the deadline to elect to participate in the Offer?

A49 You must deliver your Election Form in accordance with its instructions by
    5:00 p.m., U.S. Pacific Standard Time, on the Expiration Date, which is
    expected to be November   , 2001. Although we do not currently intend to do
    so, we may, in our discretion, extend the Offer at any time. If we extend
    the Offer, we will announce the extension no later than 6:00 a.m., U.S.
    Pacific Standard Time, on the next business day following the scheduled or
    announced Expiration Date.

Q50 Can I change my election? How often?

A50 Yes. You can change your election at any time by either delivering a Notice
    of Withdrawal or revising and re-delivering your Election Form, each in
    accordance with its instructions, prior to the deadline. There is no limit
    to the number of times you can change your election prior to the deadline.
    However, the last Notice of Withdrawal or Election Form you deliver prior
    to the deadline will determine your decision to elect.

Q51 What will happen if I don't turn in my form by the deadline?

A51 If you miss this deadline, you cannot participate in the Offer. Delivery
    will be deemed made only when actually received by us. No late deliveries
    will be accepted.

Q52 Will I receive a confirmation of my election or change of election?

A52 Yes. After you deliver an Election Form, Stock Administration will send you
    an email confirmation indicating we have received your Election Form.
    Similarly, after you deliver a Notice of Withdrawal, Stock Administration
    will send you an email confirmation indicating we have received your Notice
    of Withdrawal. You may print these email confirmations and keep them with
    your records.

Q53 What happens to my Replacement Options if Applied Micro Circuits
    Corporation merges or is acquired prior to the Replacement Option Grant
    Date?

A53 If we merge with or are acquired by another entity between the Expiration
    Date and Replacement Option Grant Date, then the resulting entity will be
    obligated to grant the Replacement Options under the same terms as provided
    in this Offer; however, the type of security and the number of shares
    subject to each Replacement Option would be determined by the acquisition
    agreement between us and the acquiror based on the same principles applied
    to the handling of the options to acquire our common stock that are
    outstanding at the time of the acquisition. As a result of the ratio in
    which our common stock may convert into an acquiror's common stock in an
    acquisition transaction, you may receive options for more or fewer shares
    of the acquiror's common stock than the number of shares subject to the
    Eligible Option Grants that you exchange, if any, if no acquisition had
    occurred.

Q54 If I elect to exchange Eligible Option Grants granted under the 1992 Stock
    Option Plan will my Replacement Options accelerate upon a change in control
    as provided in the 1992 Stock Option Plan?

A54 Yes. If non-executive officer employees exchange any Eligible Option Grants
    under the 1992 Stock Option Plan, then the Replacement Options will be
    granted under the 2000 Equity Incentive Plan. The change in control
    provisions under both the 1992 Stock Option Plan and the 2000 Equity
    Incentive Plan have been amended to provide partial acceleration of vesting
    upon the occurrence of certain corporate transactions. If executive
    officers and members of our Board of Directors exchange any Eligible Option
    Grants under the 1992 Stock Option Plan, then the Replacement Options will
    also be granted under the 1992 Stock Option Plan and will be subject to the
    amended acceleration upon change in control provisions. You may wish to
    review the 1992 Stock Option Plan and the 2000 Equity Incentive Plan for
    further information about these provisions.

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                      PRELIMINARY--SUBJECT TO COMPLETION


Q55 What if I don't accept this Offer?

A55 This Offer is completely voluntary. You do not have to participate, and
    there are no penalties for electing not to participate in this Offer.
    However, if you are an employee residing in the United States, you choose
    not to participate in this Offer and your Eligible Option Grants are
    incentive stock options, the Offer may modify the status of your incentive
    stock options. Please consult with your personal tax advisor.

Q56 I was previously employed by a company that was acquired by Applied Micro
    Circuits Corporations and my options were exchanged for AMCC options at the
    time of the acquisition. If I choose to participate, will my new options be
    made under the original plan with the same terms and conditions?

A56 No. If your option was originally granted under our 1998 Equity Incentive
    Plan (fka the Cimaron Communications Corporation 1998 Stock Incentive
    Plan), the MMC Networks, Inc. 1997 Stock Plan, the YuniNetworks, Inc. 1999
    Equity Incentive Plan, or the SiLutia, Inc. 1999 Stock Option Plan, then
    the Replacement Option will be granted under the 2000 Equity Incentive
    Plan. If you have any questions, please contact Stock Administration at
    (858) 535-3462 or stockadm@amcc.com.

Q57 Where do I go if I have additional questions about this Offer?

A57 Please direct your questions to Stock Administration, (858) 535-3462 or
    stockadm@amcc.com. We will review these questions periodically throughout
    the exchange period and add the appropriate information to the Questions &
    Answers section of the web site established for this Offer, which is
    located at http://cww/Stock/.

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