Exhibit 10.49

EMPLOYMENT TRANSITION AND RETIREMENT AGREEMENT

T HIS E MPLOYMENT T RANSITION AND R ETIREMENT A GREEMENT (“ Agreement ”) is entered into by and between D AVID M. R ICKEY (“ Mr. Rickey ”) and A PPLIED M ICRO C IRCUITS C ORPORATION (“ AMCC ” or the “ Company ”) effective as of the Effective Date specified in Section 4.2 hereof.

R ECITALS

A. AMCC is a Delaware corporation doing business in the State of California, where Mr. Rickey is employed.

B. Mr. Rickey has been continuously employed by AMCC since 1996 and is currently its Chairman of the Board, President and Chief Executive Officer. Mr. Rickey is also a Director of the Company.

C. Mr. Rickey desires to transition his employment by August 25, 2005 and to retire from the Company on that date and the parties desire to set forth the terms for such transition and the terms upon which Mr. Rickey will retire.

A GREEMENT

1. Employment Transition and Retirement.

1.1 Mr. Rickey will be retiring his employment with AMCC on August 25, 2005 (the “Termination Date” ). Effective March 20, 2005, (the “Transition Date” ) Mr. Rickey hereby resigns as Chairman of the Board, President and Chief Executive Officer, and from all other offices in which he serves at the Company or any of its subsidiaries as of the Transition Date. Mr. Rickey hereby resigns as a Director of the Company effective as of the Transition Date.

1.2 Mr. Rickey will continue to perform services for AMCC from the Transition Date through the Termination Date (the “Transition Period” ). During the Transition Period, Mr. Rickey’s primary duties will be to assist AMCC with the transition to a new Chief Executive Officer. During the Transition Period, Mr. Rickey shall report to the Chief Executive Officer and will perform duties reasonably requested by the Chief Executive Officer. AMCC and the Chief Executive Officer shall retain and exercise control over the manner and means by which Mr. Rickey performs his duties. This includes instructions regarding the duties to be performed, when they are to be performed, where they are to be performed and how the work is to be performed. All materials and support staff needed to assist Mr. Rickey in the performance of these duties shall be provided by AMCC at no expense to Mr. Rickey. During the Transition Period, Mr. Rickey will not have an office on Company premises. During the Transition Period, the Company will maintain Mr. Rickey’s email address at the Company and the high-speed interconnections that Mr. Rickey has as of the Transition Date. Reasonably before the end of the

1.

Transition Period, the Company and Mr. Rickey will jointly develop a reasonable transition plan to terminate Mr. Rickey’s Company email address and high-speed interconnections immediately following the Transition Period and to redirect email traffic addressed to Mr. Rickey.

1.3 AMCC will continue to pay Mr. Rickey’s salary at its current level and will provide him with the benefits he is currently receiving, including but not limited to medical and dental benefits, through the Termination Date, at which time AMCC shall have no further obligations to Mr. Rickey except as set forth in this Agreement.

1.4 Mr. Rickey will accept no other employment until the Termination Date. Nothing herein prevents Mr. Rickey from becoming or remaining a director of boards of other companies, consistent with AMCC policy.

1.5 In exchange for the parties’ promises and covenants in this Agreement, the Employment Agreement dated December 10, 2002 between Mr. Rickey and the Company the “Prior Agreement” ) is hereby terminated as of the Effective Date and will be of no further force or effect as of the Effective Date.

2. Benefits.

2.1 During the Transition P