) reported adjusted fourth quarter 2012 earnings of 10 cents per
share, beating the Zacks Consensus Estimate of 8 cents on higher
gross margins and lower-than-expected operating expenses. The
adjusted earnings per share exclude one-time items, but include
stock-based compensation expense.
PMC-Sierra reported revenues of $129.4 million in the fourth
quarter, down 1.7% sequentially and 15.2% from the year-ago
period. Reported revenues were toward the higher end of
management's expected range of $121 million to $131.0 million due
to strength in the Storage and Mobile market segments.
Revenues by Market Segment
Since the second quarter of 2011, PMC-Sierra has been
reporting its revenue in three market segments - Storage, Optical
and Mobile Networks.
generated 70% of fourth quarter revenue, up from 68% in the third
quarter. Its products include controllers based on Fiber Channel,
Serial Attached SCSI, and Serial ATA that enable the development
of external and server-attached storage systems.
The segment increased over 1% sequentially owing to
improvement in 6-Gb SAS business and resumption of growth in the
channel business. During the quarter, the company introduced
various new products, including the next generation of Adaptec
RAID adapters or Series 7 product line. Management stated that
design wins and various new products released in the quarter
should help the company to continue its market share
Optical market segment
generated 14% of sales, down from 20% in the prior quarter.
Segment revenue was down 28% sequentially. This decline was due
to weak spending environment and the declining legacy business.
Inventory levels also remained low in this segment. However,
management believes that the new products will help catalyze the
Optical Transport Network (OTN) switching in metro networks.
accounted for 16% of sales, up from 12% in the prior quarter.
Segment revenue was up 24% sequentially driven by an inventory
correction and increased carrier spending by two of its largest
Reported gross margin for the quarter was 71.7%, up 260 basis
points (bps) from 69.1% in the comparable year-ago quarter driven
by a favorable product mix.
PMC-Sierra reported operating expenses of $76.0 million, down
were 9.0% from $83.5 million incurred in the year-ago quarter.
Research and development and selling, general and administrative
costs, were both up as a percentage of sales from the year-ago
quarters. The net result was a GAAP operating margin of 4.6%
compared with 7.0% in the year-ago quarter.
On a fully diluted GAAP basis, PMC-Sierra recorded a net
profit of $11.1 million or 5 cents per share compared with $28.4
million or 12 cents per share in the year-ago quarter.
PMC-Sierra generated adjusted net profit of $20.2 million
compared with $28.86 million in the year-ago quarter. Pro forma
earnings per share came in at 10 cents, compared with 12 cents in
the last quarter.
Balance Sheet & Cash Flow
PMC-Sierra exited the fourth quarter with cash, cash
equivalents and short-term investments of approximately $181.4
million versus $215.6 million in the prior quarter. Trade
receivables were $62.1 million, down from $62.6 million in the
For the first quarter of 2013, PMC-Sierra expects total
revenue in the range of $123-$132 million, up 1.2%
PMC-Sierra, Inc. engages in design, development, marketing,
and support of semiconductor solutions by integrating
mixed-signal, software and systems expertise through its network
in North America, Europe and Asia. The company delivered a decent
fourth quarter, with earnings beating the Zacks Consensus
We are encouraged by the improvement in the Storage and Mobile
segments, introduction of several major products, and new design
wins during the quarter and hence expects fast recovery in the
coming quarters. The company also provided modest first quarter
guidance, indicating some signs of stabilization.
However, lack of visibility and macro uncertainty may keep the
share price range bound in the near term.
Over the long term, PMC-Sierra is well positioned for growth
and is gaining share in its key served markets namely
server/storage, wireless infrastructure and optical
communications. We expect LTE build out in China, cloud and data
center build outs, and storage demand to increase substantially,
each of which will act as a solid catalyst for the company
Currently, PMC-Sierra has a Zacks Rank #3 (Hold). Investors
should look out for some other stocks with positive Zacks Rankand
Expected Surprise Prediction or ESP (Read:
Zacks Earnings ESP: A Better Method
) has a Zacks Rank #2 (Buy) with an ESP of +10.26%.
) has a Zacks Rank #2 (Buy) with an ESP of +350.0%.
) has a Zacks Rank #2 (Buy) with an ESP of +1.61%.
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