) reported adjusted second quarter 2013 earnings of 5 cents per
share, in line with the Zacks Consensus Estimate. The adjusted
earnings per share exclude one-time items but include stock-based
PMC-Sierra reported revenues of $127.9 million in the second
quarter, up 2.2% sequentially but down 7.2% from the year-ago
period. The sequential increase was due to strength in the
Optical and Mobile market segments, partially offset by economic
softness and weakness in the Storage segment.
Reported revenues were toward the lower end of management's
expected range of $126.5 to $134.0 million.
Revenues by Market Segment
generated 65% of second quarter revenues, down from 68% in the
first 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 decreased 2% sequentially due to continued
sluggish enterprise spending. The company expects the Adaptec
RAID adapters or Series 7 product line expanded in the last
quarter to see strong interest from large data center customers.
Management stated that design wins and these new products should
help the company to continue its market share dominance and
offset most of the enterprise weakness.
generated 21% of sales, up from 20% in the prior quarter. Segment
revenues were up 7% sequentially, driven by strong growth in
Optical Transport Network (OTN) revenues as well as strength in
Passive Optical Network (PON) revenues. PON is used by carriers
worldwide to facilitate higher speed service to residences and
enterprises. The OTN strength primarily came from China as it
leads the world in OTN deployments.
accounted for 14% of sales, up from 13% in the prior-year
quarter. Segment revenues were up 16% sequentially due to
increased carrier spending by two of its largest carriers in
North America and strength in the WinPath family of
Reported gross margin for the quarter was 70.4%, up 20 basis
points (bps) sequentially and 40 bps from the comparable year-ago
quarter, driven by higher revenues and a favorable product
PMC-Sierra reported operating expenses of $84.9 million, down
1.3% from $86.0 million incurred in the year-ago quarter. As a
percentage of sales, both research & development expenses and
selling, general & administrative costs increased from the
year-ago quarter. The net result was a GAAP operating margin of
(4.3%) compared with (0.8%) in the year-ago quarter.
On a GAAP basis, PMC-Sierra recorded a net loss of $4.2
million or a loss of 2 cents per share compared with a loss of
$0.1 million or breakeven results in the year-ago quarter.
On a non-GAAP basis, PMC-Sierra generated adjusted net profit
of $9.5 million compared with $13.7 million in the year-ago
quarter. Pro forma earnings per share came in at 5 cents compared
with 6 cents in the last quarter.
Balance Sheet & Cash Flow
PMC-Sierra exited the second quarter with cash, cash
equivalents and short-term investments of approximately $136.3
million versus $106.9 million in the prior quarter. Trade
receivables were $57.5 million, up from $57.3 million in the
Cash flow from operations was $23.0 million versus $14.4
million in the prior quarter. Capex was $2.9 million versus $4.6
million in the prior quarter. In the quarter, the company spent
approximately $6 million for stock repurchases.
For the third quarter of 2013, PMC-Sierra expects total
revenue in the range of $126-$134 million, up about 2%
sequentially at the midpoint. Management expects the storage
segment to be up sequentially, driven by improved enterprise OEM
customer demand. Additionally, the carrier business is expected
to be flat to up slightly, depending on the carrier spending in
the second half of the year.
PMC-Sierra, Inc. engages in design, development, marketing and
support of semiconductor solutions by integrating mixed-signal,
software and systems expertise in North America, Europe and Asia.
The company's second quarter earnings were in line with the Zacks
Consensus Estimate driven by higher revenues, offset by economic
softness, cautious enterprise and carrier spending.
The storage segment performed poorly in the quarter but we are
encouraged by the improvement in the optical and mobile segments,
introduction of several major products, and new design wins.
Hence, we expect fast recovery in the coming quarters. The
company also provided modest third quarter guidance, indicating
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 market share gains in 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 through 2013.
Currently, PMC-Sierra has a Zacks Rank #2 (Buy). Investors can
also consider some other stocks with a positive Zacks Rank and an
expected surprise prediction or ESP Read:
Zacks Earnings ESP: A Better Method
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