Q2 2011 Earnings Call
July 21, 2011 4:30 pm ET
Michael Zellner - Chief Financial Officer, Principal Accounting Officer and Vice President of Finance
Suzanne Craig - The Blueshirt Group
Gregory Lang - Chief Executive Officer, President and Director
Sandeep Shyamsukha - Auriga USA LLC
James Schneider - Goldman Sachs Group Inc.
Ruben Roy - Mizuho Securities USA Inc.
Sundeep Bajikar - Jefferies & Company, Inc.
Harlan Sur - JP Morgan Chase & Co
Kevin Cassidy - Stifel, Nicolaus & Co., Inc.
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Thank you, operator. Good afternoon, everyone, and thank you for joining the call. With me today are Greg Lang, President and CEO; and Mike Zellner, Vice President and CFO. Greg will begin the call with the discussion of the business and key highlights from the quarter, and then Mike will discuss the financial results and the business outlook for the third quarter of 2011. Please note that our second quarter 2011 earnings press release was disseminated today via BusinessWire after market close, and a copy of the release can be downloaded from our website.
Before we begin, I would like to point out that during the course of this conference call, we'll be making forward-looking statements that involve a number of risks and uncertainties. These risks and uncertainties include, but are not limited to product demand, inventory levels, pricing, exchange rates, taxation rates and other factors that are detailed in the company's Securities and Exchange Commission filings. Actual results may differ materially from the company's projections. For further information about these risks and uncertainties, please read the company's SEC filings, including our Forms 10-K and 10-Q.
Note that PMC undertakes no obligation to update any forward-looking statements. Please note that for each of the historical non-GAAP financial measures mentioned on this call, a full reconciliation to the most comparable GAAP financial measure is included in our press release issued today. In addition, a GAAP to non-GAAP reconciliation of financial measures that we will provide in our outlook will be posted on our website under the Financial Reports section of the Investor Relations tab. [Operator Instructions]
Thank you, and I will now turn the call over to Greg Lang.
Overall, we had an excellent quarter. Our Q2 revenues came in at the high end of the guidance range that we provided last quarter at $171 million or approximately 9% sequential growth. Storage and optical market segments led the growth with a double-digit increase from storage and a high single-digit increase in our Metro and Fiber To The Home optical market segments. In fact, it was a record quarter for us in storage as our SAS-2 leadership position strengthens.
In the optical market segments, we're recovering from back -- recovering back to end market levels and are seeing the continuation of the ramp of our OTN products. From an earnings perspective, we achieved $40 million in non-GAAP operating income or 24% of revenue, which is approximately 29% growth from Q1.
Now I'd like to provide an update about our market segmentation. Traditionally, we've talked about revenue splits between our enterprise and WAN Infrastructure market segments. Given our growing emphasis i1n mobile infrastructure, we'll add a third segment starting now. Our new market segments are storage, optical and mobile networks.
Storage is primarily our OEM and channel storage products, as well as the printer ASICs, as they are most aligned with our enterprise storage customer buying patterns. Our optical network segment includes our WAN communication products focused on metro and access networks, including SONET, ATM and Fiber To The Home. And lastly, our mobile segment will include mobile backhaul, T1/E1, SERDES devices, as well as a few other small volume devices sold into the wireless infrastructure market.
To give you some historical perspective, the full year 2010 revenue breakout by market segment is 53% for the storage network segment, 35% for the optical network segment and 12% for the mobile network segment. In Q1 2001 (sic) , the market segment's breakdown would be 55% for storage, 27% for optical and 18% for mobile.
And in the quarter we just finished, our storage network segment was 57% of revenue, the optical Network segment was 27% of revenue and the mobile network segment was 16% of revenue.
Now I'll give you a little bit more color on the results by each segment. As I mentioned earlier, we had another record quarter in our storage market segment, as our leading SAS-2 design win position continues their production ramp. We experienced growth in Fibre Channel, 6-gig SAS and channel products and currently anticipate continued growth as the end market remains robust and as customers migrate to their 6-gig platforms. Printer processors were also up after working down inventory last quarter.
We made a few major announcements this quarter as well. We announced our latest Tachyon SPCv protocol controller for storage systems. This device sets the new high bar for performance in SAS controllers in the industry with up to 750,000 IOPS performance, which is double the prior generation.
We're also pleased to have our 6-gig SAS controllers with the next-generation high-speed PCI express bus, or PCIe Gen 3, working very well in our ecosystem testing. I'm quite placed with the progress we're making, building on our heritage as a leading provider of high-quality, leading-edge, high-speed interface designs.