Thoughts on PMC-Sierra

Investors Business Daily (IBD) interviewed PMC Sierra (PMCS) CEO Bob Bailey. The article starts out with the standard ‘pumper’ language, talking about analyst upgrades and how comm-semi is climbing out of the doldrums, lead by access and VoIP. Not a huge amount of enlightening info for those familiar with the business, but great fodder for the ADHD investors who want action. I attended a PMC-Sierra investor conference last summer - there were maybe 6 analysts who bothered to show up and listen. My guess is that today, the same conference would draw 15.

I admired PMC-Sierra while working at Vitesse Semiconductor (VTSS). PMC has an excellent system/architecture based approach to design which sometimes worked in Telecom but is ideally suited to more commodity and standardized markets like storage. The first post I wrote for this blog was on PMC’s acquisition of Avago’s (Agilent component spinoff) storage semiconductor business. While the acquisition looked cheap from a financial perspective, I predicted it would create strategic and pricing challenges going forward.

In telecom, Lucent’s system architecture would be slightly different than Nortel’s box which would be slightly different than Huawei’s box. PMC’s approach required customers to adopt their architecture - if it didn’t match the customer’s legacy architectural approach they couldn’t win the business. Some customers were wary to design in PMC because it locked them into PMC-Sierra as a vendor. The upside with the PMC approach was all of the components fit together nicely and worked. Here’s something I wrote fo