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PMC-Sierra Q207 Conference Call Notes
Here’s a quick snapshot of the PMC-Sierra (PMCS) FQ207 conference call.
- Revenue up slightly based on the strength of storage and FTTH chips
- Headcount down from 1182 to 1057 with a corresponding reduction in opex.
- “Market Conditions Improving”, with Video being cited as the big driver I still would like to see someone somewhere step up to the plate and quantify this effect. Without data this is another “internet traffic doubling every 9 months” type of proclamation
- Expected continued market improvement through the end of the year.
- Lots of storage design wins in SAS (Serial Attached SCSI) though it is still less than 10% of their storage business. Storage featured prominently in the “Design Win Parade” that characterizes investor calls for component companies (They never tell you what they lost).
- China is biggest area of strength, particularly in Metro Optical and Wireless Infrastructure. “Chinese OEMs are driving telecom growth”.
- FTTH revenue up in China and Korea. NTT committed to 3.2M ONU installs in Japan in the year ending March 08.
- More R&D directed at GPON. Bigger focus going forward. They think world will be 60%/40% GEPON/GPON while rest of world thinks 40/60. I agree with PMC.
- Some odd Q&A about Cable companies using PON. This is something I uncovered months back (see “PON Moves Towards the Enterprise“) but it is the first mention I’ve heard in a public forum from a public company. CEO Bailey backtracked a bit but it sounds like the cat is getting out of the bag. I’ve heard all kinds of stories about cable deploying fiber - I think the only conclusion one can reach at this point is they are going to do something beyond coax.
- Outlook is $112-$115M next quarter, up from $108.9 this Q. No mention what the deferred component will be next Q. I am assuming $112-$115 includes deferred revenue, which they don’t report on the formal P&L. This Pro Forma accounting is out of hand and the P&L is tough to digest. The key metric: Net Cash is up about $25M in the last 6 months.
Market liked the call. What did you think?
Author owns no position in PMCS
They seemed to duck questions regarding numbers in Korea. First analyst was asked to re-queue the question, and when another analyst asked, they somewhat unwillingly answered. Previous guiding has been 800.000 lines in Seoul in 2007. He said that every start of a ramp can be a bit “lumpy” and that H1 was doing well and that they were expecting a straight line ramp, but as it turns out it might not happen that way… Does anyone know what might have changed in Korea re. PMC-Sierra and Dasan?
Two things:
1) I’ve heard the same things you have about MSOs looking at PON for business services (particularly from Teknovus). Vik Saxena, CTO at Comcast, expressed an interest in PON for such applications during the OSA/Lightwave Executive Forum at OFC in March. However, I haven’t been able to get him to comment further; the company isn’t ready to discuss future optical strategies, he says. Overall, it looks like MSOs are going toward Carrier Ethernet for optically delivered business services. You can do that via PON, but some MSOs have already deployed gear from companies such as Atrica.
2) I agree with you about GEPON getting the lion’s share of the world PON market. Looking at the overall FTTH market, however, I wouldn’t ignore Active Ethernet architectures such as the ones Cisco and World Wide Packets are pushing. These will be particularly popular in Europe if the EU succeeds in pushing open access down everyone’s throat. Supporting open access via PON is a bear. That’s why many muni networks in Europe (and UTOPIA here in the States) aren’t using PON.