Light Reading
The company took a big dose of pain in 2001, hoping for a profitable 2003. It wasn't enough

More Cuts at PMC-Sierra

Light Reading
News Analysis
Light Reading
1/17/2003
50%
50%

The wheel of layoffs has come full circle, as PMC-Sierra Inc. (Nasdaq: PMCS) -- one of the first semiconductor companies to make major cuts at the start of the downturn -- is having another go.

PMC executives announced yesterday they'll be cutting 16 percent of the company's 1,099 employees, slashing annual expenses by $25 million to $28 million (see PMC-Sierra to Cut Another 16%). Charges related to the restructuring will appear in PMC's earnings statements for the March and June quarters of 2003.

PMC also announced it would write down $20 million to $25 million related to the decreased value of venture investments, inventories, and some fixed assets.

The announcement came late yesterday afternoon, possibly because Wall Street rumors about the restructuring had spread during the day. PMC officials were not immediately available for comment.

Analysts weren't surprised by the layoffs, saying it was apparent that PMC was going to need an extra nudge to become profitable.

"According to published numbers, the company was not going to break even until 2004," says Arnab Chanda, analyst with Lehman Brothers. "This just tells you the business has not improved, and it's going to be tough for a while."

"Bob Bailey [PMC's CEO] has always been forthright about this," says Jeremy Bunting, analyst with Thomas Weisel Partners. "He was saying, 18 months or two years ago, that he'll do anything it takes to make the company profitable."

Analysts give PMC credit for being one of the first companies to react early and swiftly to the downturn, the other being JDS Uniphase Corp. (Nasdaq: JDSU; Toronto: JDU). In 2001, PMC rethought some of its pricey acquisitions of the previous two years, halting future development of the TinyTera switch fabric from Abrizio and scuttling products from Extreme Packet Devices and Malleable Technologies.

The hope had been to reach profitability by the first quarter of 2003, but the market hasn't cooperated. "Early in '02, there was an expectation that some of the metro stuff was going to move, but that hasn't happened," Bunting says. "As we enter into '03, telecom continues to be moribund."

There's an interesting contrast between PMC's approach and that of TranSwitch Corp. (Nasdaq: TXCC), which announced layoffs of 25 percent yesterday (see TranSwitch Q4: Losses, Layoffs). While PMC dropped products, TranSwitch did the opposite, taking on more R&D costs with the acquisitions of Onex and Systems on Silicon Inc. (see TranSwitch Harvests Startup, TranSwitch Buys Systems on Silicon, and Onex Chip Sees Light of Day).

Of course, TranSwitch made cuts too – a total of 133 employees during 2001 and 2002. But the effect on expenses hasn't been the same. Bunting's numbers show that during the downturn, PMC's revenues fell as much as 77 percent from their peak, while TranSwitch's fell 94 percent. But PMC's operating expenses dropped as much as 44 percent from their peak, while TranSwitch's dropped only 12 percent.

"In a sense, TranSwitch moved to preserve technology by putting it on the op-ex [operating expenses] line," Bunting says. "By contrast, PMC is being bolder and more strategic in cutting off technology development that it didn't feel could deliver near-term return on investment."

It's unclear if PMC will cut any major product lines this time around, but CEO Bailey did hint at what's untouchable. His prepared statement yesterday said he wants to "strengthen development efforts in MIPS processors, high-speed mixed signal [i.e. chips mixing digital and analog functions], and sub-90 nanometer design."

Details of PMC's restructuring will be revealed in the company's earnings conference call, scheduled for Jan. 23.

— Craig Matsumoto, Senior Editor, Light Reading

(4)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View
aardvark
50%
50%
aardvark,
User Rank: Light Beer
12/5/2012 | 12:51:07 AM
re: More Cuts at PMC-Sierra
If there's one thing these guy's know how to do (apart from damm good silicon) it's metormorphise.

And it will be faster than we think.

Watch out for HQ going south of the 49th.

Sierra = Modems = early 90's
PMC = WAN (ATM/SONET..) = late 90's
QED = MIPS = 2000 and on
jackall
50%
50%
jackall,
User Rank: Light Beer
12/5/2012 | 12:51:03 AM
re: More Cuts at PMC-Sierra

I guess this puts Kevin's Ford Taurus back down
to a sensible price range, eh ?

heh heh heh.

Couldn't have happened to a nicer guy.
stinglikeabee
50%
50%
stinglikeabee,
User Rank: Light Beer
12/5/2012 | 12:51:01 AM
re: More Cuts at PMC-Sierra
Anyone have details on projects or sites that were closed up? Any directors or execs let go?

TIA, SLAB
aardvark
50%
50%
aardvark,
User Rank: Light Beer
12/5/2012 | 12:50:44 AM
re: More Cuts at PMC-Sierra
I heard a rumour the Maryland RND office was closed. Also a sales office in Europe.

Any other feedback
Flash Poll
From The Founder
It's clear to me that the communications industry is divided into two types of people, and only one is living in the real world.
LRTV Interviews
The New Wave of IP + Optical Integration

11|21|14   |   04:29   |   (7) comments


At the Alcatel-Lucent Technology Symposium, Heavy Reading senior analyst Sterling Perrin talks about how SDN has reshaped the discussion around packet and optical integration.
LRTV Huawei Video Resource Center
Huawei Highlights at BBWF 2014

11|20|14   |   3:40   |   (1) comment


Broadband World Forum is one of the world's largest telecoms, media and technology events with over 7,800 senior executives from across the globe converging on Amsterdam every year to identify the Next Big Thing. BBWF is an exciting place to meet the entire industry under one roof and identify the latest in network innovation, service optimization and customer ...
LRTV Huawei Video Resource Center
How Will BCMS Stimulate Margin for Broadband Operators?

11|19|14   |   6:52   |   (0) comments


In BBWF 2014, Liu Shuqing emphasizes the value of FMC 2.0 based full service experience by throwing light on the BCMS solution. The underlying principle of this innovative technique is to create network robustness and driving network from connection oriented to ACE – BAND oriented infrastructure, in which applications, cloud, and user experiences will be an asset ...
LRTV Huawei Video Resource Center
SingleFAN3.0: Better Connected Experience

11|19|14   |   3:06   |   (1) comment


At the BBWF 2014, David Hu, the VP of Huawei Access Network Product Line, talked about the future of access networks – SingleFAN3.0: faster broadband, wider coverage, and smarter connection.
LRTV Interviews
Basil Alwan Interview: The Road to Cloud

11|19|14   |   09:09   |   (0) comments


Alcatel-Lucent's head of IP and Transport talks about the migration towards a web-like networking environment, the impact of the cloud, SDN and NFV, and the yet-to-be-announced FP4 chip.
LRTV Documentaries
FairPoint Makes a Fair Point About Analytics

11|19|14   |   1:56   |   (1) comment


The US-based communication service provider gets to grips with advanced analytics, tackling data and breaking down the silos within its own business.
LRTV Documentaries
Analytics Lets C Spire Get to Know Subs

11|19|14   |   3:01   |   (2) comments


It's all about the data for US operator C Spire as it uses analytics to personalize its customer service down to individual subscribers.
LRTV Interviews
Nuage Branches Out With SDN: CEO Interview

11|17|14   |   9:32   |   (0) comments


Sunil Khandekar, CEO of Alcatel-Lucent's SDN-focused unit Nuage Networks, talks about the opportunities and challenges of breaking out of the data center into wide-area networks.
Light Reedy
Telecom Analytics Grows Up

11|14|14   |   1:15   |   (4) comments


The big data analytics debate has moved on from a year ago, with some experts suggesting it's no longer a technology challenge.
LRTV Huawei Video Resource Center
Huawei Compass

11|14|14   |   3:17   |   (1) comment


At OpenStack Summit 2014, Shuo Yang, Huawei Principal Cloud Infrastructure Architect introduced Huawei Compass, the software tool for solving customers' problems on the journey of OpenStack Cloud.
LRTV Huawei Video Resource Center
Huawei's Cloud Strategy in European Region

11|14|14   |   2:56   |   (1) comment


At OpenStack Summit 2014, Dr. Gotz, CTO of Huawei IT in European Region introduced Huawei's cloud strategy in European region.
LRTV Huawei Video Resource Center
Huawei's Contribution on OpenStack

11|14|14   |   5:58   |   (0) comments


At OpenStack Summit 2014, Dennis Gu, Huawei Chief Architect of Cloud Computing introduced the relationship between OpenStack and cloud computing, and Huawei's contribution on OpenStack.
Upcoming Live Events
December 2, 2014, New York City
December 3, 2014, New York City
December 8-10, 2014, Reykjavik, Iceland
February 12, 2015, Atlanta, GA
April 14, 2015, New York City, NY
May 6, 2015, McCormick Convention Center, Chicago, IL
May 13-14, 2015, The Westin Peachtree, Atlanta, GA
June 9-10, 2015, Chicago, IL
Infographics
Irish Telecom outlines the rise of VoIP technology, including its adoption within businesses and their perception of its quality.
Hot Topics
Bell Labs Chief Slams 'Toy' Networks
Robert Clark, 11/19/2014
$38.3M: Ain't That a Kik in the SMS
Sarah Reedy, Senior Editor, 11/20/2014
Do You Have a 2020 Vision?
Dennis Mendyk, Vice President of Research, Heavy Reading, 11/21/2014
Google, AT&T, BT Unite on Network Data Models
Carol Wilson, Editor-at-large, 11/20/2014
The New Wave of IP + Optical Integration
Ray Le Maistre, Editor-in-chief, 11/21/2014
Like Us on Facebook
Twitter Feed