& cplSiteName &

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        ADD A COMMENT
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
Light Reading’s Upskill U is a FREE, interactive, online educational resource that delivers must-have education on themes that relate to the overall business transformation taking place in the communications industry.
NEXT COURSE
Wednesday, September 28, 1:00PM EDT
Gigabit 101
Will Barkis, Senior Technology Analyst, Orange
UPCOMING COURSE SCHEDULE
Friday, September 30, 1:00PM EDT
Gigabit & the Great Migration
Robert Howald, Vice President, Network Architecture, Comcast
Wednesday, October 5, 1:00PM EDT
Gigabit & Smart Cities
Joe Kochan, COO & Co-Founder, US Ignite
Friday, October 7, 1:00PM EDT
Gigabit & DOCSIS 3.1
Ty Pearman, Director, Access Architecture, Comcast
in association with:
From The Founder
Light Reading today starts a new voyage as part of a larger Enterprise.
Flash Poll
Live Streaming Video
Charting the CSP's Future
Six different communications service providers join to debate their visions of the future CSP, following a landmark presentation from AT&T on its massive virtualization efforts and a look back on where the telecom industry has been and where it's going from two industry veterans.
LRTV Documentaries
MEC Congress: The Key Takeaways

9|22|16   |   03:25   |   (3) comments


Three key takeaways from the Mobile Edge Computing (MEC) Congress in Munich, Germany.
Wagner’s Ring
Time to Shut Up About 'Dumb Pipes'

9|22|16   |     |   (12) comments


Service providers can't compete with OTT players. It just isn't in their DNA. Instead, service providers need to embrace what they're good at -- providing reliable, secure connectivity.
Wagner’s Ring
Keeping Your Tech Career Going After 50

9|21|16   |     |   (13) comments


How do you keep your career moving forward when you're past the half-century mark?
LRTV Interviews
Peering Into the Digital Future

9|20|16   |   04:25   |   (0) comments


Nick Thomas, practice leader of digital media at Ovum, talks about how digital transformation in the technology, media and telecom sectors will enable the development of a new range of applications and services for enterprises and consumers and how the upcoming Digital Futures event in London will examine ...
LRTV Custom TV
Napatech Tackles NFV's Major Challenge

9|7|16   |   08:42   |   (0) comments


One of the main challenges for network operators introducing NFV is to combine performance and flexibility in a cost-effective way, but there is a solution, explains Napatech's Dan Joe Barry.
LRTV Custom TV
Huawei Optical Innovation 2016

9|6|16   |     |   (0) comments


Highlights of the 2016 Huawei Optical Innovation forum.
LRTV Huawei Video Resource Center
Are You Ready for Huawei Connect 2016?

8|31|16   |     |   (0) comments


Join us for an exclusive sneak peak of Huawei Connect, an integrated conference for the global ICT ecosystem taking place in Shanghai.
Between the CEOs
CEO Chat: UXP's Gemini Waghmare

8|26|16   |     |   (0) comments


Light Reading CEO Steve Saunders and UXP Systems CEO Gemini Waghmare discuss the strategic importance of digital identity for operators in the midst of transformation.
LRTV Custom TV
F5 Virtual Network Function Integrations With Partner Orchestration Platform

8|24|16   |   6:38   |   (0) comments


F5's Kishore Patnam, product manager for F5's service provider solutions, discusses why service providers are moving towards virtualization and how his clients are utilizing F5's solutions.
Between the CEOs
CEO Chat: Intel's Alexis Black Bjorlin

8|17|16   |   06:23   |   (0) comments


Join us for an in-depth interview between Steve Saunders of Light Reading and Alexis Black Bjorlin of Intel as they discuss the release of the company's Silicon Photonics platform, its performance, long-term prospects, customer expectations and much more.
Telecom Innovators Video Showcase
Accelerating Telecom Digital Transformation With Nominum DNS

8|1|16   |   12:04   |   (0) comments


Light Reading's Steve Saunders gets an update from Nominum CEO Gary Messiana on how his company is helping carriers on the digital transformation journey.
LRTV Custom TV
Reinventing Operations for a Virtual, Software-Defined World

7|28|16   |   5:23   |   (0) comments


Heavy Reading Senior Analyst Jim Hodges speaks with Accenture's Larry Socher and Matt Anderson about what service providers must do to transform their business to get the benefits of SDN and NFV including: leveraging DevOps, introducing real-time OSS and implementing analytics.
Upcoming Live Events
November 3, 2016, The Montcalm Marble Arch, London
November 30, 2016, The Westin Times Square, New York City
December 1, 2016, The Westin Times Square, New York, NY
December 6-8, 2016, The Westin Excelsior, Rome
May 16-17, 2017, Austin Convention Center, Austin, TX
All Upcoming Live Events
Infographics
Hot Topics
Keeping Your Tech Career Going After 50
Mitch Wagner, West Coast Bureau Chief, Light Reading, 9/21/2016
Time to Shut Up About 'Dumb Pipes'
Mitch Wagner, West Coast Bureau Chief, Light Reading, 9/22/2016
Comcast Will Go Wireless in 2017
Mari Silbey, Senior Editor, Cable/Video, 9/20/2016
Sprint CEO: We'll Lease Spectrum as Soon as Possible
Dan Jones, Mobile Editor, 9/20/2016
Like Us on Facebook
Twitter Feed
BETWEEN THE CEOs - Executive Interviews
Light Reading CEO Steve Saunders and UXP Systems CEO Gemini Waghmare discuss the strategic importance of digital identity for operators in the midst of transformation.
Join us for an in-depth interview between Steve Saunders of Light Reading and Alexis Black Bjorlin of Intel as they discuss the release of the company's Silicon Photonics platform, its performance, long-term prospects, customer expectations and much more.
Animals with Phones
You Thought Your Customer Service Was Unreliable... Click Here
Live Digital Audio

A vital part of increasing the number of women in comms is transforming the ways companies can support and empower women. While progressive company policies that support both men and women in achieving work-life balance are a step in the right direction, creating a company culture that supports those policies can at times be more challenging.

During this show, we'll talk to Lynn Comp, Senior Director of Industry and Sales Enabling (ISE) in the Network Platforms Group at Intel, about why those challenges exist and how companies can overcome them. She'll provide insight into how Intel has worked to create a culture that supports work-life balance, and provide steps and guidance for other companies wishing to do the same. We will also leave plenty of time to get your questions answered live on the air.