& 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
Featured Video
From The Founder
Light Reading founder Steve Saunders talks with VMware's Shekar Ayyar, who explains why cloud architectures are becoming more distributed, what that means for workloads, and why telcos can still be significant cloud services players.
Flash Poll
Upcoming Live Events
May 14-16, 2018, Austin Convention Center
May 14, 2018, Brazos Hall, Austin, Texas
September 24-26, 2018, Westin Westminster, Denver
October 9, 2018, The Westin Times Square, New York
October 23, 2018, Georgia World Congress Centre, Atlanta, GA
November 7-8, 2018, London, United Kingdom
November 8, 2018, The Montcalm by Marble Arch, London
November 15, 2018, The Westin Times Square, New York
December 4-6, 2018, Lisbon, Portugal
All Upcoming Live Events
Hot Topics
I'm Back for the Future of Communications
Phil Harvey, US News Editor, 4/20/2018
BDAC Blowback – Ex-Chair Arrested
Mari Silbey, Senior Editor, Cable/Video, 4/17/2018
Verizon: Lack of Interoperability, Consistency Slows Automation
Carol Wilson, Editor-at-large, 4/18/2018
AT&T Exec Dishes That He's Not So Hot on Rival-Partner Comcast
Mari Silbey, Senior Editor, Cable/Video, 4/19/2018
Facebook Hearings Were the TIP of the Data Iceberg
Dan Jones, Mobile Editor, 4/20/2018
Animals with Phones
I Heard There Was a Dresscode... Click Here
Live Digital Audio

A CSP's digital transformation involves so much more than technology. Crucial – and often most challenging – is the cultural transformation that goes along with it. As Sigma's Chief Technology Officer, Catherine Michel has extensive experience with technology as she leads the company's entire product portfolio and strategy. But she's also no stranger to merging technology and culture, having taken a company — Tribold — from inception to acquisition (by Sigma in 2013), and she continues to advise service providers on how to drive their own transformations. This impressive female leader and vocal advocate for other women in the industry will join Women in Comms for a live radio show to discuss all things digital transformation, including the cultural transformation that goes along with it.

Like Us on Facebook
Twitter Feed