Last week's Network Processors Conference in San Jose, Calif., turned out to be a bit of a damp squib for chipmaker PMC-Sierra Inc. (Nasdaq: PMCS).

The vendor had originally promised to reveal its long-awaited strategy for a complete packet processing silicon solution. But the announcement never came, because PMC-Sierra had dissolved its Internet routing division a few days earlier as part of a company-wide restructuring program (see PMC-Sierra Slides, Slashes).

It appears that the general idea behind PMC-Sierra's Internet routing group was to integrate the products from recent acquisitions into a more cohesive and complete packet processing solution. The chipmaker had layed out more than $3 billion on: switch fabric startup Abrizio, in August 1999; MIPS processor vendor Quantum Effect Devices (QED), in July 2000; and classification vendor SwitchOn, in September 2000.

If the new division had been successful, it could have resulted in PMC-Sierra bringing to market products that compete more directly with the network processors from Agere Systems (NYSE: AGR), Applied Micro Circuits Corp. (AMCC) (Nasdaq: AMCC), and Vitesse Semiconductor Corp. (Nasdaq: VTSS). PMC-Sierra declined to comment on the details of any products or plans that have been discontinued.

According to Doug Brownridge, the company's vice president for marketing, the cutbacks were essential to survive the economic downturn. "Across the industry, the cumulative R&D spend was almost equal to the total available market," he says. "In our case, [R&D] spending was pretty close to gross sales. Obviously, that's unsustainable."

To ease the situation, PMC-Sierra decided to refocus its business on revenue-generating product lines. The Internet routing group was just one casualty -- three other projects were canned and three more delayed, says Brownridge.

"The projects affected are those… of interest to large manufacturers, but not yet, and to startups that don't have the internal resources." The end result: "We managed to reduce our cost structure by 30 percent with only a minor effect on revenue."

This doesn't spell the end of PMC-Sierra's packet processing silicon, however. QED survives as the MIPS processor divsion. The SwitchOn folks (what's left of them) have been folded into the same division, while the Abrizio guys have been moved to the access products division, according to Brownridge.

And to cap it all, PMC-Sierra has come up with an alternative game plan in double-quick time. As a result of the reorganization, it will be putting more resources into its existing MIPS products, says Tom Riordan, VP and general manager of the MIPS processor division (formerly QED).

Riordan contends there's a lot of mileage left in the MIPS product line. Customers such as Cisco Systems Inc. (Nasdaq: CSCO) have been building boxes with PMC's MIPS chips for the past eight years, he claims, using them in combination with their own packet-forwarding ASICs. As Cisco upgrades its routers, it simply moves to higher-performance versions of the MIPS processor.

Riordan considers this the best approach. Simply forwarding packets is not a good use of programmable devices, he says. "If you want to forward a packet as fast as you can, that's best done in a hardwired ASIC." PMC-Sierra's processors are designed to add advanced services via software to such a system. "The bottom line is being able to differentiate services."

PMC outlined its next-generation MIPS chip, called the RM9000x2, earlier this month (see PMC-Sierra Ships MIPS Processor). It will have two 1.2GHz cores -- roughly twice the speed of most network processors -- a HyperTransport network interface (a high-speed replacement for a PCI bus), and a DDR-SRAM memory controller on-board. This chip is "very suitable as an adjunct processor for OC192 (10 Gbit/s)," Riordan claims.

But, while existing customers may be happy, new ones may be put off by the fact they would need to develop their own packet forwarding chips, or else try to glue PMC-Sierra's chip to that of another vendor.

— Pauline Rigby, Senior Editor, Light Reading
http://www.lightreading.com