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Comms chips

PMC Sags on Earnings Update

PMC-Sierra Inc. (Nasdaq: PMCS) stock nosedived today on a disappointing -- albeit unchanged -- revenue outlook and, possibly, news of the CFO's pending retirement.

PMC stock was down $1.35 (14.9%) to $7.69 by midday.

Late yesterday, the company announced that for its quarter ended July 2, it expects to be "at the midpoint of the revenue range" of $108 million to $112 million it had forecast earlier. Alas, analysts had expected PMC to report revenues of $114 million, according to Reuters Research .

The figures exclude revenues from recently acquired PON-chip vendor Passave, which will contribute another $8.5 million to $9 million in the quarter, PMC said yesterday. (See PMC Preps PON Plans.)

At the same time, PMC said CFO Alan Krock will step down "for personal reasons following a reasonable transitional period," the company announced after the market closed yesterday. PMC didn't specify a date of departure for Krock, who joined the company in 2002. (See PMC CFO Departing.)

Now, PMC does not number among the companies being investigated for stock-options practices. But with the options scandal hovering over the tech sector, it's possible some investors are feeling skittish -- and a CFO departure is often taken to be a sign of bad news. (See Infinera's CFO Quits.)

Suspicion of options back-dating has caused trouble for several of PMC's competitors -- most notably Vitesse Semiconductor Corp. (Nasdaq: VTSS), which recently fired its CEO, CFO, and former CFO after conducting an internal investigation. (See Vitesse Execs Get the Axe.)

Other chip companies being investigated by the SEC and/or federal prosecutors include Applied Micro Circuits Corp. (Nasdaq: AMCC), Broadcom Corp. (Nasdaq: BRCM), and Marvell Technology Group Ltd. (Nasdaq: MRVL). (See AMCC Gets Subpoenaed, SEC Informaling Broadcom , and Marvell Joins Options Fun.)

— Craig Matsumoto, Senior Editor, Light Reading

twill009 12/5/2012 | 3:49:31 AM
re: PMC Sags on Earnings Update I wonder if this has anything to do with the Passave acquisition? Doesn't sound like Passave contributed as much to the quarter as they may have wanted, which suggests maybe the due diligence was flawed.
Although the buck should stop at the CEO's desk, maybe the CFO is taking the fall? Or maybe he really is just leaving for personal reasons -- but i would think you could announce that on the earnings call rather than spooking people like this.

Any thoughts?

paolo.franzoi 12/5/2012 | 3:49:30 AM
re: PMC Sags on Earnings Update
According to the article, the miss was excluding Passave. Passave's numbers were noted separately.

seven
paolo.franzoi 12/5/2012 | 3:49:30 AM
re: PMC Sags on Earnings Update
According to the article, the miss was excluding Passave. Passave's numbers were noted separately.

seven
paolo.franzoi 12/5/2012 | 3:49:29 AM
re: PMC Sags on Earnings Update
I am simply reporting what the article said. It said:

"Late yesterday, the company announced that for its quarter ended July 2, it expects to be "at the midpoint of the revenue range" of $108 million to $112 million it had forecast earlier. Alas, analysts had expected PMC to report revenues of $114 million, according to Reuters Research .

The figures exclude revenues from recently acquired PON-chip vendor Passave, which will contribute another $8.5 million to $9 million in the quarter, PMC said yesterday. (See PMC Preps PON Plans.)"

The problem is that it is below analyst expectation.

seven

Pete Baldwin 12/5/2012 | 3:49:29 AM
re: PMC Sags on Earnings Update I think you both might be right -- today's dip might be a combination of disappointments. Some folks obviously expected PMC to beat its own Q2 guidance -- which won't be happening -- and it's possible the Passave forecast is a let-down too. *'ll have more time to root around on this Monday.

As for the CFO leaving -- I agree this was handled kind of strangely. Not sure what to make of it.
twill009 12/5/2012 | 3:49:29 AM
re: PMC Sags on Earnings Update PMC originally said the likely revenue range for Passave for all of the second quarter was 15.5 million to 16.5 million. The deal closed in early May, leaving 8/13 of the quarter still left to include in PMC's results. If the quarter was perfectly linear, that should have given PMC close to $10m in Passave revs, so the update suggests something less than that. If anything, i think there would be an incentive to backload the quarter (rather than rush to ship product prior to the deal closing).

The standalone PMC business was in the middle of the guidance range, so that is why i suggested Passave was a problem. But maybe it is no significant problem at all -- we'll have to wait for the company's conference call, i guess. I still think it was a mistake to announce a CFO departure with some obvious questions unanswered, but maybe all will become clear later.
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