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Slowing Sales Sting PMC-Sierra

PMC-Sierra, Inc. (PMCS) shares tumbled Sept. 26, after the Santa Clara (Calif.) company warned of a dented third quarter outlook amid weak demand for communications products.

PMC-Sierra said late Sept. 25 that revenues for the third quarter ending Oct. 1 will range between $114 million and $116 million. On July 20, the company had forecasted a revenue range of $122 million to $124 million. "Business activity in the third quarter is less than earlier expected in the communications area, particularly in Asia," said Bob Bailey, Chairman and CEO of PMC-Sierra, in a press release.

His company's stock tumbled 8.4% to $6 per share in early trading on the Nasdaq Market.

But it wasn't all bad news. Bailey says he's still positive about other businesses, such as enterprise storage (basically large-scale computer data storage and retrieval systems) and the build-out of computer networks.

Standard & Poor's maintained a hold opinion on the stock, but slashed earnings per share estimates for 2006 by $0.04 to $0.20. The ratings agency's 2007 estimate stays at $0.32 EPS. (S&P, like, is owned by The McGraw-Hill Companies.)

Analyst Zaineb Bokhari noted that the company's operating expenses remained at around $60 million. On July 20th, the company had forecast $62.5 million to $63.5 million in operating expenses. PMC-Sierra said on Aug. 25 that it shuttered its development site in Ottawa, Canada, which will likely result in the loss of 30 to 40 positions. The company is also eliminating 10 positions at a development site in Portland, Oregon.

Staffers and investors can stay tuned. PMC-Sierra provides guidance for fourth quarter 2006 and third quarter 2006 results on Oct. 19.

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