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PMC-Sierra Drops After Sales Forecast Misses Analysts’ Estimates

PMC-Sierra Inc., a maker of chips for computer-networking and data-storage equipment, declined in late trading yesterday after it forecast lower sales than estimated, citing weakness in spending by communications companies.

First-quarter sales will be $130 million to $136 million, the Santa Clara, California-based company said on a conference call. That fell short of the $153.2 million predicted by analysts on average in a Bloomberg survey.

PMC-Sierra joins a chorus of networking companies citing a slump in demand from Internet-service providers and other communications customers. Chief Executive Officer Greg Lang said on the call that spending by those businesses slowed late in 2011 in “every major market from Europe to North America to Asia.” The company said it wasn’t sure when demand would recover.

The shares fell as much as 11 percent to $6.03 in extended trading after the report. The stock, up 22 percent this year, closed at $6.74 earlier in the day.

PMC-Sierra’s remarks echoed a report last month from Juniper Networks Inc., the No. 2 maker of networking equipment, which blamed a disappointing forecast on sluggish demand from communications providers. Sunnyvale, California-based Juniper gets more than half its revenue from those customers.

Cisco’s Report

Cisco Systems Inc. plans to deliver its quarterly results tomorrow, giving investors a sense of how the slowdown is affecting the world’s biggest maker of networking equipment. San Jose, California-based Cisco gets almost a third of its revenue from service providers, said Joanna Makris, an analyst with Mizuho Securities USA in New York.

PMC-Sierra’s fourth-quarter net income rose to $28.4 million, or 12 cents a share, from $10.9 million, or 5 cents, a year earlier, the company said in a statement. Excluding some items, profit was 13 cents a share, matching analyst estimates. Revenue fell 4.2 percent to $152.6 million, short of the $155 million projected.

The stock got a boost last month when investor Ralph Whitworth’s Relational Investors LLC increased its stake to become PMC-Sierra’s third-biggest shareholder, according to data compiled by Bloomberg. The firm said it was unhappy with PMC- Sierra’s performance and may push the company to pursue “strategic alternatives,” such as cutting business lines or combining with other companies. The shares jumped more than 10 percent on Jan. 18 after the announcement.

To contact the reporter on this story: Jordan Robertson in San Francisco at jrobertson40@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

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