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Technology Stocks : PMC-Sierra (PMCS)
PMCS 11.650.0%Jan 25 4:00 PM EST
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To: Thomas Zoran who wrote (1797)6/8/1998 9:35:00 AM
From: Trader Dave   of 3818
 
A few comments, 3% growth isn't an apples to apples comparison, because their numbers used to include a fair amount of legacy v.34 business.

There's clearly market risk here. It's hard to call where the economy and the fed are headed. But I'd have to disagree with thomas' assertions that high margins aren't sustainable. That's true in commodity businesses, but in its core business PMCS is more like a software company in that they own the underlying designs and then their products get designed into their customers products. As long as they can keep designing in performance improvements/cost reductions at the same rate as the networking industry, I'd expect their margins to stay fairly high.

I do expect some declines in margins since the company is making forays into more competitive markets. The company is expecting some declines as volumes ramp up, but those declines are already built into analyst's models going forward! (Perhaps with too conservative an estimate for margin reduction.)

PMCS may be lofty and have risk from a market perspective, but do you really want to be short a company where earnings estimates are going to go up each of the next 3 to 4 quarters?

I'd say there's better stuff to short, with high valuations AND junky fundamentals.

(Generally, I only want stocks to go higher when I'm about to sell, I'd welcome a retreat to the low to mid 30's again...I'd back up the dump truck..again.)

TD
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