OK... From 3/8/00 MSCO research report:
Key Investment Positives
ú Well positioned as a communications-IC supplier. PMC Sierra's gross margins are the highest we are aware of for a semiconductor manufacturing company, and the company is also one of the fastest-growing pure-play suppliers of communication integrated circuits (ICs). PMC-Sierra has amassed one of the largest engineering teams dedicated to the development of ICs for the backbone of the global communications networks. We believe PMC-Sierra's expertise with access, synchronous optical networks (SONET/SDH), and asynchronous transfer mode (ATM) technologies position the company extremely well to participate in some of the most attractive markets within the communications industry today.
ú Barriers-to-entry are growing at a compounding rate. In our view, PMC-Sierra's system-level expertise, experience with a wide variety of communication protocols, and analog and mixed-signal IC expertise represent an extremely proprietary and increasingly challenging collection of core competencies for competitors to overcome.
ú PMCS has diverse exposure to the rapidly growing communications infrastructure market, in our view. PMC-Sierra sells ICs into a broad spectrum of communications infrastructure applications, including remote access, transmission, and switching hardware. With this level of
diversity, we believe PMCS is an excellent vehicle for gaining exposure to the expected rapid growth in communications infrastructure hardware.
ú Significant time-to-market advantage through participation in industry standards bodies. PMC-Sierra is a
co-founder and the only semiconductor company in the SATURN Development Group, and we believe the company's most important products and relationships have been formed through this group. The company is also an active member of the ADSL Forum and the Optical Internetworking Forum, to name a couple.
ú Long product life cycles enhance predictability. Many of PMC-Sierra's ICs have life cycles of eight years or more, and we believe this provides a more predictable and diverse revenue stream relative to the abrupt product transitions experienced within other semiconductor applications.
Key Investment Risks
ú Revenues are concentrated. Cisco, Lucent, and Nortel currently account for about 45% of the company's total revenues. However, the company is selling multiple products within multiple divisions at these customers, and therefore, we believe the risks are limited.
ú Growth tied to strong Internet gains. The Internet is a key driver of growth, and if our bullish outlook on the growth of the Internet proves optimistic, then our growth outlook for PMC-Sierra could be moderated. |
