To: Jorj X Mckie who wrote (1957 ) 1/26/2001 10:20:34 AM From: John Pitera Read Replies (1) | Respond to well that's the trade-off, the psychology of a 50 basis point rate cut next week versus, the current negative It was probably the most bearish call this analyst has been on. This is a fundamentally important report out of PMCS because it is not limited merely to them. The comments from the company are having a widespread chilling effect on the tech sector. The company said they were in the midst of an inventory correction and a slowdown in consumption across products and customers. On the call, management said that there has been a significant decrease in bookings from 8 of its top 10 customers as book-to-bill was "significantly below one." The weakness came in the latter part of the quarter and is continuing into Q1.PMCS expects Q1 revenue of $160-$170, well below consensus of $260 mln and Q4 sales of $230 mln. To get a feel for the impact, CSFB slashed estimates for Q1 and 2001 to $0.14 and $0.88 down from $0.37 and $1.70, respectively ....It's not just one segment of their business. Book-to-bill is below one in all major segments. As a result, expect weakness in all the other communication IC companies as PMC-Sierra is considered by most a bellwether in the comm IC universe. The two most vulnerable competitors are the ones with the highest multiples: Applied Micro (AMCC 78),Broadcom (BRCM 104), and to a lesser extent Vitesse (VTSS 69 3/4). Also, TranSwitch (TXCC 45 7/8) will be weak as investors will expect them to be be hurting by the slowdown given their exposure to the same 'access' portion of the communications network. PMCS customers are also getting hit. Cisco (CSCO 39 5/16) and Lucent (LU 18) are each roughly a 15% customers. So if PMCS is talking about slowing orders, you have to assume their customers are not seeing the demand either....As we discussed in our Dec 2 Story Stock, the lesson here is to know when your companies report and not hold tech companies going into earnings warning season and the actual release. The telecom spending slowdown has been no secret, it's just a matter of time before the companies down the supplier food chain will warn. It's not like it was last year where you buy going into a release, and watch the stock gap up the next day. Even if a company beats its number, you don't see the huge run post-release anyway while the downside potential is great . -- Robert J. Reid, Briefing.com------
