Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : PMC-Sierra (PMCS) -- Ignore unavailable to you. Want to Upgrade?

To: Scott Kessler who wrote (1961)	7/19/1998 4:28:00 AM
From: Danny Chan	Respond to of 3818

Momentum exiting is the key here. The report is still very positive. -------------------------------------------------------------------- PMC-Sierra Dn 16% On Projection Of Higher R&D Spending Dow Jones Newswires By Christopher Grimes NEW YORK (Dow Jones)--PMC-Sierra Inc. (PMCS) shares fell 16% Friday after the company met Wall Street's earnings expectations but projected that increased spending on research would impact its profits in coming quarters. Analysts were impressed with the semiconductor company's second-quarter results, in which sales increased 17% from the year ago to $40 million. Excluding acquisition charges, net income was 29 cents a diluted share, in line with Wall Street estimates and a penny above a year ago. The company's message to analysts "was actually very positive," said CIBC Oppenheimer Corp. analyst Kenneth Pearlman. But the higher spending has spooked some investors. Spending on research and development is likely to increase to between 22% and 24% of the San Jose, Calif., company's revenues, up from the previous rate of 16%-18%, analysts said. "They see a huge opportunity in their markets but need to invest more, which will cost a couple of pennies (a share) early on," Pearlman said. "It's a little confusing, but on the whole, very positive." Nonetheless, some analysts trimmed their earnings estimates, including Pearlman and Merrill Lynch & Co. analyst Joe Osha. PMC-Sierra's Nasdaq-listed shares were recently trading at 39 3/8, down 7 1/2, or 16%. Trading volume was 4.4 million. Average daily volume is 613,300. PMC-Sierra expects to spend an additional $1.5 million to $2 million per quarter to hire new chip designers and outfit them with equipment, said John Sullivan, the company's chief financial officer. In the second quarter, research and development spending was $7.8 million. Sullivan told Dow Jones that the higher spending should begin to pay off in 2000. PMC-Sierra makes semiconductors used in "broadband networking," the area of technology focused on making Internet data travel faster. Analysts said the company is working with customers to develop new generations of chips, and the spending was necessary to keep these customers. "They indicated that they've got significant customers that have asked them to do product development," said Scott Randall, an analyst at SoundView Financial Group Inc. "The alternative (to boosting spending) is to decline what your customers want you to do and let your competition have the business." Sullivan wouldn't identify the customers, citing competitive reasons. But potential customers for the developing technology could include big networking outfits such as Lucent Technologies Inc. (LU) or Cisco Systems Inc. (CSCO), analysts said. Gus Richard, an analyst at Hambrecht & Quist Inc., said most of the investors bailing out of PMC-Sierra Friday were so-called momentum players who weren't concerned about payoffs in 2000. "I think you had a lot of hot money in this stock," Richard said. -Christopher Grimes; 201-938-5253