Monday, May 11, 2015

Seeking Alpha: PMC-Sierra Leveraged To High-End Product Cycles

These aren't the best of times for the storage and carrier hardware industries, but PMC-Sierra (NASDAQ:PMCS) is looking to leverage new product introductions, the move toward software-defined networking in the data center, and a capex shift toward optical transport networking (or OTN) equipment to drive a meaningful upturn in revenue and further leverage in margins.

Mid-to-high single-digit revenue growth and low double-digit FCF growth can support today's stock price and the company's margins do argue for a higher revenue multiple than today's level. It's also worth noting that acquisition activity has picked up in the chip space and PMC-Sierra would fit in with multiple suitors that have the wherewithal to make a deal. I don't see a large discount to fair value here, but the company has a legitimate opportunity to gain share in multiple markets and the company is still of a size where a few extra points of market share can drive meaningful extra value.

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PMC-Sierra Leveraged To High-End Product Cycles

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