PMC-Sierra: Fiscal 2Q14 Financial Results

(in $ million)	2Q13	2Q14	6 mo. 13	6 mo. 14
Revenues	127.6	126.8	252.7	253.3
*Growth*		-1%		0%
Net income (loss)	(4.8)	(3.4)	(13.3)	(7.7)

PMC-Sierra, Inc. reported results for the second quarter ended June 28, 2014.

Net revenues in the second quarter of 2014 totaled $126.8 million, an increase of 0.2% from $126.5 million in the first quarter of 2014, and a decrease of 1.0% compared to $127.6 million in the second quarter of 2013.

GAAP net loss in the second quarter of 2014 totaled $3.5 million, or $0.02 per share, compared to a GAAP net loss in the first quarter of 2014 of $4.2 million, or $0.02 per share.

Non-GAAP net income in the second quarter of 2014 totaled $18.3 million, or $0.09 per diluted share, compared to non-GAAP net income of $16.0 million, or $0.08 per diluted share in the first quarter of 2014.

“We have closed another solid quarter with both revenue and non-GAAP EPS above the midpoint of our expectations. Strength in both our optical and mobile products more than offset lower revenue from our storage products due to inventory consumption at two of our larger customers,” said Greg Lang, PMC president and CEO. “As we look to the balance of 2014, we believe we will see four key areas contribute to growth: 12Gb SAS, flash controllers, OTN and RF products. After years of investment, we are pleased to see these product cycles take hold, fueled by the continued escalation of data traffic.”

Second quarter and recent announcements:

On July 15, PMC joined AT&T, Ciena and Verizon on a panel at the Lightwave Optical Summit in Austin, TX, to discuss the state of 100G OTN networking and deployment readiness, and what is beyond 100G. The discussion topics included the latest developments in equipment, optics and OTN processing semiconductors, and software-defined networking.
On May 22, PMC hosted a Storage and Connectivity Innovation Summit at the China Cloud Computing Conference in Beijing, China. PMC was joined by Alibaba Group, C3, Inspur Group, Wiwynn Corporation and Yttibrium and discussed its scalable and flexible solutions that can be tailored to each of the varied requirements across all of China’s hyperscale data centers. Specific topics discussed included hybrid and pure flash storage to accelerate applications, scalable and flexible architectures geared towards open applications and software-defined storage, and tiering data to deliver efficient and cost-effective storage.
On May 21, PMC hosted a panel with China Mobile Research Institute to discuss the State of OTN Network Deployments at the Optinet China Conference. Specific topics discussed were the 100G ecosystem and how PMC’s DIGI 120G enabled the maturity of the ecosystem and facilitated China Mobile Communications Corporation’s (CMCC) network deployment, continued scalability and transmission beyond 100G, and software-defined networking.

Comments

Greg Lang, president and CEO:
"Storage revenues declined by 4.7%, or approximately $4.1 million versus last quarter due to the inventory consumption expected at two large customers. In terms of mix, storage represented 65% of the total revenue mix, optical came in at 20% and mobile was 15% of the total.
"Our storage business performed largely as expected. Revenue from our flash controller was lower due to the timing of data center build-outs and our core storage products were down after a challenging first quarter as experienced by our large enterprise storage customers, resulting in some inventory consumption in Q2. In Q3 we expect to work through the remaining inventory and experience positive seasonality. We also expect to see a small uplift from the Grantley launch and related 12 gig SAS share gains.
"In the last quarter we were awarded 12 gig sockets from a major tier I storage system vendor, which now gives PMC a clean sweep of all three of the top three storage system OEMs.
"In flash controllers, we anticipate an increase quarter-to-quarter, due to an expanded customer base and improved data center build-outs."

Steve Geiser, CFO:
"In Q2 we had two customers, which each accounted for more than 10% of our revenues, calculated on a rolling 12-month basis, namely HP and EMC.
"We ended the second quarter with a net cash position of $214 million.
"(...) we expect Q3 revenues to be in the range of $130 million to $138 million, or an increase of approximately 3% to 9% sequentially."