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Subject:  Re: What is keeping PMCS on watchlist? Date:  3/24/2000  6:15 PM
Author:  Y2Krash Number:  1743 of 8813

PMC Sierra is a great company and I'm not ashamed to say that I own it, and have owned it since it was hovering around $30/share (hard to believe that was just last summer) and added to my position on the dip last week. They have to best gross margins of any semiconductor I've ever seen at 80% (if you find a better one let me know and I'll plow my money into it). PMC provides a key component of modern high speed telecommunications chips that format streams of data entering a network. You are correct in that PMC is making the majority of their profits off technology they developed five years ago (not to imply that they've been sitting around doing nothing over that time). An advantage PMC shares with the likes of Broadcom is that it works closely with Cisco Systems, which means that it gets an early look at the cutting edge networking-equipment design, giving it a big jump on most of its competitors.

Unfortunately it's technology is not a standard and thus it is a strong king rather than a gorilla. One other concern I have about the company is that a large portion of PMCS's sales come from producing chips related to ATM. Many people are worried that ATM will eventually be phased out by new gigabit ethernet, since its much cheaper and has recently virtually caught up to ATM in terms of quality of service.

Hold your PMCS close to your heart, but watch the industry carefully for any move in technology preferences.

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