AMCC
PMC-Sierra Q108
PMC-Sierra reported revenue at the high end of guidance but what caught investors attention was higher than expected revenue guidance for Q208. Of particular interest to readers should be PMC’s comments on FTTH in China and Japan, which we expand upon based on our in-depth knowledge of the area.
10GbE and SFP+ - This Time It’s Different
One of our more popular theme pieces (see “Five Misconceptions About the 10G Optical Market“) examined the state of the 10GbE market and sought to identify the gaps between market perception and reality. It’s time to publish an update with the facts we have collected and opinions we’ve formed since then.
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Google’s Secret 10GbE Switch
It is our opinion that Google (GOOG) has designed and deployed home-grown 10GbE switches as part of a secret internal initiative that was launched when it realized commercial options couldn’t meet the cost and power consumption targets required for their data centers.
This decision by Google, while small in terms of units purchased, is enormous in terms of the disruptive impact it should have on 10GbE switching equipment providers and their component supply chains. It is as if a MACHO just arrived in the Enterprise networking business and the orbits of the existing satellites have begun to shift without observers knowing why - until now.
LightReading Ethernet Conference Notes
This is a collection of notes and observations gathered during the LightReading Ethernet Conference that didn’t merit a standalone article. Unless noted, these conclusions were from conversations I had while at the conference, and not the opinions of presenters.
Vitesse Sells Storage
After dropping hints in an earlier conference call (see Vitesse Q207 Conference Call Notes) Vitesse announced the sale of a portion of their storage products to Maxim (MXIM). The $63M transaction has a provision for an additional $12M if certain milestones are hit. The company will use the proceeds from Maxim and $30M in new convertible debt to repay the junk debt to Tennenbaum Capital. (see Tennenbaum and Vitesse).
Three months ago I expected the sale of the entire storage unit to fetch 3.5x revenue. Subsequent research and discussions led me to believe this estimate was inaccurate, something reflected in comments I made (see here).
The Madness of the Carrier Chipset Market
There is an excellent editorial today by Lee Goldberg that explores the lack of new R&D in SONET/SDH and PDH chip sets. While I don’t agree with the conclusion it is a worthy topic of exploration and he highlights something missed by the mainstream tech media.
The networking industry may be about to hit a hidden speed bump as the number of semiconductor companies actively involved with developing products to support SONET/SDH, PDH, and other TDM-based technologies can now be counted on one hand.
Lee thinks this is a big problem. This is not a problem at all. It is the only logical solution to the madness of the past 6 years.
AMCC - Further Down the Spiral
AMCC (AMCC) held a conference call last Friday to review preliminary FQ108 results. The company indicated in April that FQ108 would be $60M down from $70M in the previous quarter (see “AMCC Kicks the Distribution Habit“). The final tally now puts it closer to $50M, a quarter over quarter decline of nearly 30%. This is worthy of detailed examination.
FTTH Silicon Market Share
The latest Linley Group report on Networking Silicon Market Share provides a breakout of PON FTTH silicon market share for the second year running.. It includes both market size and market share information for all Networking markets, including PON. The key takeaway is that Linley believes the market grew only 20% in dollar size, though I estimate deployments grew worldwide over 50% year over year. Such is life as a semiconductor vendor.
They shared the following data with me.
State of the Photon - Global FTTH Activity
I haven’t been shy about my prediction that GE-PON would trump GPON deployments and so far I’ve been right. The dominance of GE-PON continues, with large deployments planned or underway throughout Asia. Verizon (VZ) is the only carrier deploying BPON/GPON in size though some activity is promised in Europe. We shall see.
Let’s take a quick look at the state of the photon.
Vitesse Q207 Conference Call Notes
Vitesse (VTSS.pk) delivered the required fiscal discipline in Q207. While running a super-tight ship does not come without downsides, at this point I believe the benefits outweigh the drawbacks.
My biggest concerns going into the call were inventory and cash management, and the company executed well in these areas in the face of declining shipments.
AMCC Kicks the Distribution Habit?
AMCC (AMCC) pre-announced a major shortfall in revenue for the March quarter and revised guidance for June down even further. The magnitude of the revenue decline is breathtaking - $76M in Dec ‘06 to $70M in Mar ‘07 to a projected $60M in June ‘07. Analysts were projecting around $76M in June ‘07 revenue.
Enterprise Access Capex - A Ray of Hope?
Only one half of Verizon’s wireline (VZ) revenue comes from consumers; the rest comes from business connectivity and services. Verizon, as well as other carriers, have been spending money to deliver better broadband services to consumers. What will happen when they spray this capex hose in the direction of their long neglected business customers? Which equipment companies will benefit?
Finisar FQ307 Earnings Commentary
Finisar (FNSR) reported revenue Monday evening of $107.5M. No written transcript of the call is available, though a replay is and the company overview was updated. I thought there were three notable announcements.
Vitesse Investment Thesis
I’ve been engaged in constant debate with readers and other investors about my position in Vitesse Semiconductor since disclosing it. Based on reader email, it was one of my more unpopular opinions. I thought it would be appropriate to share my investment thesis from early August with a wider audience.
Cortina Acquires Intel Comm Semi’s
It’s official. Looks like Cortina acquired a digestible portion of Intel’s (INTC) comm semi product line, forgoing the network processors that would bring high SG&A overhead. They focused on the parts they could plug into the company to generate cash flow.
Quake - Another Failed AMCC Acquisition
The slow motion disaster movie that is Applied Micro Circuits Corporation (AMCC) is still in theaters even though investors stopped buying tickets long ago.
AMCC announced this morning an all cash deal to buy Quake Technologies for $69M net. AMCC has managed to spend nearly $1BB in cash on a number of acquisitions, none of which have provided a return better than simply sticking the dollars in the bank. We feel that Quake will be yet another failed acquisition.
Intel’s Communication Group - Destiny Fulfilled
Intel corp (INTC) lands on Page A1 of the WSJ with a story covering their Analyst Day presentation in New York yesterday. The big news that is getting widespread coverage in many media outlets- including BusinessWeek - is that they are cutting $1BB (8%) in spending but without across the board job cuts.
The big problem is Intel’s work force grew 17% in the last year alone. So, the obvious path is to find businesses with high costs and low revenue, and spin those out to people who can manage them tighter. It sounds like this is exactly what Intel plans to do.
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AMCC demonstrates GPON MAC
AMCC (AMCC) demonstrated a GPON chipset in a Xilinx FPGA at OFC in Anaheim. No announcement (that I saw) was made, and no press was in Lightreading.
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AMCC GPON SERDES
AMCC (AMCC) announced today that they have a SERDES for GPON ONU equipment. This isn’t really that spectacular given that these 2.5G components are typically just re-branded SONET/SDH components priced with lower margins and tested to lower standards. Even the burst mode support required at the OLT isn’t a big challenge for the CDR (keeping the analog front end linear is another story). It is a good way for a company to make waves about FTTH without doing a lot of work. Rumor has it that AMCC is also working on a GPON MAC device, which would be much more interesting news.
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