SG Cowen Cuts PMC-Sierra Rating to Neutral

SG Cowen cut its rating on PMC-Sierra (PMCS

) to neutral from buy.

Analyst Rick Billy say he was surprised at the magnitude of chipmaker's expected shortfall. Although the shortfall was a result of an industry slowdown in communication-equipment sales, Billy notes PMC's performance was reflected in the industry slump. He notes Cisco (CSCO

) and Lucent (LU

), the firm's two largest customers, curbed their spending plans.

With no visibility into Q2, Billy believes PMC's new guidance for 30% 2001 revenue growth is dramatic. He cut the 2001 EPS estimate to $0.75. Billy also reduced the 2001 EPS estimate for TranSwitch Corp. (TXCC

) to $0.75. He says management gave good data points, and he looks for the business to firm up as PMC is still well positioned for the long term.