Monday, November 20, 2006

Calls of Note Part 3

- Merrill Lynch notes theyrecently met with several service providers and equipment vendors in Asia and came away positively about PMC-Sierra's (NASDAQ:PMCS) growth prospects in 2007. China appears set to rollout 3G, and trends in FTTx in Japan and Korea are encouraging. Firm continues to believe that the recent decline in PMC's telecom business is related to a temporary inventory correction rather than any structural issues and expect street estimates to begin to move higher in the next 1 - 2 quarters.

Most service providers and equipment vendors in China expect 3G licenses to be granted in 1H07. PMC has about 15% exposure to the China wireline and wireless infrastructure markets, and supplies to leading Chinese OEMs Huawei and ZTE. While it's unclear how the technology landscape (WCDMA vs. TD-SCDMA) will emerge, PMC's components are mostly technology agnostic.

Firm met with NTT, SoftBank and KDDI in Japan and came away positively about the prospects of FTTH in Japan. They think the recent weakness at Passav is primarily related to excess inventory at NTT and expect Passav to rebound in Q1. Korea Telecom is also evaluating FTTH and is likely to begin its rollouts sometime in 2007, which could drive upside to our current estimates. Also, recent esults from NTAP and HP suggest that the storage market remains healthy.

Reits Buy and $10 tgt saying they expect the stock to move higher over the next few quarters from a combination of estimate revisions and multiple expansion.

Notablecalls: Think ML's Srini Pajjuri is making a good trading call here. Would buy the stock here with a $0.15 stop. Could be a half a pointer in the making.

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