by Houghton and Atkeson 08/28/08
On March 10, 2000, PMC Sierra (PMCS) traded up to $255.50. Then the stock almost disppeared like a shooting star with the bursting of the tech bubble.
Within the past 52 weeks, PMCS traded at $4.21. Today, it is roughly at $9 up 25% for the month of August and 38% year-to-date. The call activity today is unusual and bullish. The call activity in PMC Sierra has exploded today.
Market participants have traded more than 17,000 calls versus a mere 654 puts. Market participants are traded the PMCS Sept 10 Calls (SQLIB) 8,200 times, the PMCS Oct 10 Calls (SQLJB) 6,000 times and the PMCS Nov 10 Calls (SQLKB) and PMCS Jan 10 Calls (SQLAB) 1,000 times each.
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This volume is 10 times usual volume. Open interest is rounghly 70,000 calls and 60,000 puts.
PMCS reported a strong Q2 on July 17 -- its highest revenue quarter since Q4 2000. The fundamental thesis on PMCS is that there is good visibility over the intermediate term due to strength in telecom spending, particularly in Asia (revenue growth was strongest in China) and thier ramp of its Raid-on-Chip program at Hewlett-Packard (HPQ).
Total design wins for the company improved again in the second quarter and were the highest they've been in the last four quarters.
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Bryan Perry
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