George Soros Betting On PMC-Sierra Inc. (PMCS) Turnaround

The semiconductor and software company did not have a great start to 2015, facing weaker-than-expected growth in the carrier and storage end markets. As a result of its lower-than-expected financial results, PMC-Sierra announced its plans to pursue spending reduction efforts. Specifically, the company intends to cut spending by roughly 14%, which involves a reduction in its workforce of 200 employees worldwide. Other reduction measures are expected to be implemented so as to achieve approximately $40 million per year in savings. PMC-Sierra posted net revenues of $124.8 million for the second quarter, down by 2% year-over-year. The decrease in revenues was primarily impacted by lower sales volumes of its Mobile network products, which were in turn offset by higher volumes of its Storage and Optical network products. The company’s non-GAAP net income amounted to $18.0 million or $0.09 per diluted share, compared to $18.3 million or $0.09 per share reported a year ago. PMC-Sierra has been struggling greatly of late and the $40 million cost reduction might not trigger a turnaround right away. It might be the case that Soros has spotted some opportunities that might put the company back on track in the months or years ahead, despite PMC-Sierra’s outlook not appearing to very good at the moment.

Let’s now take a quick look at how the hedge funds within our database feel about PMC-Sierra Inc. (NASDAQ:PMCS). A total of 27 hedge funds tracked by Insider Monkey owned stakes in the company at the end of the second quarter, four funds more than in the prior quarter. Nevertheless, the value of the stakes shrunk to $664.22 million from $724.63 million over the quarter. Hedge funds we track are quite bullish on the company, as the 27 hedge funds own 39.30% of the company’s outstanding common stock.

To sum up, even though the future outlook of PMC-Sierra Inc. (NASDAQ:PMCS) is blurry at the moment, George Soros’ bullish move and the positive hedge fund sentiment might suggest that the company is yet to reveal its true intrinsic value. Therefore, it is highly likely that the stock will advance in the months ahead, barring further market mini-crashes.

Disclosure: None