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Stock Analyst Update

PMC-Sierra Chalks Up Another Great Acquisition

Quantum purchase expands the firm's reach in communication-chip market.

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The latest chapter in PMC-Sierra's (PMCS) acquisitive streak was unquestionably a good one. The company announced Wednesday that it acquired Quantum Effect Devices (QEDI), a small semiconductor-design firm. The acquisition will allow PMC-Sierra to further expand its already-impressive portfolio of communication chips.

To understand the significance of the deal requires a little background on PMC-Sierra and the markets it targets. The company is a leading supplier of many of the chip components essential for wide-area networking (WAN) equipment, or the gear used in networking and telecommunication infrastructure. The market for such equipment has exploded over the last year. But even more important, the prospects of chipmakers in the communication sector have been especially favorable, because large equipment firms such as Lucent Technologies (LU) have been outsourcing more and more of their chip design to companies like PMC-Sierra.

Jeremy Lopez does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.