TRANSFORMING NETWORKS THAT
CONNECT, MOVE, AND STORE BIG DATA
PMC Investor Relations
October 2015
SAFE HARBOR STATEMENT
This presentation contains forward looking statements which are
subject to known and unknown risks and uncertainties that could
cause actual results to differ materially from those expressed or
implied by such statements, including but not limited to risks described
in PMC-Sierra’s SEC filings. PMC-Sierra undertakes no obligation
to update any forward looking statements.
This presentation also includes certain non-GAAP financial measures,
which are reconciled to the most directly comparable GAAP financial
measures in the financial news releases posted at our website,
http//investor.pmcs.com.
2
MISSION STATEMENT
PMC is the Semiconductor and Software Solutions Innovator
Transforming Networks that Connect, Move, and Store Big Data
3
PMC AT-A-GLANCE
Founded: 1984
Public: 1991
Stock Symbol: PMCS
Headquarters: Sunnyvale, CA
Montreal
Allentown
Vancouver
Roseville
Sunnyvale
Houston
Colorado Springs
Italy
Israel
Shanghai
Bangalore
Penang
WW Employees: ~1,200
2014 Annual Revenue: $526 Million
Business Segments: Storage, Optical & Mobile
Website: www.pmcs.com
Corporate Headquarters
International Headquarters
4
Design Center
KEY INVESTMENT HIGHLIGHTS
• World leader in Storage Systems SAS port connectivity
• World leader in high-performance SSD controllers
• World leader in enabling 100G OTN switching deployment
• Best-in class gross margins in the semiconductor sector at ~70%
• Operating model offers best-in-class operating leverage
• Targeting a $2.3 billion market growing at a CAGR greater than 10%
2014
Revenue:
$526 Million
70% 18% 12%
Storage
Optical
5
Mobile
Revenue, in millions
TRANSFORMED REVENUE PROFILE
700
35%
600
30%
500
25%
400
20%
Mobile
Optical
300
15%
Storage
Legacy as % of total
200
10%
100
5%
0
0%
2007
2008
2009
2010
2011
2012
Note: Legacy includes SONET, ATM and MIPS Processors
6
2013
2014
UNPRECEDENTED
TRAFFIC GROWTH
2008
2010
2012
2014
EVERYTHING
AS A SERVICE
2016
MOBILE DEVICE
PROLIFERATION
2018
DIGITIZATION
OF EVERYTHING
BIG DATA TRENDS DRIVING GROWTH
7
“From 2013 to 2020,
the digital universe
will grow by a factor
of 10 – from 4.4
trillion gigabytes to 44
trillion. It more than
doubles every two
years.”
A DECADE OF DIGITAL UNIVERSE GROWTH:
STORAGE IN TRILLIONS OF GIGABYTES
50
45
40
35
30
25
20
15
10
5
0
2013
- IDC
Source: IDC’s Digital Universe Study,
Sponsored by EMC, April 2014
8
2020
PMC’s GROWING MARKET SEGMENTS
PMC SAM, $ in Millions
$3.0B
$2.3B
$1.1B
Carrier
$960
Carrier
$1.3B
$1.9B
Storage
Storage
2014
2017
PMC poised to capture significant revenue growth through market
segment expansion and increased share
Note – all numbers are based on data from IDC, Gartner & PMC Estimates
Storage includes $80M SAM in 2014 and $90M SAM in 2017 representing printer ASICs to enterprise customers
9
GROWTH DRIVERS
OTN
CLOUD DATA CENTER
FLASH CONTROLLER
12G SAS
Full
Potential
Run Rate
Incremental
Annual
Revenue
H2’17
$100 - $150M
2017
$60 - $80M
H2’17
$100 - $150M
H2’16
$70 - $90M
Target / Opportunity
OTN Switching in Metro
Highest Density Solutions
Enterprise SSDs
>10% share gain in Server &
Storage; 6G to 12G transition
$330 - $470M
PMC still to realize ~75% of the Incremental Annual Revenue
OTN = Optical Transport Network
SAS = Serial Attached SCSI
10
STORAGE
PMC STORAGE SOLUTIONS
• Premier supplier of storage solutions optimized for Data
Centers
• Focused and investing for the
storage solutions market segment
- Annual storage revenue >$370M
- Leading-edge silicon and
hardware expertise
- Robust and industry-hardened
software
• Comprehensive product portfolio
• Dedicated global engineering support team
• Engaged with worldwide ODMs and system builders
12
LEADING SOLUTIONS FOR SERVERS
AND STORAGE SYSTEMS
I/O
Solutions
Expander &
Switching
Solutions
Highest port
density &
highest
performance
RAID
Solutions
Flash
Solutions
13
Industry-leading
port count &
signal integrity
Flashtec™
Industry’s highest
performance NVMe
controller
PMC IN ENTERPRISE STORAGE
A H I S T O RY O F I N D U S T RY L E A D E R S H I P
2015
2008
2012
2013
1st ControllerBased
Encryption
Solution
Industry’s Highest
Performance
12G SAS Controllers
and Highest Port
Expanders
1st NVMe Enterprise
Flash Controller
enables highest
performing SSDs
2014
1st PCIe Storage
Switch
1st NVRAM Drive
establishes ultrafast storage class
memory tier
Fastest and
Highest Capacity
NVMe SSD
controller
2008
2015
2009
2012
2013
2014
1st 6Gb/s SAS RoC
and SAS/SATA
Protocol
Controllers
1st PCIe Gen 3
RAID Controller
1st Single Chip 24port SAS HBA & 1st
24-port, Low Profile
SAS/SATA RAID
Adapter enable
densification of the
Data Center
1st 16-port SAS
and SATA I/O
Controllers
14
PMC SAS: MARKET SEGMENT LEADER
CONTINUING TO GAIN SHARE
% Of Total SAS Ports Shipped
100%
Other
90%
•
PMC is the market
segment share
leader in 6G SAS
•
PMC to gain >10%
share in the 12G
SAS transition in
server and storage
systems, based on
current design wins
80%
70%
Competitor
60%
50%
40%
30%
20%
10%
0%
2007
2008
2009
2010
2011
2012
2013
2014
7 OF THE TOP 7 STORAGE OEMS AND 3 OF TOP 3 SERVER OEMS
SHIPPING WITH PMC SAS PRODUCTS
SAS market segment share data as of year-end 2014
15
THE STORAGE OPPORTUNITY
D ATA C E N T E R & F L A S H S O L U T I O N S A C C E L E R AT I N G G R O W T H
PMC SAM, $ in Millions
$1.9B
$85
$380
$1.3B
Enterprise SSD Controller
Enterprise SSD Controller
$980
$1.2B
Data Center
Data Center
$275
$310
Storage System
Storage System
2014
2017
PMC poised to capture significant revenue growth from 2014 to 2017
Note – all numbers are based on data from IDC, Gartner & PMC estimates
Data Center includes $80M SAM in 2014 and $90M SAM in 2017 representing printer ASICs to enterprise customers
16
CLOUD DATA CENTERS DEMAND THE
HIGHEST-DENSITY SOLUTIONS
INITIAL DEPLOYMENTS
2014 DEPLOYMENTS
• Initial deployments were based on standard motherboard/form factors
- Challenge: Inefficient, not optimized for Power/Density
• Trend towards customization for hyperscale deployments with
demanding density/power/cost requirements
- OpenCompute, Windows Cloud Servers, OpenStack, Project Scorpio
17
PMC OFFERS HIGHEST DENSITY
SOLUTIONS
HBA: INDUSTRY-LEADING PERFORMANCE
SERIES 8: CORNERSTONE OF
12GB/S PRODUCT LINE-UP
• Industry’s only PCIe Gen3 low-profile/MD2 formfactor with 16 native ports
• Industry’s only 16-port native 12Gb/s SAS
Adapter with embedded flash backup – all within
an LP/MD2 form-factor
• Industry’s first solution to take full advantage of
PCIe Gen3 bandwidth
• Industry’s first SAS/SATA HBA solution capable
of over 1M IOPS
• Advanced SSD caching software, maxCache™,
helps IT managers get the most value and
performance out of their storage assets
• Industry’s only encrypted HBAs with
maxCrypto™ hardware encryption
• Industry leading 700,000+ IOPS; 60% faster
than its predecessor
18
SERIES 8 INDUSTRY REVIEW:
AMAZING THROUGHPUT
“The [Adaptec] ASR-8885 is a great RAID
adapter. It offers 16
ports of 12Gbps
SAS with amazing throughput.
We had no issues hitting 700K
IOPS and 6GB/s. Those are amazing
maximums, but we were more impressed
with the incredible consistency that we
observed. With sub-microsecond variance,
the Series 8 destroyed our latency
tests. Although prices may be high for the
consumer market, the pricing for enterprise
customers is very competitive, especially on
a per port basis.”
- SSD Review –Sept 30, 2013
Note: Review based on Adaptec (by PMC) ASR-8885 12Gb/s PCI Express RAID Adapter
Review – RAID Testing With 8 HGST 12Gbps SSDs
19
DATA CENTERS DEMAND A NEW
PERFORMANCE TIER OF STORAGE
• Hyperscale and enterprise data centers are adopting
low-latency, high-performance PCIe-based performance
storage tier
x16
- Switchtec PSX: Industry’s First PCIe Storage Switches
• Scalability, resiliency, programmability and advanced
diagnostics to scale PCIe
- Flashtec NVMe Controllers: Industry’s Fastest SSD
Controllers
•
•
1 Million IOPS, 20TB of flash capacity
40x2 SSDs
…
Advanced LDPC error correction
Switchtec PSX storage switches and Flashtec NVMe SSD controllers provide
the end-to-end solution to reliably scale the performance tier
20
PMC EXPANDING WITH FAST-GROWING
ENTERPRISE SSD CONTROLLERS
WW ENTERPRISE SSD REVENUE SHARE
BY INTERFACE
ENTERPRISE SSD
PCIe CONTROLLER
SAM
($M USD)
$12,000
$380
$10,000
Millions
$8,000
$6,000
$4,000
$85
$2,000
$2014
2015
PCIe
2016
SATA
2017
2018
SAS
Source: Worldwide Solid State Drive 2014–2018 Forecast and Analysis, Doc # 248727, June 2014
21
2014
2017
FLASHTEC™
INDUSTRY-LEADING NVMe FLASH SOLUTIONS
• Performance Dominance
- Industry’s highest performance NVMe
controller for PCIe SSD and
NV-DRAM applications
• Flexible Architecture
- Customers can easily optimize
and deliver their IP providing
cost/performance (cost per I/O) tuning
• Broad Market Support
- Driver development across all major
Operating Systems and NAND suppliers
22
PMC LEADERSHIP IN FLASH
• Uniquely positioned in the Enterprise
- Focused on enterprise PCI Express (PCIe) SSD controllers
- Leadership products, including:
• World’s first enterprise NVMe flash controllers for PCIe solutions
• World’s first enterprise NVMe NV-DRAM controllers for PCIe solutions
• Fast growing market – transitioning from SAS/SATA to PCIe SSDs
- Much lower latency and 10X the IOPs
• Marquee customers
- Design wins across a broad customer base:
• Tier 1 SSD vendors
• NAND suppliers
• Tier 1 OEM and hyperscale customers
• All-Flash array vendors
• Flashtec™ NVMe Controllers in volume production
23
FLASHTEC™ NVRAM DRIVE
N E W M E M O RY T I E R F O R H Y P E R S C AL E D ATA C E N T E R S T O R AG E
• New ultra-fast storage class memory tier
- 10X higher performance than the fastest SSD
- More than 10 million IOPS in Memory Mapped Access
- 1 million IOPS (4KB) as a block device
- Industry-standard NVMe interface
- Use cases include metadata store in a scale-out file
system or as a caching tier in an all-flash array
24
SWITCHTEC™ PSX STORAGE SWITCHES
S T O R AG E , S E R V E R , D ATA C E N T E R AP P L I C AT I O N S & S S D - AT TAC H E D S T O R AG E
• PCIe Resiliency
‒ Error containment to prevent system crashes
and blue-screening, hot-, surprise-plug support
‒ Extensive diagnostics and debug
• Scalability
‒ Flexible x2/4/8/16 port bifurcation
‒ Up to 60% lower power than other solutions
‒ Highest Port and NTB Density
• Programmable PCIe Switch
‒ PCIe Switch programmability
‒ Integrated enclosure management processor
25
40 SSD FLASH ARRAY
SINGLE-CHIP SWITCHTEC VS. 4-CHIP COMPETITOR SOLUTION
Host
Host
x16
x16
48-lane
switch
96-lane
switch
40x2 SSDs
external
BMC
96-lane
switch
40x2 SSDs
…
…
• 75% Fewer Devices
• 60% Lower Power
26
STORAGE SYSTEM SAM OPPORTUNITY
PMC SAM, $ in Millions
$310
• Switching SAM Growth Drivers
$275
$180
$230
$95
$80
2014
2017
- PCIe switching will accelerate
SAM Expansion
- PCIe SSD growth driving
switch demand
SAS Controller & Storage Switching
PMC is #1 in SAS Switching
FC Network & Interconnect
* Note – all numbers are based on data from IDC, Gartner & PMC estimates
27
PMC WELL POSITIONED IN ENTERPRISE
AND DATA CENTER MARKETS
#1 in SAS ports shipped
#1 in Storage Systems
#1 in Performance
#1 in Density / Port Count
#1 in Enterprise NVMe Flash
Controllers
# 2 in WW Server OEM / Channel
28
CARRIER
PMC IN METRO OPTICAL TRANSPORT
A H I S T O RY O F N E T W O R K L E A D E R S H I P
PMC’s SONET/SDH,
ATM and T1/E1
solutions form the
backbone of global
voice and data
convergence
1990
PMC establishes
early leadership
in networking
with the 1st
SONET device
and the 1st
Asynchronous
Transfer Mode
(ATM) solutions
2000
HyPHY & META
solutions lead
transition to
converged OTN
infrastructure
across IP and
optical
2010
PMC enables new
generation of metro
transport equipment
with both Ethernet
and T1/E1 services
over SONET/SDH
META-240G
Ethernet/OTN
framer with
integrated
encryption for
routers
2015
DIGI-120G
1st OTN
processor for
10G, 40G
and 100G
accelerates
deployment of
OTN Switching
30
META-120G
1st tri-speed
converged
Carrier
Ethernet/OTN
framer
DIGI-G4
1st OTN
processor for
dense 4x100G
enables transition
to 400G OTN
switching in metro
networks
OTN - NEW OPTICAL TRANSPORT LAYER
31
THE CARRIER OPPORTUNITY
PMC SAM, $ in Millions
$1.1B
$290
$960
$475
OTN
OTN
$120
$90
SONET / SDH
SONET / SDH
$550
$560
OPTICAL
PON &
MOBILE
BACKHAUL
2014
2017
PMC poised to significantly increase share in the OTN segment
* Note – all numbers are based on data from IDC, Gartner & PMC estimates
32
PMC LEADING IN OTN SWITCHING
• PMC has been a leader in optical transport for over a decade
• Carriers and Data Centers deploying 100G OTN
- Backbone deployment underway
- Metro deployment is still ahead – bandwidth doubling every two years
- Data Center
Data Center traffic has exceeded Data Center
User traffic
• Leading global optical network transition to 100G OTN Switching
- Enabling 400G OTN switching in metro networks
- Enabling security cloud networking with low latency OTN encryption
- Reducing power by 50% per 100G port at each product generation
- Carrier hardened OTN Switching SDK accelerating OEM time-to-market
• Four generations of OTN processors with wins at 8 of the 9 top OEMs
33
NETWORK ARCHITECTURE OF CHOICE:
100G + OTN SWITCHING + SECURITY
• Increases fiber capacity by 10X
• 40%+ more efficient use of optical
resource
• Makes 100G deployments
economical
• Virtualizes network architecture
• Security for new cloud services
34
INNOVATIVE SOLUTIONS:
OTN PROCESSOR PORTFOLIO
Gen 1:
Gen 2:
Gen 3:
Gen 4:
Transition from
SDH to OTN in
Access and Metro
Optimization of
Transport Network
for Packet
Enabling 10G and
100G Port Cards
Enabling Highest
Density 400G Cards
10G-40G Line Card
Multi-service
SFP/10G
10G-40G Line Card
Multi-service
SFP/10G
with ODU0/flex
100/200G Line Card
Multi-service
10/40/100G
with ODU0/flex
400G Line Card
Multi-service
10/40/100G
with OTN Encryption
IN PRODUCTION
IN PRODUCTION
IN PRODUCTION
SAMPLING
35
WINPATH TM :
LEADERSHIP IN ACCESS AGGREGATION
• Segment leader in hybrid
packet/TDM backhaul with
WinPath NPU
WinPath NPU
4 Generations of Innovation
- WinPath4 purpose-built processor
for 40G Carrier Ethernet Routeron-Chip
- WinPath3 for 10G access backhaul
- WinPath3-SuperLite for enterprise
backhaul and 3G base stations
• OpenFlow-ready Silicon and
Software Architecture
- Programmable data plane to
enable OpenFlow support for SDN
100+ design wins to date
36
CONTINUING TO LEAD JAPAN PON
DEPLOYMENTS
• First to 20M+ ONUs
• First to cut PON power by 50%
20M
ONUs
EPON
• Wide Carrier footprint in PON access
Japan, Korea, Europe
15M
ONUs
• Enabled “ONU in SFP” form factor to
reduce cost & application use cases
10M
ONUs
GPON
EPON
GPON
5M
ONUs
EPON
2006
2009
Today
PMC provides mature and field proven end-to-end solutions for EPON and GPON
37
PMC KEY TAKEAWAYS
• Semiconductor and software solutions innovator
transforming storage, optical, and mobile networks
- Expertise to Connect, Move, and Store Big Data
• Franchise player in key infrastructure segments
- Growth trends: Cloud services, Internet of Things, digitization
of content, mobile proliferation and distribution services
- Leadership in SAS, Flash and OTN technology
• New product cycles in expanding addressable markets:
- Flash, 12G SAS, Hyperscale Data Center, OTN
- New product cycles began in late 2013 & 2014 after years of
investment
- SAM to increase from ~$2.3 Billion to ~$3 Billion between
2014 and 2017
• Strong financial performance
38
OPERATING RESULTS
N O N - G A A P Q 4 ’ 1 3 – Q 3 ’ 1 5 ( $ U S I N M I L L I O N S E X C E P T % AN D E P S )
Q4’13
Q1’14
Q2’14
Q3’14
Q4’14
Q1'15
Q2’15
Q3’15
$126.9
$126.5
$126.8
$135.5
$136.9
$133.1
$124.8
$133.6
90.0
89.1
90.2
95.4
96.4
93.4
87.8
95.1
Gross Profit Margin
70.9%
70.5%
71.1%
70.4%
70.5%
70.2%
70.4%
71.2%
Operating
Expenses
(70.3)
(72.1)
(71.2)
(71.9)
(72.8)
(71.8)
(68.7)
(67.7)
Operating Income
19.7
17.1
19.0
23.5
23.6
21.6
19.1
27.4
Operating Margin
15.5%
13.5%
15.0%
17.3%
17.2%
16.2%
15.3%
20.5%
19.0
16.0
18.3
22.5
22.7
20.9
18.0
26.2
Revenue
Gross Profit
Net Income
EPS
$
0.09 $
0.08 $
0.09 $
0.11 $
0.11 $
0.10 $
0.09 $
0.13
Financial measures shown for periods prior to the fourth quarter of fiscal 2013 (“Q4’13”) may differ from those previously published as a result
of changes made in connection with the restatement of certain GAAP financials as presented in our Annual Report on Form 10-K for fiscal year
ended December 28, 2013 filed on February 26, 2014. Also, for reconciliation between GAAP and non-GAAP financials, please refer to the
quarterly summary published under the Financial Reports tab of the Investor Relations page of the PMCS website.
39
STRONG BALANCE SHEET
( $ U S M E X C E P T D S O S AN D I N V E N T O RY T U R N S )
Key Balance Sheet
Items
Total Cash &
Investments*
Dec
2013
Mar
2014
June
2014
Sep
2014
Dec
2014
Mar
2015
Jun
2015
Sep
2015
$214
$193
$214
$228
$266
$230
$242
$250
Accounts Receivable
$56
$57
$58
$57
$55
$62
$58
$62
Inventory
$31
$30
$31
$35
$38
$36
$36
$33
Revolving Debt
$30
$5
-
-
-
$10
$37
$30
Net Cash
$184
$188
$214
$228
$266
$220
$205
$220
DSOs
40
days
41
days
42
days
38
days
37
days
43
days
42
days
42
days
Inventory Turns
4.8x
5.0x
4.7x
4.7x
4.3x
4.5x
4.1x
4.6x
Capex & IP Additions**
$7.5
$4.2
$4.6
$3.6
$3.0
$4.9
$7.8
$5.1
Depreciation &
Amortization
$4.5
$5.8
$5.4
$5.5
$5.8
$5.7
$6.1
$5.9
Quarterly Metrics
Financial measures shown for periods prior to the fourth quarter of fiscal 2013 (“Q4’13”) may differ from those previously published as a result
of changes made in connection with the restatement of certain GAAP financials as presented in our Annual Report on Form 10-K for fiscal year
ended December 28, 2013 filed on February 26, 2014. Also, for reconciliation between GAAP and non-GAAP financials, please refer to the
quarterly summary published under the Financial Reports tab of the Investor Relations page of the PMCS website.
*Cash + Cash Equivalents + Short-term Investments + Long-term Investment Securities
**Capex is cash purchase of property and equipment from cash flow statement
40
LONG-TERM FINANCIAL MODEL
(NON-GAAP)
Long2014 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Term
Model
2010
2011
2012
2013
Gross Margin %
68.2%
69.3%
70.3%
70.5%
70.6%
70.5%
71.1%
70.4%
70.5%
70.2%
70.4%
71.2% 67-69%
R&D %
27.3%
32.4%
38.3%
38.5%
35.6%
37.0%
36.5%
34.0%
35.1%
34.5%
36.1%
33.2% 27-30%
SG&A %
13.4%
15.0%
17.6%
18.6%
19.2%
20.0%
19.6%
19.1%
18.1%
19.4%
18.9%
17.5% 12-13%
Operating Income % 27.5%
21.9%
14.4%
13.5%
15.8%
13.5%
15.0%
17.3%
17.2%
16.2%
15.3%
20.5% 25-30%
Financial measures shown for periods prior to the fourth quarter of fiscal 2013 (“Q4’13”) may differ from those previously published as a result
of changes made in connection with the restatement of certain GAAP financials as presented in our Annual Report on Form 10-K for fiscal year
ended December 28, 2013 filed on February 26, 2014. Also, for reconciliation between GAAP and non-GAAP financials, please refer to the
quarterly summary published under the Financial Reports tab of the Investor Relations page of the PMCS website.
41
NASDAQ: PMCS
www.pmcs.com