An important measure of the worth of a firm is the recognition it receives for service and support. There is a Santa Clara, California chip maker that regularly receives awards in that arena from the best possible sources.....its customers.

PMC-Sierra (NASDAQ: PMCS) provides broadband communications and storage semiconductors for the communications service provider, storage, and enterprise markets. Its switches, mappers, multiplexers, and other chips handle various protocols, including Ethernet, voice over Internet, and asynchronous transfer mode. Major customers include Alcatel-Lucent (NYSE: ALU), Cisco Systems (NASDAQ: CSCO), EMC (NYSE: EMC) and Hewlett-Packard (NYSE: HPQ). PMC-Sierra offers worldwide technical and sales support, including a network of offices throughout North America, Europe, Israel and Asia.

The firm surprised investors last week, when it said that it was undertaking a corporate restructuring that was expected to reduce ongoing annualized operating expenses by an estimated $20-$24 million per year. That led management to predict that Q1 revenues would ultimately fall between the middle and the high end of the previously announced $98-$105 million guidance range. On average, the Street had been expecting $101.99 million. UBS and Stifel Nicolaus subsequently reiterated "buy" ratings on the issue and declared price targets in the $9-$10 range. PMCS shares broke through concentrated moving average resistance on the news and have since been defining a bullish "pennant" consolidation pattern. Prices frequently exit pennants moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.

Altogether, brokers recommend the issue with one "strong buy," three "buys," ten "holds" and one "sell." Analysts see a 100% growth rate, through the next year. The PMCS Price to Sales ratio (3.50), Price to Book ratio (2.57) and Sales Growth rate (31.41%) compare favorably with industry, sector and S&P 500 averages.

Institutional investors hold about 94% of the outstanding shares. The stock is one of those used to calculate the S&P 500 Index. Over the past 52 weeks, it has traded between $4.78 and $13.77. A stop-loss of $6.10 looks good here. Note that the firm is expected to report Q1 earnings on April 25th, after the close.

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.