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Chipmakers Turn to Storage

It's not exactly the breakup of The Beatles, but ever since the dot-com deflation began, the telecom chipmaker triad of PMC-Sierra Inc. (Nasdaq: PMCS), Vitesse Semiconductor Corp. (Nasdaq: VTSS), and Applied Micro Circuits Corp. (AMCC) (Nasdaq: AMCC) have begun going their separate ways.

A few years ago, all three were jewels of the semiconductor industry: telecom boutiques enjoying the high margins associated with long-haul networks. But each had to spend 2002, and much of 2001, coming up with a new game plan.

Now, a new area of growth for two of these players Vitesse and PMC – is the Fibre Channel market. The results are taking shape, as reflected in the companies' earnings reports during the past week. Vitesse's escape from long-haul is almost complete, although it's still got high hopes for Sonet chips. PMC hasn't fled the service-provider scene yet, but executives are shoring up other businesses as contingency plans. But AMCC has stood pat for now, although the company's got the cash to find a new direction if it has to.

Vitesse Stores up for Winter

In Vitesse's case, the changes made for a surprisingly upbeat call with analysts on Monday. The firm isn't quite storming back, but CEO Lou Tomasetta said Vitesse's makeover is starting to yield results (see Vitesse Reports Flat Q1).

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