PMC-Sierra Reports Fourth Quarter and Fiscal 2006 Results.

* Q4 2006 Net Revenues: $ 101.9 million

* Q4 2006 Non-GAAP Net income: $ 4.7 million; $0.02 per share (diluted)

* Q4 2006 GAAP Net loss: $ (42.2) million; $(0.20) per share (diluted)

SANTA CLARA, Calif. -- PMC-Sierra, Inc. (NASDAQ:PMCS), a leading provider of broadband communications and storage semiconductors, today reported results for the fourth quarter ending December 31, 2006.

Net revenues in the fourth quarter of 2006 were $101.9 million, a decrease of 13% compared to $116.5 million for the third quarter of 2006 and 31% higher than the fourth quarter of 2005.

Net income in the fourth quarter of 2006 on a non-GAAP basis was $4.7 million (non-GAAP diluted earnings per share of $0.02) compared to non-GAAP net income of $17.4 million (non-GAAP diluted earnings per share of $0.08) in the third quarter of 2006. GAAP net loss in the fourth quarter of 2006 was $42.2 million (GAAP loss per share of $0.20) compared to GAAP net loss of $11.5 million in the third quarter of 2006 (GAAP loss per share of $0.05). The increase in our GAAP net loss in the fourth quarter was primarily due to an increase in our tax provision arising from a change in our estimate of tax liability for prior years as a result of a written communication we received in 2007 from a tax authority.

Non-GAAP net income in the fourth quarter of 2006 excludes: (i) $29.9 million additional tax expense related to prior years; (ii) $11.4 million stock-based compensation expense; (iii) $10.1 million amortization of purchased intangible assets; (iv) $3.5 million foreign exchange gain on Canadian taxes; (v) $0.5 million restructuring cost; and (vi) $1.4 million income tax effect relating to these non-GAAP adjustments.

For the year ended December 31, 2006, net revenues were $425.0 million compared with $291.4 million for the year ended December 31 2005, an increase of 46% year-over-year. Non-GAAP net income in 2006 was $57.9 million (non-GAAP diluted net income per share of $0.28) compared with non-GAAP net income of $37.5 million (non-GAAP diluted net income per share of $0.20) for the prior year. GAAP net loss in 2006 was $99.9 million (GAAP net loss per share of $0.49) compared with the prior year's GAAP net income of $28.0 million (GAAP diluted net income per share of $0.15).

For a full reconciliation of GAAP net income to non-GAAP net income, please refer to the supplemental schedule on page 7 of this release. The Company believes the additional non-GAAP measures provided are useful to investors for the performance of financial analysis. Management uses the non-GAAP measures internally to evaluate its in-period operating performance and to plan for the Company's future periods. However, non-GAAP measures are neither stated in accordance with, nor are they a substitute for, GAAP measures.

"In 2006, PMC-Sierra's revenues and market position improved following the acquisitions of the Avago storage semiconductor business and the Passave Fiber To The Home business," said Bob Bailey, chairman and chief executive officer of PMC-Sierra. "PMC-Sierra now has a more diversified product line and broader customer base, and we're well-positioned in both the service provider and enterprise storage markets as we enter 2007."

In the fourth quarter of 2006, PMC-Sierra made the following announcements:

* Korea Telecom FTTH: PMC-Sierra and DASAN Networks, Korea's leading supplier of broadband access equipment, announced that Korea Telecom selected DASAN Networks for deployment of Fiber To The Home (FTTH) equipment in the greater Seoul area. DASAN's EPON FTTH solution is based on PMC-Sierra's FTTH chip set for central office and customer premises equipment. DASAN Networks expects the number of subscribers under this deployment to reach 800,000 in the 2007 calendar year.

* TEMUX 336: we announced the TEMUX 336, the industry's most integrated and scalable framer solution for next-gen voice, wireless and router platforms. The TEMUX 336 meets density and feature requirements of both proprietary and AdvancedTCA/Advanced Mezzanine based equipment, enabling carriers to cost-effectively upgrade their equipment. Feature integration and scalability make TEMUX 336 the ideal solution for high-density SONET/SDH, T1/E1 and DS3/E3 line cards used in voice/media gateways, wireless infrastructure and routers.

* Multi-Service Residential Gateway Platforms: we announced a suite of multi-service residential gateway reference platforms for the industry's broadest range of advanced broadband access protocols. The MSP7100-based platforms are available in a broad range of configurations including ADLS2+, VDSL2, Ethernet and EPON to enable delivery of carrier-grade services into the digital home. These platforms, based on PMC's VoIP-enabled Multi-Service Processor family, allow OEMs and ODMs to rapidly develop high-performance residential gateways for enhanced Triple Play service delivery.

* Next-Gen EPON Solutions: we announced the industry's first EPON optical network unit (ONU) and optical line terminal (OLT) silicon devices that support China Telecom defined algorithms for the Chinese telecom market. The new ONU for customer premises equipment and OLT for central office equipment provide an end-to-end EPON solution ideal for high volume deployments in China. The two system-on-chip devices are the first to meet China Telecom standards that define data encryption and decryption algorithms, quality of service procedures and classification protocols.

* Next-Gen SONET/SDH Framer: we introduced the ARROW 2488, a feature-rich, high capacity single-chip solution that combines multi-rate SONET/SDH framers, non-blocking STS/AU and VT/TU cross-connect, and best-in-class backplane SERDES for next-gen compact and scalable chassis-based SONET/SDH platforms. Carriers are driving the adoption of converged networks to more effectively manage both new Ethernet services and existing T1/E1 services over their SONET/SDH infrastructures.

Fourth Quarter Conference Call

Management will review the fourth quarter 2006 results and provide guidance for the first quarter of 2007 during a conference call at 1:30 pm Pacific Time/4:30 pm Eastern Time on January 25, 2007. To listen to the call, investors can access an audio webcast of the conference call on the Financial Events and Calendar section at http://investor.pmc-sierra.com/. A replay of this webcast will be posted and available two hours after the conference call has been completed. To listen to the conference call live by telephone, please dial [phone] approximately ten minutes before the start time. A telephone replay will be available 15 minutes after the completion of the call and can be accessed by dialing [phone] (replay access code is 9329344). A replay of the webcast will be available for five business days.

First Quarter 2007 Conference Call

PMC-Sierra is planning on releasing its results for the first quarter of 2007 during the last week of April. A conference call will be held on the day of the release to review the quarter and provide an outlook for the second quarter of 2007.

Safe Harbor Statement

This press release contains forward-looking statements, including statements regarding PMC-Sierra's position in the service provider and enterprise storage markets, which are subject to risks and uncertainties. Actual results may differ from projections. The Company's SEC filings describe more fully the risks associated with the Company's business including PMC-Sierra's limited revenue visibility due to variable customer demands, orders with short delivery lead times, inventory levels in the supply chain, customer concentration, and changing environments in the different segments and regions of the business. The Company does not undertake any obligation to update the forward-looking statements.

About PMC-Sierra

PMC-Sierra(TM) is a leading provider of broadband communications and storage semiconductors for metro, access, fiber to the home, wireless infrastructure, storage, laser printers and customer premises equipment. PMC-Sierra offers worldwide technical and sales support, including a network of offices throughout North America, Europe, Israel and Asia. The company is publicly traded on the NASDAQ Stock Market under the PMCS symbol and is included in the S&P 500 Index. For more information, visit www.pmc-sierra.com.

[c]Copyright PMC-Sierra, Inc. 2007. All rights reserved. PMC, TEMUX and Multi-Service Processor are registered trademarks of PMC-Sierra, Inc. in the United States and other countries. PMC-SIERRA, PMCS and "Enabling connectivity. Empowering people." are trademarks of PMC-Sierra, Inc. Other product and company names mentioned herein may be trademarks of their respective owners.

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