Citing a spending slowdown in China that could dampen revenue growth for PMC-Sierra Inc., an analyst on Monday downgraded the maker of communications and storage chips.
"Though well positioned from a competitive standpoint, we expect PMC to go from firing on 3-4 cylinders to 1-2 cylinders in (2010)," analyst Romit J. Shah wrote in a note to investors.
Shah downgraded PMC to "Equal-Weight" from "Overweight" but kept his target price on the stock at $9.
He said revenue at the company's communications segment, which makes up 35 percent of total sales, could decline next year due to lower capital spending in China, which accounted for about 30 percent of the world's mobile infrastructure capital expenditures in 2009.
The analyst said he expects government and company spending on equipment in China to decline 20 percent to 25 percent year-over over year next year $10 billion.
Shares of Santa Clara, Calif.-based PMC-Sierra slipped 11 cents to $8.53 in afternoon trading.