PMC Sierra (PMCS) SC 13D PMC SIERRA / RELATIONAL INVESTORS ownership change

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 13D

Under the Securities Exchange Act of 1934
(Amendment No.     )*

PMC-Sierra, Inc.

(Name of Issuer)

Common Stock, $0.001 par value

(Title of Class of Securities)

69344F106

(CUSIP Number)

Ralph V. Whitworth

Relational Investors, LLC

12400 High Bluff Drive, Suite 600

San Diego, CA 92130

(858) 704-3333

(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)

January 4, 2012

(Date of Event Which Requires Filing of this Statement)

If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of §§240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box. o

Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See §240.13d-7 for other parties to whom copies are to be sent.

* The remainder of this cover page shall be filled out for a reporting person’s initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.

The information required on the remainder of this cover page shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934 (“Act”) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).

CUSIP No.   69344F106
	1.	Names of Reporting Persons. I.R.S. Identification Nos. of Above Persons (Entities Only) Relational Investors, LLC
	2.	Check the Appropriate Box if a Member of a Group (See Instructions)
		(a)			x
		(b)			o
	3.	SEC Use Only
	4.	Source of Funds (See Instructions) OO
	5.	Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e)  o
	6.	Citizenship or Place of Organization Delaware
Number of Shares Beneficially Owned by Each Reporting Person With			7.	Sole Voting Power 16,495,777
			8.	Shared Voting Power -0-
			9.	Sole Dispositive Power 16,495,777
			10.	Shared Dispositive Power -0-
	11.	Aggregate Amount Beneficially Owned by Each Reporting Person 16,495,777
	12.	Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions)o
	13.	Percent of Class Represented by Amount in Row (11) 7.17%
	14.	Type of Reporting Person (See Instructions) IA/HC/OO

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	1.	Names of Reporting Persons. I.R.S. Identification Nos. of Above Persons (Entities Only) Relational Investors Mid-Cap Fund I, L.P.
	2.	Check the Appropriate Box if a Member of a Group (See Instructions)
		(a)			x
		(b)			o
	3.	SEC Use Only
	4.	Source of Funds (See Instructions) WC
	5.	Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e)  o
	6.	Citizenship or Place of Organization Delaware
Number of Shares Beneficially Owned by Each Reporting Person With			7.	Sole Voting Power 11,311,919
			8.	Shared Voting Power -0-
			9.	Sole Dispositive Power 11,311,919
			10.	Shared Dispositive Power -0-
	11.	Aggregate Amount Beneficially Owned by Each Reporting Person 11,311,919
	12.	Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions)o
	13.	Percent of Class Represented by Amount in Row (11) 4.91%
	14.	Type of Reporting Person (See Instructions) PN

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	1.	Names of Reporting Persons. I.R.S. Identification Nos. of Above Persons (Entities Only) Relational Investors Mid-Cap Fund II, L.P.
	2.	Check the Appropriate Box if a Member of a Group (See Instructions)
		(a)			x
		(b)			o
	3.	SEC Use Only
	4.	Source of Funds (See Instructions) WC
	5.	Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e)  o
	6.	Citizenship or Place of Organization Delaware
Number of Shares Beneficially Owned by Each Reporting Person With			7.	Sole Voting Power 5,183,358
			8.	Shared Voting Power -0-
			9.	Sole Dispositive Power 5,183,358
			10.	Shared Dispositive Power -0-
	11.	Aggregate Amount Beneficially Owned by Each Reporting Person 5,183,358
	12.	Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions)o
	13.	Percent of Class Represented by Amount in Row (11) 2.25%
	14.	Type of Reporting Person (See Instructions) PN

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	1.	Names of Reporting Persons. I.R.S. Identification Nos. of Above Persons (Entities Only) Ralph V. Whitworth
	2.	Check the Appropriate Box if a Member of a Group (See Instructions)
		(a)			x
		(b)			o
	3.	SEC Use Only
	4.	Source of Funds (See Instructions) NA
	5.	Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e)  o
	6.	Citizenship or Place of Organization United States
Number of Shares Beneficially Owned by Each Reporting Person With			7.	Sole Voting Power -0-
			8.	Shared Voting Power 16,495,777
			9.	Sole Dispositive Power -0-
			10.	Shared Dispositive Power 16,495,777
	11.	Aggregate Amount Beneficially Owned by Each Reporting Person 16,495,777
	12.	Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions)o
	13.	Percent of Class Represented by Amount in Row (11) 7.17%
	14.	Type of Reporting Person (See Instructions) IN

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	1.	Names of Reporting Persons. I.R.S. Identification Nos. of Above Persons (Entities Only) David H. Batchelder
	2.	Check the Appropriate Box if a Member of a Group (See Instructions)
		(a)			x
		(b)			o
	3.	SEC Use Only
	4.	Source of Funds (See Instructions) NA
	5.	Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e)  o
	6.	Citizenship or Place of Organization United States
Number of Shares Beneficially Owned by Each Reporting Person With			7.	Sole Voting Power -0-
			8.	Shared Voting Power 16,495,777
			9.	Sole Dispositive Power -0-
			10.	Shared Dispositive Power 16,495,777
	11.	Aggregate Amount Beneficially Owned by Each Reporting Person 16,495,777
	12.	Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions)o
	13.	Percent of Class Represented by Amount in Row (11) 7.17%
	14.	Type of Reporting Person (See Instructions) IN

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Item 1.	Security and Issuer
This statement on Schedule 13D (this “Statement”) relates to the common stock, $0.001 par value (the “Shares”), of PMC-Sierra, Inc., a Delaware corporation (the “Issuer” or the “Company”).  The Issuer’s principal executive offices are located at 1380 Bordeaux Drive, Sunnyvale, CA 94089.
Item 2.	Identity and Background
This Statement is being filed by Relational Investors Mid-Cap Fund I, L.P. (“MC I”) and Relational Investors Mid-Cap Fund II, L.P. (“MC II”), collectively, the “Relational LPs.”  Each of the Relational LPs is a Delaware limited partnership.  The principal business of each is securities investment.
This Statement is also being filed by Relational Investors, LLC (“RILLC”), a Delaware limited liability company.  The principal business of RILLC is being the sole general partner or sole managing member of the general partner of certain investment partnerships, including the Relational LPs, and the manager of certain investment accounts.  The Relational LPs are the beneficial owners of the securities covered by this Statement.  Pursuant to the Limited Partnership Agreement of each of the Relational LPs, RILLC has sole investment discretion and voting authority with respect to the securities covered by this Statement.
This Statement is also being filed by Ralph V. Whitworth and David H. Batchelder.  Messrs. Whitworth and Batchelder are the Principals of RILLC, in which capacity they share voting control and dispositive power over certain securities covered by this Statement.  As such, Messrs. Whitworth and Batchelder may be deemed to have indirect beneficial ownership of such securities, but, each of Mr. Whitworth and Mr. Batchelder disclaim beneficial ownership of the Shares except to the extent of his pecuniary interest therein.  The present principal occupation of each of Messrs. Whitworth and Batchelder is serving as Principals of RILLC (Messrs. Whitworth and Batchelder, together with Relational LPs and RILLC, hereinafter, the “Reporting Persons”).
During the last five years, none of the Reporting Persons has been (i) convicted in a criminal proceeding (excluding traffic violations and similar misdemeanors) or (ii) a party to a civil proceeding of a judicial or administrative body of competent jurisdiction, and as a result of such proceeding, was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws.
The business address of each of the Reporting Persons is 12400 High Bluff Drive, Suite 600, San Diego, CA 92130.
Messrs. Whitworth and Batchelder are citizens of the United States.

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Item 3.	Source and Amount of Funds or Other Consideration
The Reporting Persons purchased an aggregate of 16,495,777 Shares for total consideration (including brokerage commissions) of $109.8 million derived from their working capital.

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Item 4.

Purpose of the Transaction.

The Reporting Persons acquired the Shares covered by this Statement because, in their opinion, such Shares are undervalued by the market at the present time. The Company’s Shares have underperformed the Philadelphia Semiconductor Index and the semiconductor “Peer Group,” as defined by the Company for comparative purposes in its Definitive Proxy Statement on Schedule 14A on March 22, 2011, over the last one-, two- and three-year periods.  The Shares have also underperformed the broader market Russell 1000 Index over this same period. The Reporting Persons believe the Company’s share price does not adequately reflect the longer-term earnings and cash flow generating potential that is currently depressed due to delays in converting design wins to sales.  In addition, the Company maintains a net cash balance (cash, short-term investments and investment securities, less short and long-term debt) as of October 2, 2011, as reported by the Company on its Form 10-Q dated November 10, 2011, representing approximately 30% of the Company’s market capitalization as of January 13, 2012. The Reporting Persons believe the Share discount is at least partially attributable to the Company’s business mix and capital allocation strategy.  While the Reporting Persons believe that anticipated sales growth in both the Optical and Mobile segments will lead to an improved valuation, to the extent these sales do not materialize and the discount persists, the Company’s board may need to consider broader strategic alternatives.  Since their initial investment in January 2011, the Reporting Persons have maintained a dialogue with the Company’s management and members of the board and have periodically presented their views and concerns. While the Reporting Persons have gained confidence in the Company’s board and management and their ability to maximize shareholder value going forward, the Company’s sub-optimal size and diverse business mix create numerous capital allocation challenges in maximizing R&D spending efficiency.  Longer-term, to improve R&D efficiency and achieve scale benefits, it may be necessary to rationalize the business mix and/or pursue industry consolidation. The Reporting Persons intend to closely monitor management’s progress toward improving the Company’s operations and ultimately the share price.  Depending on such progress (or lack thereof) the Reporting Persons may modify their plans. The Reporting Persons and their representatives and advisers intend to continue from time to time to discuss the Company and its performance with members of the Company’s board and management.  In addition, the Reporting Persons and their representatives and advisers may communicate with other shareholders, industry participants, and other interested parties concerning the Company.  Although the Reporting Persons do not have any current plans other than the monitoring program outlined above, the Reporting Persons may in the future exercise any and all of their respective rights as shareholders of the Company in a manner consistent with their equity interests, including seeking representation on the Company’s board of directors at a special or annual meeting of the Company’s shareholders.

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The Reporting Persons may from time-to-time (i) acquire additional Shares (subject to availability at prices deemed favorable) in the open market, in privately negotiated transactions or otherwise, or (ii) dispose of Shares at prices deemed favorable in the open market, in privately negotiated transactions or otherwise.

As of the date of this Statement, except as set forth above, none of the Reporting Persons has any present plan or intention which would result in or relate to any of the actions described in subparagraphs (a) through (j) of Item 4 of Schedule 13D.

Item 5.

Interest in Securities of the Issuer

(a)           As of the date of this Statement, the Reporting Persons beneficially own in the aggregate 16,495,777 Shares, constituting approximately 7.17% of the outstanding Shares.  The percentage of Shares owned is based upon 230,186,366 Shares reported to be outstanding on November 4, 2011, as set forth in the Issuer’s Quarterly Report on Form 10-Q for the quarter ended October 2, 2011.  The Reporting Persons may be deemed to have direct beneficial ownership of the Shares as follows:

NAME	NUMBER OF SHARES	% OF OUTSTANDING SHARES	VOTING AND DISPOSITIVE POWER
RILLC	500	0.00%	Sole
MC I	11,311,919	4.91%	Sole
MC II	5,183,358	2.25%	Sole

RILLC, as the sole general partner, of each of Relational LPs may be deemed to beneficially own (as that term is defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended) the 16,495,777 Shares beneficially owned by the Relational LPs because the limited partnership agreements of the Relational LPs specify that RILLC has sole investment discretion and voting authority with respect to those Shares.

Each of Messrs. Whitworth and Batchelder, as Principals of RILLC, may be deemed to share indirect beneficial ownership of the Shares which RILLC may beneficially own.  Each of Messrs. Whitworth and Batchelder disclaims beneficial ownership of such Shares except to the extent of his pecuniary interest therein.

To the best of the knowledge of each of the Reporting Persons, other than as set forth above, none of the persons named in Item 2 is the beneficial owner of any Shares.

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(b)           See item (a) above.
(c)           Information concerning transactions in the Shares by the Reporting Persons during the past 60 days is set forth in Exhibit A filed with this Statement.
(d)           No other person is known to have the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, the Shares covered by this Statement, except that dividends from, and proceeds from the sale of, the Shares held by accounts managed by RILLC may be delivered to such accounts.
(e)           Not applicable.
Item 6.	Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer
Except for the joint filing agreement between and among the Reporting Persons attached hereto as Exhibit B, and except for the investment discretion and voting authority described in Item 2 of this Statement and in the respective partnership agreements of the Relational LPs which each contain provisions whereby RILLC may, after certain adjustments, receive a percentage of realized or unrealized profits, if any, derived from that partnership’s investments, to the best of the knowledge of the Reporting Persons, there are no contracts, arrangements, understandings or relationships (legal or otherwise) among the Reporting Persons or between the Reporting Persons and any other person with respect to any securities of the Issuer, including but not limited to transfer or voting of any of the securities, finder’s fees, joint ventures, loan or option arrangements, puts or calls, guarantees of profits, division of profits or loss, or the giving or withholding of proxies.
Item 7.	Material to be Filed as Exhibits
	The following Exhibits are filed herewith: Exhibit A – Information concerning transactions in the Shares affected by the Reporting Persons in the last 60 days. Exhibit B – Joint Filing Agreement.

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Signature

After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.

Dated:  January 17, 2012

RELATIONAL INVESTORS MID-CAP FUND I, L.P.
RELATIONAL INVESTORS MID-CAP FUND II, L.P.

By:	RELATIONAL INVESTORS, LLC
	as general partner to each,

	By:	/s/ Ralph V. Whitworth
		Ralph V. Whitworth, Principal
RELATIONAL INVESTORS, LLC
	By:	/s/ Ralph V. Whitworth
		Ralph V. Whitworth, Principal
/s/ Ralph V. Whitworth
Ralph V. Whitworth
/s/ David H. Batchelder
David H. Batchelder

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EXHIBIT INDEX

Exhibit	Description
A.	Information concerning transactions in the Shares affected by Reporting Persons in the last 60 days.
B.	Joint Filing Agreement

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