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Pulse: Applied Micro and Juniper's Reports Buoy Communications Chip Stocks

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Communications semiconductors kept the

Philadelphia Stock Exchange Semiconductor Index

, or SOX, up today, thanks to a buoyant earnings report from industry leader

Applied Microcircuits

(AMCC)

and a little help outside the sector.

Applied Micro closed up $10, or 14.2%, to $80.38 and brought other communications chip stocks with it, after reporting earnings that beat Street estimates yesterday by 2 cents a share and revenue that was well ahead of analysts' projections.

But it wasn't only Applied's news that provided the lift -- the communications chips got a boost because

Juniper Networks'

(JNPR) - Get Juniper Networks, Inc. (JNPR) Report

strong report that relieved concern over a possible inventory backlog. Juniper closed up $8.19, or 6.4%, to $136.19.

Vitesse Semiconductor

(VTSS)

rose $8.06, or 14.8%, to $62.50, and

PMC-Sierra

(PMCS)

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closed up $11.75, or 14.7%, to $91.69, far outrunning the SOX, which rose 6.3%.

The chips sell into optical networks, one of the higher-flying sectors in tech. And sales have benefited from the trend by large manufacturers to buy components from outside the company for new products, said Karl Motey, analyst for

C.E. Unterberg Towbin

. (His firm has not done underwriting for the three companies named.)

But communication companies, which help direct the traffic in high-speed data networks, were held previously to be vulnerable to conditions at major customers

Cisco

(CSCO) - Get Cisco Systems, Inc. Report

,

Nortel

(NT)

and

Lucent

(LU)

. The stocks fell sharply in November after Nortel announced in late October that it saw sales for its communications networks slowing down and Cisco said that its components inventory had increased. During the month after the Nortel announcement, Applied Micro dropped 45%, Vitesse fell nearly 14% and PMC-Sierra lost more than 46%.

The stockpiling fear was legitimate, said Motey. But Juniper's strong showing in beating earnings estimates by 6 cents a share have given investors confidence in the strength of the stocks, perhaps too much.

"Investors are concluding that maybe it's just a Cisco problem. I don't think so. If the world economy is slowing, why would only one company get hit?"