PLX Technology, a provider of PCI Express switches and bridges, spent most of last year preparing to be acquired by Integrated Device Technology Inc. (IDT). In April, IDT announced it would acquire PLX in a cash and stock deal worth about $330 million.
That's when the regulators got involved. The U.S. Federal Trade Commission (FTC) did an initial review of the proposed merger, then decided it wanted to take a closer look. When the FTC decided to do a secondary review of the deal, it became an enormous, time-consuming and expensive process, according to David Raun, PLX's president and CEO.
Ultimately, the FTC commissioners voted to forbid the merger from moving forward. According to Raun, the FTC determined that the merger would lead to a monopoly that would result in price increases and stifle innovation.
Raun did—and still does—disagree with the decision. According to him, PLX's main competition is (like many others) Intel Corp. Raun said he was frustrated because, in his view, the commissioners do not really understand the semiconductor industry, and though he interacted with dozens of FTC staff members, he did not encounter anyone with strong semiconductor industry experience.
"You have to understand the competitive landscape before you can make that judgment, from my perspective," Raun said.
But a ruling is a ruling. Shortly after the FTC's decision, PLX and IDT—rather than fight the FTC in what would have been another long, time-consuming and expensive process—terminated the merger agreement.
Now, a leaner PLX is back to focusing on a standalone company. Raun maintains PLX has no plans to find another buyer. In the past few months, PLX has shed unprofitable products—chiefly 10GBASE-T chips—and is focused 100 percent on PCI Express Gen3 switches. The company shed about 60 employees—those who were involved with the 10GBASE-T chips—and about $20 million in annual operating expenses. Whereas the company had been losing $5 million to $9 million per quarter, analysts now expect PLX to be profitable in 2013 and 2014.
Raun said he has mixed feelings about the merger being squashed. "The merger would have been good for the industry," he said, citing the combination of IP that would have resulted.
But the moves that PLX made as it prepared for the merger leave the company in a much stronger position going forward, Raun said. "The company is in a good position," Raun said. "Morale is very high about remaining an independent company."