PMC-Sierra Inc. has agreed to purchase privately owned SwitchOn Networks
Inc. for $450 million, in an effort to expand its broadband-communications revenue base
and gain entry into several new markets, including web switches and security systems.
The transaction adds high-speed classification and packet processing
technology to PMC-Sierra's stable of telecom products and is expected to
deepen the company's broadband communication chips offering.
The explosion of the Internet and the resulting demand for fatter data and
video traffic pipes is pushing companies like PMC-Sierra and its
competitors to plug holes in their portfolio of web switching and Internet
Protocol routing products by acquiring smaller players. With the pool of
potential acquisitions dwindling, the leading players are being forced to
pay a high premium for their purchases, analysts said.
PMC-Sierra, Burnaby, B.C., is betting that the money it is spending on SwitchOn Networks
will give it a toehold in new markets and expand its engineering team.
With this acquisition, the company gains a total of 90 employees in
Milpitas, Calif., and Pune, India.
This deal gives PMC-Sierra "what we consider to be some of the best packet
classification technology in the world, along with knowledgeable and
talented design teams in California and India," said Bob Bailey,
PMC-Sierra's chairman and chief executive. "We continue to be committed to
provide best-in-class architectural solutions for our customers and
SwitchOn is an important element of this strategy."
SwitchOn Networks provides standard semiconductor and software components
to what company executives described as "the emerging market of content
and policy-based networking." The company's products enable applications
such as load balancing, universal resource location switching, VPN and
firewall at wire speed exceeding OC-48, the company said.
By agreeing to be acquired by one of Wall Street's favorite technology
companies, SwitchOn Networks gains instant access to a larger pool of R&D
and manufacturing capital. The company will also be able to market its
products to PMC-Sierra's blue-chip communications and networking OEM
"This combination will allow us to increase our customer base
significantly because of PMC-Sierra's extensive market reach," said Moti
Jiandani, president and chief executive of SwitchOn Networks. "The
ultimate winners will be our customers who will now enjoy PMC-Sierra's
world class customer support."