SAN FRANCISCO—Microsemi Corp. has no intention of killing off any Actel Corp. product lines following the anticipated close of the $430 million tender offer the company made for Actel earlier this week, according to Russell Garcia, Microsemi's executive vice president of marketing and sales.
"These products are so differentiated in the marketplace," Garcia said. "We want to take full advantage of that and continue to grow and build on it."
Instead, Garcia said, Microsemi would shy away from seeking new design wins in sockets where the appeal of Actel products is not sufficient to command high margins. Garcia said Microsemi would channel engineering, marketing and sales resources to focus on design wins in applications where Actel's low-power, mixed-signal and radiation-hardened FPGAs offer the most value to customers and thus would generate the most profitability to Microsemi.
"The only reason you don't get the value for your differentiation is that the customer doesn't see the valuation," Garcia said. "Otherwise they are willing to pay more for it."
Garcia said applications where Actel's technology is sufficiently differentiated to command higher margins include not only many military and aerospace end markets but also medical, industrial and even some consumer grade applications.
"We just aren't going to compete one on one in a mass market arena where our low power differentiation is not valued," Garcia said. "It's that simple."
Garcia's comments came two days after Microsemi President and CEO James Peterson, in a conference call with analysts to discuss the $430 million tender offer, made comments that many interpreted to mean Microsemi would discontinue some Actel product lines where Microsemi felt that it was trailing the leading programmable logic vendors, Xilinx Inc. and Altera Corp.
Peterson never specifically stated that Microsemi would kill some Actel product lines, but made statements suggesting that Actel would no longer chase the market leaders in some commercial applications.
"Where we can differentiate and add value while driving high-growth opportunities we will do so," Peterson said. "Where dollars have been spent chasing an entrenched incumbent, we will disengage."
Peterson also said during the call, "I intend to walk away from commercial business that dilutes profitability." Later, he suggested that Actel might have taken on some business in an effort to "take down the two big dogs" and said that in some areas Microsemi wouldn't chase Xilinx and Altera.
@dylan.mcgrath: thanks for the clarification. It took less than two days for the big chiefs to backtrack on their statements. I would love to revisit this story a year from now!
@elPresidente: I buy your explanation! Customers do see the wisdom in going to an alternate design from a different source if prices are raised. Actel products may see end of life sooner than their customers think!
As part of an acquisition in the past, I have heard that statement before, "yeah we will support all products", right! As one of you said above, it's a profit game, as soon as a product drops, it's on the "not recommended for new designs list", then later when sales dip further, it's typically End of Life... but perhaps they are different?
After listening to Peterson's conference call about the merger, I am believe that Peterson was very straight-forward about his plans for Actel although delivered in a Freudian-slip like amateurish manner.
By the time that Microsemi's management realizes that FPGAs products are significantly more complex to create, support and sell than discrete components, the number of Actel's knowledge workers will have dropped to unrecoverable levels.
My question is whether the intangibles from an offer from Company C (or B) would have offset the relatively small ( ~5 %) share price ?
Couldn't you push back your hedge fund board members harder ?
This is the way the world ends
This is the way the world ends
This is the way the world ends
Not with a bang but a whimper.
The Hollow Men - TS Elliot
Marketerspeak possible translation: "we're not going to kill any products like my boss said to everybody a couple of days ago, I'm just going to raise prices until those customers just go away or continue to pay through the nose to keep the product".
Looks like there may be an Exec VP marketing opening at Microsemi real soon....
This is a welcome clarification, thanks. Having used both Actel and Altera/Xilinx, for very different purposes, the idea that Actel were pursing the exact same sockets was a bizarre thing to read. Each family shines in different ways.
@Sheetal.Pandey: Some background on the damage control aspect- Actel/Microsemi contacted me because the idea that products would be discontinued obviously made customers nervous. On the analyst call, Peterson made it very clear that Microsemi would pull Actel back from certain applications to cut costs and increase profitability. I took that to mean that they would kill certain products, but in fact Peterson never used the word product-- he only said they would walk away from some business. Russell Garcia said the word product was deliberately omitted from any messaging because that is not what they plan to do. And he went on the record stating in no uncertain terms that they don't plan to kill any products.
In my opinion, Peterson emphasized cutting costs and increasing profitability on the analyst call because that plays well to that audience. It's not completely clear to me how you save meaningful dollars by stopping targeting certain sockets if you are still manufacturing the product (which would seem to be the bulk of the investment). But I do understand after talking with Garcia that, at least in Microsemi's mind, there are certain apps where customers are willing to pay more for Actel's low power and other differentiating factors and that they can clear higher margins by focusing all attention on those apps.
Microsemi is very strong in Hi-Rel power and RF semiconductors. And Actel is also pioneer in space grade and military programmable logic. By acquiring Actel, Microsemi may have new product line in mind. It will combine embedded intelligence of Actels FPGAs with their unique power and RF products. This will provide smart power and RF products for military and space market.
But many comapnies after acquisition kills the product of the acquired company that have low revenue and profit. Sometimes if they conflict with their own products chances are high.lets wait and watch. Definitely some damage control is being done here.
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