SAN FRANCISCO—Chip vendor Integrated Device Technology Inc. (IDT) said Monday (April 30) it signed a definitive agreement to acquire connectivity chip vendor PLX Technology Inc. in a cash and stock deal worth about $330 million.
Also Monday, IDT announced it acquired frequency control products vendor Fox Electronics for about $30 million in cash.
IDT (San Jose, Calif.) said it would acquire all outstanding shares of PLX. Under the terms of the deal, IDT will pay all PLX shareholders $3.50 in cash plus 0.525 shares of IDT common stock for each share of PLX. Based on IDT's closing price last week, the value of the deal is roughly $7 per share of PLX, IDT said. Both companies' boards unanimously approved the deal, which still requires the approval of PLX shareholders, IDT said.
Ted Tewksbury, IDT's president and CEO, said through a statement that the proposed acquisition of PLX would expand IDT's core serial switching and interface business.
"Our two companies have complementary product sets, technologies and customer bases, and we share a focus on delivering the highest-performance system-level interconnect solutions for data centers and other applications," Tewsbury said.
IDT said it expects to achieve cost synergies, excluding transaction related charges, of more than $35 million in its next fiscal year. The companies expect that the proposed transaction will close as early as the second calendar quarter of this year.
Under the terms of the merger agreement, PLX may solicit additional proposals from third parties for a “go shop” period of 30 calendar days continuing through May 30, IDT said. The merger agreement provides IDT with a customary right to match a superior proposal, the company said.
IDT, founded in 1980, made its name making digital semiconductors, but in recent years has undergone a strategic shift toward more mixed-signal products. PLX (Sunnyvale, Calif.) is known for PCI Express switches, bridges and 10GBase-T PHY chips and also markets consumer storage controllers as well as general purpose USB controllers.
Fox Electronics, a private company based in Florida, markets a portfolio of frequency control solutions, including the XpressO family of quick-turn oscillator products, quartz crystals, voltage-controlled crystal oscillators and more, IDT said. The company added that Fox's frequency control products sales team would be a valuable asset to grow IDT’s crystal and CrystalFree product offerings.
Also Monday, IDT reported sales of $119.1 million for its fourth quarter of fiscal 2012, which closed April 1. IDT's sales for the quarter were down on both a sequential and annual basis, but exceeded consensus analysts' expectations of about $117.3 million, according to Yahoo Finance.
For the fiscal year 2012, which also closed April 1, IDT reported sales of $526.7 million, down 13 percent from fiscal 2011. The company reported a net income for the quarter of $58.5 million, down 16 percent from fiscal 2011.
"We achieved top and bottom line results that exceeded our expectations for our fiscal fourth quarter as a result of strong sales from our communications and computing segments and higher gross margins," Tewksbury said in a separate statement. Tewksbury added that IDT's fiscal fourth quarter results reflect improving trends in the company's communications and enterprise computing businesses. Revenue from new products accounted for 13 percent of IDT's sales in the quarter, up from 10 percent in the fiscal third quarter, Tewksbury said.
Coincidentally, PLX also reported quarterly results Monday. The firm reported that first quarter sales declined on both a sequential and annual basis to $25.4 million. PLX's first quarter sales came up short of consensus analysts' expectations of about $26.8 million, according to Yahoo Finance.
"Our product revenue grew five percent in the quarter, driven by a 12 percent growth rate in PCI Express," said Ralph Schmitt, PLX president and CEO, in a statement. "Our overall revenues were within our guidance range, but toward the lower end as some IP revenue slipped into Q2 due to ongoing strategic combination activities."
Schmitt said PLX's bookings strengthened progressively in the first quarter, indicated that a market recovery is underway. "As a result, we are optimistic that we will see growth in Q2," Schmitt said.
I guess you have Pericom as a competitor? Also what about Intel - most of their chipsets already incorporate PCIe. My guess is that IDT won't have too much pricing power even after buying PLXT - their OEM customers should be strong enough in pricing discussions to discipline IDTI. Also it seems that PCIe switches are pretty straightforward and commoditized these days and not difficult to develop - so any other chip producer could also do it and enter the market? However, not really sure how important the high-performance switches with 64 or 96 lanes are and where those are used.
Any views on those points?
"Our two companies have complementary product sets" in my view is a lie, and i suspect this is about the elimination of competition. because so far the only alternative to PLX PCIe switches was IDT. or is there any other vendor that makes PCIe switches with 24 to 96 lanes?