New York — M/A-COM Technology Solutions Holdings Inc.'s recent $272 million cash deal to acquire Mindspeed Technologies Inc. accelerates the RF chip supplier's goal of becoming a dominant semiconductor supplier to the 100G optical networking sector.
Last week, M/A-COM announced that it agreed to acquire Mindspeed for $5.05 per share. The deal represented a 70 percent premium over the closing price of $2.97 on November 5, 2013.
While Mindspeed is better known for its communications processors business, its appeal for MACOM lies in its high-performance analog products for high-speed switching and signal conditioning as well as its VoIP business, which combined account for approximately 60 percent of its revenue with gross margins approaching 70 percent. Products include low-latency crosspoint switches, integrated optical physical media devices, and low-power signal conditioners.
In a recent conference call with analysts, John Croteau, president and chief executive of M/A-COM, said:
Within 100G, M/A-COM will become the only vendor addressing all segments, long-haul metro and data centers, with a complete portfolio of physical media devices, modulator drivers, transimpedance amplifiers, and clock and data recovery circuits, based on all requisite technologies -- helium phosphite, gallium arsenide, silicon germanium, all of them.
In addition to access to the enterprise sector, Mindspeed gives M/A-COM silicon germanium-based capability, allowing it to address new applications and additional system content in its core RF and microwave customers and applications, he added. And it gives it an established sales channel in Asia Pacific, enabling M/A-COM to expand its worldwide customer base.
Mindspeed's wireless business, which accounts for 11 percent of its revenue, is up for sale since it does not fit into M/A-COM's business strategy. If it is not sold, M/A-COM will restructure and wind down the business while continuing to support its customers. M/A-COM is evaluating "strategic options" for Mindspeed's communications processor business, which accounted for 45 percent of its third-quarter revenue of $36 million.
In M/A-COM's 2013 fourth fiscal quarter ended September, revenue was $83.7 million. The companies' combined trailing 12 months revenue is approximately $451 million with non-GAAP gross margin of approximately 50 percent, excluding Mindspeed's wireless business.
— Ismini Scouras is a freelance writer for EE Times.