MediaTek buys ADI's cellular chip operations

LONDON — One of Taiwan's top fabless chip groups and consumer chip designers, Mediatek Inc., has bought, for about $350 million in cash, Analog Devices Inc's baseband chips product lines as well as some of ADI's cellular handset baseband support operations.

Reports surfaced two months ago of an impending deal. At the time, analyst Doug Freedman of American Technology Research suggested: ''The acquisition would make strategic sense for MediaTek as the company would gain a leg-up on entering the 3-G TD-SCDMA mobile market in China.''

''We believe it is prudent for ADI to sell the wireless division ahead of the impending volume ramp in China as 3G equipment is deployed. We believe competition will emerge as a result of the ramp and challenge the segment's profitability for all but the lowest cost providers.''

Included in the deal are Analog Devices' Othello radio and SoftFone baseband chipset lines, which, together with support operations, generated approximately $230 million in revenue for ADI, based on fiscal year 2006 financial results.

Analog Devices, (Norwood, MA>) was one of the pioneers in the development of baseband chips based on its DSPs for both the mobile handsets and infrastructure sectors.

MediaTek's wireless handset division gains: a global team of approximately 400 product development and customer support staff; an established customer base around the world along with new radio transceiver and baseband chipset products, including GSM, GPRS, EDGE, WCDMA, and TD-SCDMA chipsets.

Analog Devices says it plans to continue to invest in the wireless handset market by focusing on developing analog, micro-electro mechanical systems (MEMS), and programmable digital signal processing (DSP) products that enhance the audio, video, connectivity, and power efficiency capabilities in a range of wireless multimedia devices.

Mediatek confirmed one motivation for the deal was ADI's strength in the Chinese handsets business and the potential growth in China's home-grown 3G mobile TD-SCDMA. According to Jerry Fishman, ADI's president and CEO, the deal will allow ADI to focus resources in areas where its signal processing expertise "can provide unique capabilities and earn superior returns."

Fishman adds the deal also "unlocks the value of the Othello and SoftFone operations by creating the scale needed to support the R&D investment required for sustainable, long-term success."

Both companies' board of directors have approved the acquisition, which is expected to close near the end of 2007, depending on the usual regulatory requirements and other customary closing conditions.

In ADI's recently completed third quarter of fiscal year 2007, revenue from the operations involved represented $43 million, or 6 percent of revenue