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cordovan66
goafrit
@Dave - the problem is the integration as you noted. That is the devil. It seems ...
LSI to acquire SandForce for $370 million
Dylan McGrath
10/26/2011 5:56 PM EDT
SANTA CLARA, Calif.—Chip maker LSI Corp. said Wednesday (Oct. 26) it signed a definitive agreement to acquire SandForce Inc., a supplier of flash processors for solid state drives, in a deal worth about $370 million.
LSI (Milpitas, Calif.) will pay about $322 million in cash—net of cash assumed from SandForce—and assume about $48 million worth of unvested stock options and restricted shares held by SandForce employees, the company said.
"Adding SandForce's technology to LSI's broad storage portfolio is consistent with our mission to accelerate storage and networking," said Abhi Talwalkar, LSI president and CEO, in a statement. "The acquisition represents a significant, rapidly growing market opportunity for LSI over the next several years."
The transaction is expected to close early in the first quarter of 2012, LSI said. It is subject to customary closing conditions and regulatory approvals, the company said. Upon closing, the SandForce team will become part of LSI's newly formed Flash Components division, with Michael Raam, SandForce president and CEO, serving as general manager, LSI said.
LSI has previously been among several firms which backed SandForce over three funding rounds. The list of investors also included foundry United Microelectronics Corp.'s venture capital arm, UMC Capital.
Also Wednesday, LSI reported that third quarter sales grew to $546.9 million, an increase of 9 percent compared to the second quarter and an increase of 21 percent year-to-year. The company reported a net income for the quarter of $29.3 million, down from $293.8 million in the second quarter but up from $23.4 million in the third quarter of 2010.
For the fourth quarter, LSI said it expects sales to be between $500 million and $550 million.
LSI (Milpitas, Calif.) will pay about $322 million in cash—net of cash assumed from SandForce—and assume about $48 million worth of unvested stock options and restricted shares held by SandForce employees, the company said.
"Adding SandForce's technology to LSI's broad storage portfolio is consistent with our mission to accelerate storage and networking," said Abhi Talwalkar, LSI president and CEO, in a statement. "The acquisition represents a significant, rapidly growing market opportunity for LSI over the next several years."
The transaction is expected to close early in the first quarter of 2012, LSI said. It is subject to customary closing conditions and regulatory approvals, the company said. Upon closing, the SandForce team will become part of LSI's newly formed Flash Components division, with Michael Raam, SandForce president and CEO, serving as general manager, LSI said.
LSI has previously been among several firms which backed SandForce over three funding rounds. The list of investors also included foundry United Microelectronics Corp.'s venture capital arm, UMC Capital.
Also Wednesday, LSI reported that third quarter sales grew to $546.9 million, an increase of 9 percent compared to the second quarter and an increase of 21 percent year-to-year. The company reported a net income for the quarter of $29.3 million, down from $293.8 million in the second quarter but up from $23.4 million in the third quarter of 2010.
For the fourth quarter, LSI said it expects sales to be between $500 million and $550 million.
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Dave.Dykstra
10/26/2011 11:30 PM EDT
From a product point of view, this looks like a good fit that could increase LSIs penetration in storage if they can make the merger work well for them.
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DBSingh180
10/27/2011 12:37 AM EDT
LSI has been using Sandforce flash controllers in warpdrive (PCIe based SSD) for some time now.
Sandforce controllers are essentially SAS/SATA to flash IF bridge which implies the PCIe based SSD's from LSI are going to have the added latency of SAS/SATA interconnect, which according to me is a disadvantage as compared to products which have PCIe-to-Flash controllers.
Only possibility I see is that LSI and SandForce are already working on PCIe-to-Flash controller in backgroung.
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DBSingh180
10/27/2011 12:41 AM EDT
The price point at which LSI sells warpdrive ($11K)this acquisition wouls only make sense when there is a confirmed customer in top three OEM's for warpdrive.
As $370 Mn in such times is huge bet.
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goafrit
10/27/2011 4:33 PM EDT
@Dave - the problem is the integration as you noted. That is the devil. It seems internal innovation is low and people are just buying these days.
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cordovan66
10/27/2011 5:01 PM EDT
The annual revenue is about 2 Billion and net income is about 120 million.
Given this, isn't 370 million too low a sale price?
I thought the valuation of a company was typically 4x the revenue.
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