A well known nick name among its employees is MicroCheap. This company is very stingy with its employee while working hard on its propaganda like no other company care about their employees like MicroCheap. Its frontline and middle management are a whole bunch of idiots yes men and women who known nothing about the processes and operations they are put in charge to supervise.
"Low-margin" is relative. Lots of successful businesses are low-margin. The issue is that when you make pennies on the dollar, you have to take in a *lot* of dollars to make pennies on.
And I agree: a 54.4% non-GAAP margin isn't bad at all.
But as for "Why put yourself on the block", it's a converse of "Why make an acquisition?" In either case, you've read the tea leaves and decided that survival and prosperity require being bigger than you are. If you can't grow by making an acquisition (the failed deal with Conexant), you can grow by *being* acquired by a better, better heeled partner.
It will come down to execution. They don't have product overlap, and each provides opportunities for the other. The issues will be compatibility of corporate cultures, and whether MicroChip can successfully integrate an acquisition that has a somewhat different business model.
Microchip must really like the 8051 - they have bought another 8051 company !
That aside, SMSC has a _very_ different customer profile to Microchip, which is sure to cause significant mindset and culture issues.
Hi, yalanad. It's true that the computer and consumer business these days is often regarded as "low-margin," and those in the financial community (and obviously our readers too)are averse to that.
But look. SMSC’s annual sales is $412 million and it's got 54.4 percent non-GAAP gross margin. My friend, that is NOT bad.
However, you do ask a good question. Why did SMSC start looking to be sold?
A little over a year ago, SMSC was on its own expansion plan, and it was going to buy Conexant.
But the deal fell through, as Conexant went to Gold Holdings, Inc., an affiliate of San Francisco-based private equity firm Golden Gate Capital.
I would love to get a chance to sit down with Christine King, SMSC CEO, and ask her what prompted this sale.
SMSC is in a quiet period and nobody at SMSC is talking at this point.
Microchip CEO refrained from commenting any questions regarding to SMSC's motivation, or whether there was anyone else was courting SMSC.
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