Hardly a week goes by without some DSP startup being acquired by-or merged into-a bigger company. Such acquisitions often enable a company to quickly move into a new market, as in the case of PMC-Sierra Inc.'s acquisition of Malleable Technologies, which gave PMC instant entry into the packet-voice gateway chip market.
On a larger scale are Intel Corp.'s nonstop acquisitions in communications-its way of ensuring that there is life after the PC. Many of those acquisitions have been based on the company's DSP needs, including its acquisition of Ambient Technologies, Dialogic, DSP Communications and Level One Communications.
On the other hand, some companies are obviously shoring up their product lines. Texas Instruments Inc., for example, brought on board the CDMA talent of Dot Wireless, the cable modem expertise of Libit Signal Processing and the voice-over-Internet Protocol software talent of Telogy Networks.
Not content with measured expansion, TI topped it off with the biggest acquisition in semiconductor history-the $7.6 billion purchase of Burr-Brown Corp. Among other things, Burr-Brown brought to the TI portfolio high-end converters and sophisticated DSL front ends. But even more important, it brought TI a treasure trove of expert analog and mixed-signal talent, which is probably even tougher to find than DSP talent.
It's tough to value an acquisition on the basis of the target company's current revenue. Rather, valuation has to be based on the near-term market expansion it can bring the acquirer and the long-term profitability of being early in a fast-growing market. So the true worth of the company may not be known for a couple of years. In the near term, we have to rely on the wisdom of Wall Street's valuation of the acquiring company's stock. And with dozens of new DSP startups ripe for picking, the game is far from over.
So when will it all end? With company stock valuations significantly higher than a couple of years ago, some of this activity seems almost like playing with Monopoly money. And the worry is that the next recession will bring it all to a halt. But for now it's time to make hay while the sun shines. The semiconductor industry is having a great year and DSP continues to be its new technology driver.
Will Strauss is President of Forward Concepts (www.forwardconcepts.com). he may be contacted at wis@fwdconcepts.com.
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