NEW YORK--Correct us if we’re wrong, but many readers may be writing off MIPS Technologies way too soon.
The fate of MIPS is shaping up as one of the industry’s biggest stories in 2012. The company’s potential sale would have a significant impact on its storied processor IP line, MIPS customers, potential suitors who would either gain access to the processor IP or lose access and, of course, the current MIPS work force.
MIPS has not commented on speculation about a possible sale, and we’ve been unable to confirm that it has retained an investment banker to represent it (the rumor mill says it’s Goldman Sachs). Nevertheless, the question of who might buy MIPS is unavoidable and should be debated considering the broader implications of such a deal.
For one thing, there are enough chip companies -- including Broadcom, Sigma Design, Cavium Networks and others -- whose SoC roadmaps are dependent on MIPS cores. The outlook for MIPS licensees is as muddled as the future of MIPS. Switching to new cores is tricky since it requires an extensive rework of the internal software infrastructure. As one EE Times reader noted: “Current-day SoCs need a fast turnaround time, and the time needed to rework the software / debug with a new processor IP is just not there.”
But some argue that the transition might not be all that traumatic. Gary Mobley, senior research analyst at The Benchmark Co., wrote in his recent research note that “there is evidence that many of MIPS’ long-time licensees such as Sigma Designs and MStar have started to migrate toward ARM cores.”
To close a deal, seller and buyer must first agree on the sale price. MIPS, which has reportedly been shopped around for the last decade, the question of price is a moving target. In assessing the value of MIPS, Mobley wrote that “the wild card is MIPS patents.” He believes MIPS’ patents, “at a minimum,” could be “worth $100 million.” Mobley estimates the liquidation value for MIPS at about $5 per share “based on our best estimate for the present value of the company’s royalty stream, plus cash and certain assets, minus balance sheet and off-balance sheet liabilities.
MIPS understands how to play this game.
J. Scott Gardner, a senior analyst at The Linley Group, said MIPS has had its patent portfolio evaluated and is now included in the Ocean Tomo 300 Patent Index for 2011-2012. Ocean Tomo, an IP merchant bank, developed an “IPQ score” to rate patent assets based on a proprietary statistical methodology. The IPQ score has a median of 100. Patent assets with higher IPQ scores are statistically more likely to generate economic returns, according to the firm. The IPQ score for MIPS is 135 – one of the highest among semiconductor companies listed in the Ocean Tomo 300 list of member companies
The list “includes a lot of very large companies, and the median market cap is over $9 billion,” said Gardner. “MIPS could raise cash without selling the entire company.”
Gardner added that there are “a few scenarios that would really shake up the industry,” including Apple and Google. “Apple has proven the value of complete vertical integration and ecosystem control,” he said.
Others find promise in the emergence of a tighter Google-MIPS relationship. Google has recently decided to include the MIPS architecture as part of its SDK for the next generation of Android, noted Mobley. "This means eventually all future Android applications will run native on MIPS.
In the following pages, EE Times editors weigh in on the debate, sharing their thoughts in the categories of: a few unlikely candidates, best bets and a potential wild card.