Irvine-based Microsemi Corp., a chipmaker that’s been on a buying binge of late, recently broke its long streak of rolling up small makers of chips that cater to military, aerospace and industrial uses.
Microsemi, which had a recent market value of about $1 billion, last week bought Irvine-based startup Nexsem Inc., a maker of chips that manage power in consumer electronics.
Nexsem designs and markets chips that go into liquid crystal display TVs, television set-top boxes, disk drives, notebook computers and netbooks, which are inexpensive, portable computers with fewer features.
The buy is seen by Wall Street as a bit of a departure for Microsemi, which has done half a dozen deals in the past two years in an effort to consolidate makers of what’s known as high-reliability chips.
High-reliability chips go into devices that need to perform under extreme conditions where failures can be costly, such as satellites, medical devices and industrial machinery.
This time around, Microsemi picked up a distinctly commercial player in Nexsem in an effort to go deeper into a faster-growing market.
What it Means
The deal “demonstrates our continued focus on a balanced growth model at Microsemi,one which augments the steady nature of our high-reliability markets with the traditionally high growth opportunities found in the commercial marketplace,” Chief Executive Jim Peterson said.
The Nexsem buy was viewed positively by analysts.
“This acquisition is unique and different from other recent ones in that Nexsem is a provider of high-performance analog chips,as opposed to high-reliability,” said Tore Svanberg, an analyst at Thomas Weisel Partners LLC in San Francisco. “We believe the acquisition is consistent with Micro-semi’s growth strategy, which is a combination of organic growth and tactical acquisitions.”
Terms of the deal were not disclosed.
Svanberg estimates Nexsem to be “modestly profitable” and the deal size to be in the “single-digit millions.”
The deal stands to make Microsemi a bigger player in a niche that’s known as power application chips, which help manage electricity voltage between various devices within a single consumer gadget.
In TVs, it helps manage the power that goes to the lights that illuminate a liquid crystal screen.
“In Nexsem we have found an excellent complement to our existing power management offerings,” Peterson said.
The buy “nicely supplements our industry-leading low power product offering, while increasing our total dollar content per application in several high-growth markets,” he said.
Analysts particularly like the idea that the acquisition means Microsemi has a chance to increase the number of chips it has in each device.
“The acquisition plugs a hole in Microsemi’s product portfolio and expands the company’s total semiconductor content opportunity,” said Patrick Wang, an analyst at Wedbush Morgan Securities in New York.
Nexsem’s chips “could easily be paired with existing designs for LCD TVs and monitors,” he said.
It also gives the company an “in” with manufacturers of consumer electronics.
The deal is set to “advance the company’s effort in penetrating major consumer electronics manufacturers in LCD TVs and notebooks,” analyst Svanberg said.
Nexsem, which has a dozen workers here, started in 2004 by engineering duo Asvadi and Reza Amirani.
The company saw less than $5 million in yearly sales when it was snatched up by Microsemi.
The pair had teamed up a few years ago at Irvine-based chipmaker Unisem Inc., which was acquired by International Rectifier Corp. for around $50 million in 2000.
Mindspeed’s Shares Up on Sales Outlook
Shares of Newport Beach-based chip-maker Mindspeed Technologies Inc. jumped last week after the company increased its sales outlook for the current quarter.
Investors sent shares up more than 10% last week on a market value of about $55 million.
The company said it now expects revenue for the three months through June of $32 million to $33 million, up from its previous forecast of $30 million to $32 million in sales.
The company didn’t give a profit outlook.
Wall Street analysts, on average, are expecting Mindspeed to report a loss
of about $3 million on sales of $31 mil-lion.
Mindspeed said it’s seeing better than expected sales as third-generation wire-less networks being built out in China
have kept demand steady for some of its
chips.
The company makes chips for wide area networks and for placing calls over the Internet. Mindspeed is set to report results July 27.
,Sarah Tolkoff
