Another big shake-up could play out soon in Orange County’s chip sector, which has lost several local headquarters over the last few years amid a growing appetite for consolidation.
Word has spread that Aliso Viejo-based Microsemi Corp. hired Bank of Montreal to drum up potential buyers after Skyworks Solutions Inc. expressed interest in buying the company.
Microsemi, a longtime acquirer under Chief Executive Jim Peterson, is an attractive takeover candidate, given its ongoing diversification efforts in the communication, Internet of Things and data center segments that augment its legacy positions in the military, industrial and aerospace sectors.
Its chips are built into satellites, drones, digital televisions, defibrillators, pacemakers and other devices made by the likes of Boeing, Hewlett-Packard, Dell and Samsung Electronics. The company is OC’s fourth largest chipmaker by local employee count, with about 240 workers. It had a record revenue of $1.65B in the 12 months through September—the end of its fiscal year—and a recent market cap of about $5.6 billion, making it the fifth-biggest public company based here.
Skyworks Chief Executive Liam Griffin, who leads the Woburn, Mass.-based chipmaker from its Irvine office at University Research Park, highlighted some important criteria in a potential buy—although he stopped short of singling out specific targets—in a recent earnings call with analysts.
“We would like to have the kind of acquisitions that really raise the overall franchise, that bring us into new technology opportunities that perhaps augment our strength,” he said. “Diversification is an element. But really, it isn’t the only criteria. We’re looking for opportunities that really drive the entirety of the business.”
Microsemi certainly fits the bill, considering Skyworks’ core markets.
Its communication chips are used in smartphones, tablets, routers, PCs and notebook computers, among other devices, including Apple’s iPhones, the newly launched Google-branded LTE Pixel smartphone, Huawei’s Honor 8 premium smartphone line, Amazon’s Echo and Tap digital assistants, and Netgear’s Orbi home router system.
The company posted record revenue of nearly $3.3 billion in the 12 months through September—the end of its fiscal year—and net income of $246.8 million. It had a recent market value of $14.5 billion.
A quick deal for Microsemi is unlikely, considering other companies might be better suitors, according to a recent investor note by RBC Capital Markets.
“This list would include Skyworks, Texas Instruments, Maxim and even Broadcom, if it divests overlapping segments,” the report stated. “We think the asset could be attractive to a myriad of acquirers but believe it may be a bit early for a sale.”
Microsemi got a boost last week after an RBC analyst said the chipmaker could be among the biggest beneficiaries in a Donald Trump presidency, given its strong ties to the defense sector.
Prior Competition
Skyworks and Microsemi have tussled before.
Skyworks, a rare acquirer in an era of industry consolidation, went all in last year for PMC-Sierra Inc., but ultimately lost a bidding war to Microsemi, which acquired the Sunnyvale chipmaker for $2.5 billion.
The deal, which closed in December, was Microsemi’s largest to date and provided entrée to the growing and hotly contested storage products market.
Storage products accounted for about 70% of PMC’s $525.6 million in revenue in 2014. Customers include some of the world’s largest big-data aggregators, such as search giant Google, HP, and data center builder and business software maker EMC Corp., which was acquired by Dell Inc. in September for a record $67 billion.
Skyworks is OC’s third largest chipmaker, with 330 local workers.
A company spokesperson directed inquiries to the conference call.
A Microsemi spokesperson said the company’s policy was not to comment on such matters.
Other Shifts
Word that Microsemi could go on the block closely followed Irvine-based ClariPhy Communications Inc.’s $275 million sale to Inphi Corp. in Santa Clara.
Inphi makes chips for communications, data centers and computing.
ClariPhy makes chips that speed up the transfer of data.
The ClariPhy sale was one of several in the last few years that have altered the local industry.
None more so than Broadcom Corp.’s $37 billion sale in February to Singapore-based Avago Technologies Inc., which renamed the company Broadcom Ltd. and fortified its U.S. base in San Jose.
The Business Journal has reported that Broadcom has slashed more than 750 local jobs since the sale, about a third of its local workforce, and plans to sell at least two buildings at its campus under construction at the Great Park development in Irvine.
The company sold its wireless infrastructure backhaul business in May for $80 million to Carlsbad-based MaxLinear Inc. In late April it sold its Internet of Things business for $550 million to Cypress Semiconductor Corp. in San Jose. The cash buy included Broadcom’s Wi-Fi, Bluetooth and Zigbee IoT product lines and intellectual property, plus its WICED Smart chipsets, which allow devices to talk to each other.
The IoT business and the WICED brand, which have been around for a few years, were based at the company’s University Research Park campus and employed about 430 worldwide.
