Costa Mesa’s MegaPath Inc., a technology services outsourcing company, is combining with a data services provider to form a new private company.
MegaPath is joining with San Jose-based Covad Communications Group, a provider of broadband Internet services to corporations.
Terms of the deal, which is set to close by the third quarter, weren’t disclosed.
A private holding company was formed to purchase shares of each company and combine the operations of Covad and MegaPath.
Covad is owned by Los Angeles private equity firm Platinum Equity LLC.
The combined company is set to be run from Costa Mesa with yearly sales of more than $150 million, according to MegaPath Chief Executive Craig Young.
MegaPath, which started in 1998, provides what’s called “managed services” to companies, in which it offers voice-over Internet, data networking and network security services.
MegaPath has big customers in financial services, retail, restaurants and manufacturing. Some of its customers include Jamba Inc., RadioShack Corp., Public Storage, Yum Brands Inc.’s Taco Bell and others.
MegaPath services private networks that link up a company’s headquarters with its retail outlets. It also does security and encryption for credit card transaction data.
MegaPath was a customer of Covad, which owns big data storage sites (basically rooms full of servers) where it hosts others’ networks.
“What Covad brought to the table is a nationwide network,” Young said. “They own facilities throughout the U.S., which gives us reach at the lowest possible cost.”
MegaPath primarily does direct sales. With Covad it also gains a big reseller network.
“The biggest benefit of this combination is we create the largest managed services company in the U.S.,” Young said.
The deal is set to save both companies around $30 million per year.
MegaPath has some 75 workers in Orange County and 400 in all.
Young is set to run the combined companies as executive chairman and Covad’s chief executive will report to him.
Qualcomm/Broadcom Saga
A federal judge ruled in favor of a handful of lawyers for Qualcomm Inc. in a case that stemmed from a 2008 complaint by Irvine-based chipmaker Broadcom Corp.
U.S. Magistrate Barbara Major found errors had occurred in the patent dispute between the two chipmakers but that outside lawyers who represented San Diego-based Qualcomm did not act in bad faith, according to reports.
The move overturned a previous ruling by the judge in early 2008, when she cited “exceptional misconduct” on the part of Qualcomm’s lawyers for withholding critical e-mails and other important documents to gain an edge over Broadcom.
The allegations of misconduct stem from a previous patent dispute involving video compression chips for cell phones.
Qualcomm settled the case with Broadcom and was ordered to pay $8.5 million in legal fees. In addition, Qualcomm and six outside lawyers involved in the case were sanctioned by the judge for withholding the documents.
The lawyers appealed the sanctions.
The decision wraps up what is perhaps the last legal issue in what was a pattern of legal tit-for-tat over chip patents between the two companies.
About a year ago, Broadcom emerged as the victor in a four-year feud with Qualcomm over wireless phone chip patents.
Kingston Stake in Elpida
Fountain Valley’s Kingston Technology Co., the top maker of memory products for computers and consumer electronics, recently made a $200 million investment in Japan’s biggest memory chipmaker.
Kingston’s bought $125 million worth of Tokyo’s Elpida Memory Inc. shares and another $75 million in bonds that convert to stock.
Elpida is set to use part of the money to convert its factories to the latest technology for chip making, called 65 nanometer, for the size of the silicon wafers it uses.
Elpida is one of Kingston’s memory chip suppliers. Kingston buys up massive amounts of what’s called dynamic random access memory chips, the most common type used in computers, and assembles them into modules.
Kingston also makes flash memory cards that store pictures, songs and other data in consumer electronics.
It’s not unusual for Kingston to take a stake in one of its suppliers.
Last year, Kingston paid $60 million for shares of Taiwan’s Powerchip Semiconductor Corp.
Bits and Pieces
Aliso Viejo-based Telogis Inc., a maker of GPS and traffic software for delivery fleets, hired Susan Heystee as its executive vice president of worldwide sales. Heystee joined the company from Waltham, Mass.-based Novell Inc. … Kingston gave $1 million for the “Building Dreams” project of the Boys & Girls Clubs of Huntington Valley. The organization is set to break ground on an eight-classroom preschool, which is slated to open early next year… Apple Inc.’s iPad is expected to sell some 2.5 million units in the third and fourth quarters of this year, according to estimates by RBC Capital Markets Corp. That’s good news for Broadcom, which recently was confirmed to have a combo chip inside the “it” device.