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Mindspeed Plans Acquisition of U.K. Chipmaker, Lowers Revenue Target

Mindspeed Technologies Inc. plans to buy a U.K.-based chipmaker in a deal that overshadowed its recent announcement of a lower revenue outlook for the December quarter.

News of the Newport Beach-based chipmaker’s pending acquisition sent its shares up more than 10% Jan. 5 to a market value of about $177 million.

The pending deal offset word that Mindspeed lowered its guidance on revenue in the December quarter to about $33 million, down from its previous target of $35.9 million to $37.5 million.

Wall Street analysts on average had projected sales of about $36 million.

Mindspeed also lowered its gross margin target to 58%, down from November’s guidance of 60% to 62%.

The lowered expectations were prompted by “weaker demand” and “a slower work-down of inventory levels,” according to Chief Executive Raouf Halim.

Mindspeed said it plans to buy Picochip Ltd. for $51.8 million, with a potential for $25 million to be paid in the first quarter of 2013 if certain benchmarks are met.

The deal has been approved by Mindspeed and Picochip’s boards and is expected to close this quarter.

Picochip makes systems-on-chip for small cell base stations, an explosive growth market as the race to 4G supremacy plays out among the nation’s largest wireless carriers.

Campbell-based research firm Mobile Experts LLC predicts small cell base station shipments will grow to 24 million units by 2016.

The deal also increases scale, boosts Mindspeed’s addressable market to $3 billion by 2016 and provides cross-selling opportunities.

Picochip said it controls about 70% of market share in the 3G high-speed packet access small cell infrastructure market. High-speed packet access helps improve speed while supporting more users on a network.

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