Everything old is new again at Costa Mesa-based chipmaker Semicoa Semi-coductors Inc.
Semicoa spent more than 40 years as an independent, private company until it was acquired by larger Irvine-based competitor Microsemi Corp. in 2007 for $25 million.
A little more than a year later, it’s a stand-alone company again and looking to rebuild itself.
It’s hiring back workers, managers and executives who lost their jobs when Microsemi cut the company’s workforce to 40 people, down from some 120 before the acquisition.
“I think people are really excited,” said Kathleen Whitcher, global distribution sales manager. “Microsemi was a bit infamous as far as gobbling up their competitors, absorbing and disassembling them. We are pleased to see a lot of the old management come back and separate the company away from Microsemi.”
Along with Whitcher, former Chief Executive Perry Denning is back as president and Bill Caparelli is back as vice president of sales and marketing.
“I was let go during the sale, so it’s quite surreal to be back,” Whitcher said.
The company, which has about 50 workers now, is looking to hire chip assemblers and testers, marketing managers and sales people.
It’s looking to have roughly 100 workers by year’s end.
“We are hoping to be as robust as prior to the sale,” Whitcher said.
Semicoa regained its independence a few weeks ago as part of a settlement the Justice Department struck with Microsemi.
Microsemi faced an antitrust lawsuit after the government looked into the deal as creating a monopoly on a certain type of chips.
It agreed in August to undo the deal to settle the suit and sold off Semicoa to Los Angeles-based private equity firm Vance Street Capital LLC.
Terms of the deal weren’t disclosed.
Denning, 62, came back to run Semicoa as president. He was president and chief executive at the time of the acquisition.
Three executives from Vance Street Capital—Richard Crowell, Richard Roeder and Tom Epley—are set to get seats on Semicoa’s board. Other board seats are set to be filled by outside directors, Denning said.
In an interesting twist, Vance Street was in negotiations with Semicoa founder and former chairman Mark Kalatsky for a possible sale more than a year ago, before the Microsemi deal.
Ultimately, Kalatsky and the board decided to sell to Microsemi.
When the Justice Department began sniffing around, Vance Street re-engaged with Microsemi as a possible buyer of Semicoa’s assets, according to Denning.
Kalatsky, who’s in his 70s, held on to some assets from Semicoa and went on to start another company: Array Optronics Inc. in Costa Mesa.
Microsemi and Semicoa make what industry insiders call “high reliability” chips, which go into devices that need to perform under extreme conditions in which failures can be costly.
The chips end up in devices for the military, medical and industrial markets.
Both sell chips to nearly the same group of top defense contractors, including Northrop Grumman Corp., Lockheed Martin Corp., Boeing Co., Raytheon Co., General Dynamics Corp. and Honeywell International Inc., among others.
After the acquisition, Microsemi had made big plans for Semicoa’s 47,000-square-foot chip plant in Costa Mesa.
Semicoa invested some $4 million in the factory by buying chip making equipment in 2007.
Microsemi planned to disassemble the factory and send the equipment to a site in Ennis, Ireland, where it’s cheaper to do business because of more favorable tax laws.
The move never happened and the factory sat idle for the better part of a year, Whitcher said.
“The government shut down the plant during the investigation,” she said. “It wasn’t operational under Microsemi.”
Microsemi decided it wasn’t worth it to fight the case, said Rob Adams, the chipmaker’s vice president of business development.
“The money we would have spent litigating this case would be much more than the profits we would be making from (Semicoa),” he said. “Semicoa stands in a great position to benefit from our dominance and playing as a second source to Microsemi. We wish them the best of luck.”
Semicoa had yearly sales of around $15 million in 2007, which is the most recent data available. Microsemi saw roughly $500 million in sales last year and had a recent market value of about $1 billion.
The two companies are back to being competitors, with Microsemi having better insight into Semicoa’s operations.
Semicoa plans to grow sales and add to its product lineup with a series of chips set to be announced during the next year or so, Denning said.
Wall Street, for its part, is generally pleased to see Microsemi come out of the ordeal unscathed.
The sale of Semicoa to Vance Street won’t have an impact on Microsemi’s books, the company said.
“We view the removal of this overhang as a significant positive given the associated investor concerns, legal uncertainties and litigation expense,” said Patrick Wang, an analyst at Wedbush Morgan Securities LLC in New York. “The fact that management left guidance unchanged speaks to the strength of current orders and existing backlog, offsetting the absence of Semicoa-related revenue.”
For the current quarter, Microsemi said it expects profits, excluding charges, of $18 million to $19 million on sales of $108 million to $111 million.
Analysts, on average, are looking for profits of $19 million on sales of $109 million.
