The $660 million sale of networking gear maker Emulex Corp. in Costa Mesa to Singapore-based Avago Technologies Ltd. highlights an ongoing consolidation in the global chip industry.
Netherlands-based NXP Semiconductors NV announced a $12 billion deal for Freescale Semiconductor Ltd. in Austin less than a week after the Emulex announcement, signaling the fourth significant takeover in the past two months.
The chip sector saw 23 deals totaling about $25 billion last year, which included two local sales.
Mindspeed sold its wireless infrastructure business about a year ago to Santa Clara-based Intel Corp., the world’s largest chipmaker with $55.8 billion in revenue last year, for an undisclosed sum.
Lake Forest-based Newport Media Inc., which makes chipsets that allow devices to talk to each other, was sold for $140 million in July to San Jose-based Atmel Corp., a burgeoning player in the Internet of Things market (see list of biggest deals for OC-based companies last year in Special Report: Mergers & Acquisitions, which starts on page 17).
“The semi sector consolidation wave will continue,” Deutsche Bank analysts said in a recent note to investors.
Avago will likely keep Emulex’ networking technology and sell other parts of the business and related assets. That could include the Susan Street headquarters of Emulex off the 405 Freeway.
The consolidation trend makes it a good time to keep tabs on Aliso Viejo-based networking gear maker and Emulex rival QLogic Corp. Both battle in sales of bus adapters, or circuit boards, a profitable piece of networking electronics, as well as the fibre-channel market, a segment considered in long-term decline but still lucrative.
The rivals in the past few years moved into the 10-gigabit Ethernet connection market, a competitive segment that has drawn big industry players.
CM Office Unaffected by Sale
The local operation of Northern California-based MegaPath Corp., which got its start in Costa Mesa significantly of its managed services business division to GTT Communications Inc., the company told the Business Journal.
About 20 employees in its Costa office will switch to the GTT banner but remain in the office. McLean, Va.-based GTT will acquire the MegaPath unit for $152.3 million in cash and stock.
MegaPath Chairman and Chief Executive Craig Young will remain in OC, along with IT, finance, sales, customer service and administrative personnel in the company’s cloud services and corporate business units.
The managed services division provides private networking, access and security services to more than 500 large corporate clients.
MegaPath was established here in 1998 and merged with San Jose-based broadband Internet services provider Covad Communications Group in 2010 in a deal led by Beverly Hills private equity firm Platinum Equity LLC.
The combined company was run from Costa Mesa and had annual sales of more than $150 million.
Telecom Names Vegas Head
Irvine-based telecom ARQ LLC has expanded operations to Las Vegas and hired Phillip Ohler to run the office there. Ohler, who had prior stints at MCI and ACSI, has closed deals with Mirage Hotel, Venetian and Las Vegas Motor Speedway.
ARQ, established in 2008, has been on a growth spurt since changing its game plan from designing and building cellular networks for outdoor venues to those for indoor venues, such as office buildings, hospitals and casinos, among others.
Its flagship contract for outfitting the Staples Center for the 2010 NBA All-Star game jumpstarted the company, according to founder Kunal Hinduja.
ARQ made its debut on the Business Journal’s annual list of the largest telecom employers last year after doubling its local workforce to 40. The company projects revenue of $50 million this year.
