The deep roots of Orange County’s technology sector intersected with one of the industry’s hottest segments in last week’s $140 million sale of Lake Forest-based chipmaker Newport Media Inc.
The company’s chipsets, which allow devices to talk to each other, were coveted by San Jose-based Atmel Corp., a burgeoning player in what’s referred to as the “Internet of Things” market.
Atmel hopes to take on several notable contenders in the segment, including Irvine-based Broadcom Corp., D-Link Systems Inc. in Fountain Valley and Playa Vista-based Belkin International Inc.
Newport Media’s roots are grounded at Broadcom, Conexant Systems Inc. in Irvine and Mindspeed Technologies Inc. in Newport Beach. Its founder and chief executive, Mohy Abdelgany, is a former executive at Conexant and Skyworks Solutions Inc., where he ran the Woburn, Mass.-based company’s $500 million RF Solutions business unit.
Other Newport Media executives with local ties include Senior Vice President of Engineering Mohamed Ben-Romdhane, a former executive director at Conexant’s systems-on-a-chip business; Chief Technology Officer Nabil Yousef Wasily, a one-time senior staff scientist at Broadcom; Hassan Hasemi, vice president of operations, a former executive director of packaging and product development at chipmaker Mindspeed Technologies Inc. and director of advanced packaging at Conexant; Chief Financial Officer J. Scott Blouin, who held the same title at Conexant; and Vincent Wang, vice president of marketing for China and Taiwan, who was a principal engineer at Broadcom’s Broadband Systems Group.
It remains to be seen whether Newport Media’s management and operations will remain in place under Atmel, which gains some 120 patents in the deal. The portfolio is steeped in key wireless connectivity and Bluetooth technology, combo RF chips that power those applications, and the ability to stream video, an increasingly important feature for consumers.
“Our intent is to leverage the technology,” Atmel Chief Executive Steven Laub said in an analyst call last week following the announcement. “Winning in the Internet of Things requires a broad portfolio.”
Global sales of components and equipment that power the Internet of Things market will explode to $7.1 trillion by 2020, up 273% from last year, according to Massachusetts-based market researcher International Data Corp.
Morgan Stanley estimates that by that time, some 75 billion products, such as washing machines, lighting systems and body health sensors, will be connected to the Internet.
The Newport Media buy fits into Atmel’s game plan of developing power-efficient microcontrollers targeting the industrial, consumer, and home and building automation markets. Its technology is embedded in the Wi-Fi Roku remote controller, Vizio remotes, Sony’s smart stick, and the next-generation Google TV remote control.
Atmel, which is publicly traded on the Nasdaq, posted sales of about $1.4 billion last year.
The deal for Newport Media, expected to close by October, could hit $170 million if certain revenue benchmarks are met over the next two years.
Newport Media posted revenue of about $43 million last year. The 16th largest chipmaker in Orange County has about 50 local employees and 230 companywide.
It has raised more than $80 million in venture capital funding. Backers include Pinnacle Ventures, Global Catalyst Partners, Oak Investment Partners, Venrock, Benchmark Capital, DAG Ventures and the Ontario Teachers’ Pension Plan.
Groups
The latest development in the Internet of Things market comes as the industry aims to develop a standard that allows all smart gadgets, regardless of brand and components, to communicate with each other. Atmel and Broadcom have joined with Samsung, Intel and Dell in the newly created Open Interconnect Consortium, whose members will contribute software and engineering resources to establish a protocol.
It remains to be seen whether that group’s strategy for syncing devices will contradict the efforts of the AllSeen Alliance, another consortium of companies aiming to define a blueprint for smart-device communication. The larger AllSeen group has more than 50 members, including Broadcom rival Qualcomm Corp. in San Diego, as well as D-Link, LG and Microsoft.
