Vitesse Semiconductor Corp. (Nasdaq: VTSS) today announced plans to acquire Multilink Technology Corp. (Nasdaq: MLTC) for roughly $23 million, a deal that could prime Vitesse for participation in the high-speed backplane market (see Vitesse to Acquire Multilink).

Terms of the deal, announced just after markets closed, have Vitesse ponying up 4.2 million shares -- 0.5493 shares per share of Multilink, to be exact.

The deal would finally put Multilink out of its misery. The company was founded on the basis of 10-Gbit/s transceiver technology for metro and long-haul markets, but being young, it didn't have any fallback product lines to cushion the blow when demand for the new technology withered.

Multilink's revenues swiftly dribbled to nearly nothing. In its most recent quarter ended March 31, Multilink reported losses of $12.2 million, or $1.62 per share, on revenues of $959,000. It still had $30 million in cash at the time, but that figure should end up between $8 million and $12 million by the time the deal closes, the companies said in a release.

Analyst Jeremy Bunting of Thomas Weisel Partners discontinued coverage of Multilink earlier this year, citing institutional investors' lack of interest in the stock.

By contrast, Vitesse's fortunes seem to be on the rise. The company's quarterly conference calls with analysts have gotten progressively cheerier as its new strategy has taken hold. A shift into the storage business, which now accounts for roughly half of Vitesse's sales, seems to have particularly paid off.

But the Multilink deal doesn't mean Vitesse wants back into the next-generation long-haul game. Much of the 10-Gbit/s technology developed at Multilink has uses in backplanes and in very-short box-to-box connections, and those appear to be the markets Vitesse has in mind.

The companies expect to close the deal in the third quarter of 2003. The release states Multilink "will have reduced" its staff to 45 by that time; presumably those folks will be picked up by Vitesse.

— Craig Matsumoto, Senior Editor, Light Reading