AMCC Switches On IBM's Fabric
Applied Micro Circuits Corp. (AMCC) (Nasdaq: AMCC) is dropping its homegrown switch fabric and buying IBM Corp.'s (NYSE: IBM) PowerPRS line to take its place, the companies announced today (see AMCC Acquires IBM Switch Fabrics).
The deal appears to complete IBM's retreat from network processors and related chips. It also continues AMCC's buying spree, fueled by the $1 billion in cash the company has held since last year. Already AMCC has acquired a portion of Cicada Semiconductor Inc. and has offered to buy JNI Corp. (Nasdaq: JNIC), the latter move bringing AMCC into storage networking for the first time (see AMCC Snacks on Cicada Scraps and AMCC Moves Into Storage).
The $47 million deal, technically a purchase of assets and licensing of some rights, would be the first step in AMCC's acquisition of PowerPRS. It appears AMCC will also acquire the PowerPRS design team in France, but the $3 million deal with IBM affiliate La Compagnie IBM France is still in process. IBM and AMCC officials couldn't reveal how many employees might be affected, citing French law.
For now, the product line will be in AMCC's hands, with IBM lending technical support.
AMCC had two lines of switch fabrics. Its high-end Cyclone chip set comes from the June 2000 acquisition of YuniNetworks Inc. for stock then worth $240 million. AMCC director of marketing Keith Morris says the company will continue developing Cyclone, which targets systems with aggregage bandwidth of 640 Gbit/s or more (see AMCC Raises Eyebrows).
The PowerPRS, designed for 10-Gbit/s to 320-Gbit/s systems, replaces AMCC's nP5800, which is being cancelled. "We couldn't get where we wanted to be fast enough with development," Morris says.
The PowerPRS fills a product void for AMCC, and it also brings revenues, customers, and its own established manufacturing. "IBM doesn't have the greatest products, but it does have a reliable supply line," says Jag Bolaria, analyst with The Linley Group.
AMCC officials say they hope to continue with IBM's road map, which includes a new PowerPRS version. That chip could be announced by the end of this year, says Gilles Garcia, IBM's strategic manager for switching technologies. One challenge AMCC will face is melding the PowerPRS into its overall plans. "I don't know how they're going to develop a strategy that bridges software and reuseability between the IBM product and the Yuni product," Bolaria says.
Separately, the deal seems to close the door on IBM's network processing efforts. The company has stopped development on its NP4GS3 and NP2GS3 network processors, although it continues to sell the chips. The company could still build network processors using its PowerPC architecture, but officials say the volume of business hasn't justified such a move.
Additionally, IBM sold technology related to search-engine chips that were in development but never made it to market (see IBM Sells Off Search Engines).
IBM's not alone. PMC-Sierra Inc. (Nasdaq: PMCS) backed out of this area in 2001, dropping most of its projects related to network processors, including a switch fabric and a traffic manager chip. Vitesse Semiconductor Corp. (Nasdaq: VTSS) has likewise trimmed back substantially on its ambitions in this area. (See PMC-Sierra Pulls Packet Silicon, Vitesse Drops Some Packets, and Chip Trio Faces Post-Bubble Blues.)
— Craig Matsumoto, Senior Editor, Light Reading