AMCC Retreats From France
During the next few quarters, AMCC expects to incur restructuring charges totaling $4.5 million to $11.5 million.
AMCC built its French operation from a pair of deals with IBM Corp. (NYSE: IBM). AMCC bought IBM's PowerPRS switch-fabric chipset for $51 million in 2003 and picked up an IBM PowerPC product line months later for $228 million. Dozens of employees were transferred to AMCC in the process. (See AMCC Switches On IBM's Fabric and AMCC Powers Up.)
Late last year, AMCC decided it would stop further development of the PRS. Moreover, most of the PowerPC-related employees were returned to IBM in February, the result of a labor decision in the French courts. According to the SEC filing, the combined events leave the French subsidiary too small to be worth maintaining, so AMCC has begun the process of shutting down the subsidiary.
Around the year 2000, several chip makers developed switch fabrics. But many router and switch vendors still prefer to develop their own switch fabrics and have been slow to adopt merchant chips, according to Sam Fuller, an AMCC vice president of marketing. Moreover, any further generations of the PRS would probably have to be reworked to accommodate today's emphasis on Ethernet: "The market is moving to 10-Gbit/s Ethernet as a backplane technology," Fuller says.
AMCC does have customers for the PRS and will continue supporting them for years, says Fuller. To that end, he adds, about one third of the 56 employees in France have been offered jobs in the United States.
But the PRS roadmap ends here. "We're not planning to develop a second-generation architecture based on the PRS," Fuller says.
AMCC has now taken three swings at the network processor market without knocking a home run. It had developed the nP5800 line inhouse, but shelved that in favor of the PRS. Separately, AMCC acquired switch-fabric startup YuniNetworks in 2000 -- development of that company's Cyclone chipset was halted some time ago, and Fuller believes the product doesn't have any customers left. (See AMCC's Triple Acquisitions.)
Fuller wouldn't rule out the possibility of AMCC trying yet another switch fabric. It's just that the company doesn't see the PRS meeting the needs of the next generation.
Startups Dune Networks , Enigma Semiconductor Inc. , and TeraChip Inc. continue to pitch switch fabrics to OEMs. Another company with a switch fabric and other related chips, Sandburst Corp. , was recently acquired by Broadcom Corp. (Nasdaq: BRCM). (See Siemens Invests in Dune, Enigma Unlocks Packet Switch Fabric, TeraChip Raises $7M, and Broadcom Builds on Sandburst.)
AMCC shares rose 19 cents (5%) to $3.99 yesterday.
— Craig Matsumoto, Senior Editor, Light Reading