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Comms chips

AMCC, Vitesse Nearly Tied the Knot

The departing chief operating officer of Applied Micro Circuits Corp. (AMCC) (Nasdaq: AMCC) appears to have been the stumbling block in a failed merger nearly negotiated earlier this year.

Sources requesting anonymity say AMCC and Vitesse Semiconductor Corp. (Nasdaq: VTSS) came very close to a deal a few months ago. But they add that the contract of Tom Tullie, AMCC's COO, became a problem. When the details couldn't be resolved, the deal was called off.

AMCC announced last week that Tullie will leave the company on June 17 to pursue other interests. A replacement won't be hired (see AMCC COO Quits).

Could this mean that talks would resume? Neither company offered comment on the merger story. A Vitesse spokeswoman noted her company won't comment on rumors.

Even though AMCC has the larger market capitalization of the two -- roughly $900 million compared with Vitesse's $500 million -- one source notes that Vitesse's team probably would have run the combined company. That's because AMCC had a shortage of "C" execs: CEO Dave Rickey had announced his pending retirement, and CFO Steve Smith had already stepped down (see AMCC CEO Plans Retirement and AMCC's CFO to Retire).

AMCC installed former Cisco Systems Inc. (Nasdaq: CSCO) executive Kambiz Hooshmand as CEO in March, which would suggest any potential deal with Vitesse is off.

Tullie joined AMCC in 1996 and became COO last year (see AMCC Gets COO). That he won't be replaced is partly a reflection of Hooshmand's style; an AMCC spokeswoman says the new CEO is very "hands-on" and will have the company's general managers reporting directly to him.

In the late 90s, AMCC, Vitesse, and PMC-Sierra Inc. (Nasdaq: PMCS) made their names selling chips for telecom applications including optical networking and Sonet/SDH infrastructure. Since the telecom crash, all three have had to diversify into other businesses. PMC picked up a microprocessor line, as did AMCC; meanwhile, AMCC and Vitesse have expanded into the storage market (see Chip Trio Faces Post-Bubble Blues, AMCC Powers Up, and AMCC Looks to Buy JNI).

Would an AMCC-Vitesse pairing have made sense? Possibly. A merger would have helped each company eliminate some competition on the telecom side while creating a stronger breadth of products on the storage front.

Unrelated to all of this, AMCC announced last week that Daryn Lau will take over as vice president of the communications group. Lau was CEO of network processor startup ZettaCom, a competitor to AMCC in the switch-fabric area. Lau arrives from Integrated Device Technology Inc. (IDT) (Nasdaq: IDTI), which snatched up ZettaCom last year (see ZettaCom Finds a Home).

— Craig Matsumoto, Senior Editor, Light Reading

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