Freescale Harbors Seaway
Freescale is already referring to Seaway as its "Ottawa Technology Center" and will keep "90 percent" of the startup's 45 employees, including the full engineering team, says Bob Gohn, director of strategy and business development for Freescale's Networking and Computing Systems Group. [Ed. note: So they're only keeping 40.5 employees?]
Terms of the deal were not disclosed, but it's likely Seaway went for less than $10 million, says Linley Gwennap, principal analyst with The Linley Group.
"Like a lot of startups, I think they were struggling," Gwennap says. "They did raise some money in 2004, but it was a small round."
Even so, the deal "was not a fire sale," a Freescale spokeswoman says, adding that some of the rationale for an asset sale (as opposed to an outright acquisition) was because Seeway was based in Canada.
Seaway had raised C$23 million in 2002 (roughly US$15.1 million at the time) from investors including JK&B Capital, Novacap, VenGrowth Investment Fund Inc., and Venture Coaches.
Seaway was founded in 2001 by a team from . Its aim was to develop chips for Layer 4 through Layer 7 processing, an idea that was catching on even as network processor startups -- concentrating mostly on Layer 3 -- were beginning to flail and fail (see Nortel Folk Float to Seaway).
TCP offload engines were a popular Layer 4 application at the time, but Seaway chose to concentrate more on the security market, which didn't offer much security. Seaway's chip, the SW 5000, is a co-processor that adds Layer 7 packet handling to a general-purpose processor and can do TCP offload, too.
Seaway's general-purpose processor of choice happened to be the PowerPC from Motorola Inc. (NYSE: MOT), which spun off its chip division as Freescale last year (see Motorola Names Semiconductor Firm). That made Seaway an attractive acquisition target, Gohn says.
The long-term plan is to add Seaway's security technology to general-purpose processors, a move that would endow routers and switches with functions such as intrusion detection and virus protection. On paper, this could eliminate some of the need for separate security appliances for those functions. [Ed. note: Psssst! Fortinet, look behind you!]
The trend has been progressing for the past couple of years. Broadcom Corp. (Nasdaq: BRCM) and have already added encryption functions to their communications processors.
"Everybody's pretty much integrated the encryption stuff, so I guess the next level is to integrate the upper-level content processing. Intel and Broadcom haven't really stepped up to the plate on that one yet," Gwennap says.
Security-chip firms Cavium Networks Inc. and Hifn Inc. (Nasdaq: HIFN) are making moves similar to Freescale's, but in reverse, as both companies started by building security chips and are now developing products closer to general-purpose processors (see Broadcom Blends Ethernet, Security, Intel Moves on Security, Wired, Meet Wireless, and Hifn Debuts 'Antero' Security Processor).
— Craig Matsumoto, Senior Editor, Light Reading