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Mindspeed Snaps Up Picochip for $51.8M

Mindspeed Technologies Inc. (Nasdaq: MSPD) announced Thursday that it will acquire femtocell chipset specialist Picochip for US$51.8 million in cash and stock.

Mindspeed will pay $27.5 million in cash and offer about 5.19 million new shares of its common stock -- which is approximately 15 percent of Mindspeed's outstanding shares -- that is worth $24.3 million based on the closing price of the company's stock on Jan. 4.

In addition, there is an earn-out provision whereby the purchase price can be increased by up to $25 million depending on whether certain milestones are met and which would be payable in the first calendar quarter of 2013.

Picochip has about 150 employees, all of whom will join Mindspeed following the acquisition.

The transaction is expected to close in the first quarter of 2012.

Why this matters
This latest M&A action shows that the mobile chipset is still hot at the beginning of 2012. (See MWC 2011: Betting on the Next Chip M&A Deal, Broadcom to Buy a 4G Strategy Via Beceem, Intel’s Infineon Acquisition: All About 3G and Broadcom to Buy Femto Chip Startup for $86M.) Picochip, which leads the market in 3G femtocell chipsets, had talked about going for an initial public offering (IPO) in 2012 and was the subject of M&A rumors throughout last year. (See What's picoChip's Exit Strategy? and PicoChip Bags $20M, Plans IPO.)

Now, Mindspeed appears to be a good home for the U.K.-based femto chip company. This acquisition brings together Picochip's 3G small-cell expertise and Mindspeed's LTE chipset capabilities for small cells, which will be important as demand increases for dual-mode 3G/4G small cells. The two companies already have some customers in common, including Alcatel-Lucent (NYSE: ALU), Cisco Systems Inc. (Nasdaq: CSCO) and Samsung Electronics Co. Ltd. (Korea: SEC) and have worked together on some designs.

However, the purchase price of $51.8 million for a company that has raised more than $100 million in venture capital funding looks low.

For more
For more on Picochip, which was a finalist in Light Reading's private company of the year category, and Mindspeed, check out these stories:

— Michelle Donegan, European Editor, Light Reading Mobile

gtchavan 12/5/2012 | 5:46:38 PM
re: Mindspeed Snaps Up Picochip for $51.8M

Lets not forget that mindspeed stock has been languishing like other tech companies and part of the deal is in mindspeed stock so that will go up if both are successful.   Halim does not get the credit he deserves but this year he had made some great purchases.

Michelle Donegan 12/5/2012 | 5:46:38 PM
re: Mindspeed Snaps Up Picochip for $51.8M

$51.8M -- or potentially up to $76.8M with the earn out -- seems like a low price for Picochip.


Broadcom paid $86M for femto startup Percello in October 2010.

Gabriel Brown 12/5/2012 | 5:46:37 PM
re: Mindspeed Snaps Up Picochip for $51.8M

Mindspeed's investor call talked about Picochip having $15M in revenue for 2011. It sort of implied there was some revenue backed-up, but wasn't specific.

chips_ahoy 12/5/2012 | 5:46:35 PM
re: Mindspeed Snaps Up Picochip for $51.8M

Somebody is blowing smoke.... 50% growth to 25M after 10 years and 100M invested... the perfect time to sell cheap?

Michelle Donegan 12/5/2012 | 5:46:35 PM
re: Mindspeed Snaps Up Picochip for $51.8M

On the conference call about this acquisition, one of the analysts asked if Picochip was in Alcatel-Lucent's lighRadio, since AlcaLu is one of Picochip's customers. There was some noise on the call at that point, but it really sounded like Mindspeed CEO Raouf Halim said, yes it's in the lightRadio.


Did I hear that right?


 

Michelle Donegan 12/5/2012 | 5:46:35 PM
re: Mindspeed Snaps Up Picochip for $51.8M

Ah, thanks! That's the number we needed here. 


I tuned in the Mindspeed conference call replay and they also seid that Picochip's revenues in calendar year 2012 are expected to grow between 50 and 60 percent. And that the $25 million extra that Mindspeed could pay in early 2013 is essentially dependent on Picochip delivering more than $25 million in revenue next year.


 

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