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Comms chips

PMC-Sierra Regains a Layer

2:40 PM -- PMC-Sierra Inc. (Nasdaq: PMCS) is getting thumbs-ups for yesterday's deal to acquire Wintegra Inc.

Wintegra deserves a pat on the back, too, because now the company won't have to face a difficult IPO market. Instead, it would pick up a net $213 million (plus $60 million more in incentives) if the deal closes as planned this year. (See Wintegra Tries This IPO Thing Again and PMC-Sierra to Acquire Wintegra.)

So, it's an exit for Wintegra. But PMC-Sierra "needed to do this deal," notes Simon Stanley, principal of Earlswood Marketing Ltd. and a Heavy Reading analyst-at-large.

"They have no strategic products in the wireless market and, since they sold off the multiservice processors, they have no packet processing devices," he writes in an email to Light Reading.

PMC-Sierra does have WiMax chips, but it's not like it's built a huge wireless franchise. (See PMC's Wireless Connection.)

PMC-Sierra already had a small stake in Wintegra, and they'd worked together on some reference designs, notes Bob Wheeler, an analyst with The Linley Group , in a note issued last night.

"We wonder why this acquisition didn't happen sooner. Apparently, PMC had to wait until Wintegra's valuation was more in line with reality," Wheeler writes.

Wintegra's processors were designed for access equipment in general, but the real plum here is mobile backhaul. That's been where most of Wintegra's revenue has been coming from, and it's practically all PMC-Sierra talked about in its press release.

More generally, though, PMC-Sierra is taking a step back into the packet-processing world. And for Wintegra, it's presumably a richer take than an IPO would have brought in.

— Craig Matsumoto, West Coast Editor, Light Reading

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