Comms chips

TranSwitch Sweeps Up Centillium

Shares of chipmaker Centillium Communications Inc. skyrocketed after hours last night after a buyout offer from TranSwitch Corp. (Nasdaq: TXCC) came in at nearly double Centillium's market capitalization.

TranSwitch announced late yesterday it's agreed to buy Centillium for roughly $42.8 million in cash and stock. TranSwitch calculates that the deal values Centillium at $1.02 per share, versus the company's closing value of 59 cents per share last night. (See TranSwitch Buying Centillium.)

The result was a big cha-ching! for Centillium, as its shares climbed by 31 cents (52.5%) to 90 cents in after-hours trading Wednesday evening. TranSwitch shares traded up 1 cent (0.6%) at $1.12 in after-hours trading.

The combined company would likely be profitable by the first quarter of 2009, TranSwitch officials said in a conference call with analysts Wednesday. And if that happens, pop the champagne corks (within reason) -- because it's been a long wait for both sides.

TranSwitch has not had a profitable quarter since 2003 and hasn't had a profitable year since 2000. And Centillium has never had a profitable 12-month period in its 11 years of existence.

What's the attraction of Centillium, then? TranSwitch sees the company as a way to get more deeply into the passive optical networking (PON) market. TranSwitch recently launched a GPON line called Taurus, but Centillium's EPON chips are more established, having won jobs at NTT Group (NYSE: NTT). (See TranSwitch Unveils GPON Chips and Centillium Soars on PON Deal.)

Centillium also has a VOIP chip business that TranSwitch officials described as "stable" during the conference call.

Those product lines are the new-look Centillium, however. The DSL business that was Centillium's original bread and butter got sold to Ikanos Communications Inc. (Nasdaq: IKAN) in February. (See Centillium Unloads DSL Business to Ikanos.)

TranSwitch's business until now included chips for the Ethernet-over-Sonet, Sonet (Synchronous Optical NETwork) and SDH (Synchronous Digital Hierarchy), and broadband access markets.

— Craig Matsumoto, West Coast Editor, Light Reading

marlin_brando 12/5/2012 | 3:36:58 PM
re: TranSwitch Sweeps Up Centillium TranSwitch got all CTLM's existing PON customers for its Taurus project.

Pete Baldwin 12/5/2012 | 3:37:04 PM
re: TranSwitch Sweeps Up Centillium TranSwitch stock is down about 20 percent this morning, which makes a little more sense.

I was suspicious of the number quoted in the story, because it looked like there were glitches in the online after-hours numbers last night. Centillium showed almost no change either at first, but when it snapped to that +50% level, I figured things had been fixed.

The deal seems very much a win on Centillium's side. What about TranSwitch?
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