Comms chips

Skyworks Scoops Up PMC-Sierra for $2B

The unusually large wave of consolidation in the semiconductor market this year rolls on, with Skyworks Solutions buying PMC-Sierra for $2 billion in cash.

Other big deals this year include Intel Corp. (Nasdaq: INTC) buying Altera, Avago Technologies Pte. buying Broadcom and NXP Semiconductors N.V. (Nasdaq: NXPI) buying Freescale.

Skyworks Solutions Inc. (Nasdaq: SWKS) intends to position itself as a one-stop shop for OEMs and ODMs involved in building Internet infrastructure. The company expects data center equipment will be a big target market.

The two companies have complementary skills. Skyworks has expertise with analog, RF and mixed signal ICs. PMC-Sierra Inc. (Nasdaq: PMCS), meanwhile, specializes in ICs and software for storage, optical and mobile networks.

The deal works out to $10.50 a share. The price Skyworks is paying is about where PMCS stock has peaked from time to time over the years. PMC-Sierra's stock hit one of those peaks earlier this year, but in July it dropped to trade at about $6 a share after the second-quarter earnings report.

PMC-Sierra missed its earnings projection for Q2 and announced an exit from the market for chips for cellular basestations, a layoff (200 employees, or 14% of its total workforce) and a reduction in spending. The company blamed weakness in the carrier and storage end markets.

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Skyworks has experienced some ups and downs of its own. It has supplied chips for Apple's iPhones, but demand from Apple Inc. (Nasdaq: AAPL) has been unsteady recently.

Buying PMC-Sierra, expanding its portfolio and targeting new and apparently growing markets, such as hyperscale data centers (where demand has remained strong, PMC-Sierra reported in its second-quarter earnings call in July), could help the combined entity buffer itself better from ups and downs in the market.

"With our acquisition of PMC, Skyworks will be uniquely positioned to capitalize on the explosive demand for high performance solutions that seamlessly connect, transport and store Big Data," said David J. Aldrich, chairman and chief executive officer of Skyworks, in a statement.

"Specifically, we plan to leverage PMC's innovative storage systems, flash controllers, optical switches and network infrastructure solutions to expand our engagements with some of the world's leading OEMs and ODMs as well as emerging hyperscale data center customers," he continued. "At a higher level, this complementary yet highly synergistic acquisition is consistent with our stated strategy of diversifying into adjacent vertical markets while leveraging our system-level expertise and global scale. PMC enables us to substantially expand our serviceable market within some of the fastest growing segments in technology, including cloud storage and optical networking."

— Brian Santo, Senior Editor, Components, T&M,

inkstainedwretch 10/7/2015 | 2:52:06 PM
Analyst call Skyworks CEO Dave Aldrich said there's no expectation that any PMC-Sierra product lines will be shut down or divested.

Part of the rationale for the deal was creating a one-stop shop for large OEMs. When asked about where the two companies' product lines might complement each other, Aldrich said, "today Skyworks, we don't play in hyperscale storage. We would love to. We also have some power management products that could potentially dovetail in. But on the infrastructure side, optical networking, for example, we share some common customers and we bring a new set of customers to the PMC portfolio, and that really down the line there is potential for in mobile infrastructure, they have the data converted portfolio that would dovetail very well into some of the analog mixed products that we have. So there is product synergy, there are some unique markets that they bring and then there are some common customers in markets that we can grow together." 

--Brian Santo
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