Comms chips

Cypress Improves Its Line Card Lineup

In another move aimed at becoming a one stop shop for line card chips, Cypress Semiconductor Corp. (NYSE: CY) yesterday announced an agreement to acquire Silicon Packets Inc., a startup making 10-Gbit/s multiprotocol framer chips (see Cypress Acquires Silicon Packets).

The part cash, part stock deal values Silicon Packets (no Website) at $25 million, a figure that could increase in the future if performance targets are met, according to Geoff Charubin, director of marketing for Cypress’s datacom products, the division in which Silicon Packets will fall. Silicon Packets was founded in mid-2000 and has 28 employees.

Cypress has been on quite an acquisition spree and isn’t finished yet, according to Charubin. In the past two and a half years, it’s acquired no fewer than 15 companies. In 2001, it bought four startups -- three of them making communication chips -- for a total consideration of $414.5 million, $345.9 million of which was in cash.

Last year’s landmark acquisition was Lara Networks Inc., a developer of packet coprocessors, for $225 million in cash (see Cypress Goes Long on Line Cards). Other acquisitions included International Microcircuits Inc. (IMI), which specializes in timing circuit ICs, and HiBand Semiconductors Inc., a manufacturer of physical layer ICs.

Silicon Packets' first product, which is "just about ready" and should ship later this quarter, is a multiprotocol framer chip for 10-Gbit/s networks. The device has three modes, allowing it to take in data in any of three protocols: OC192c Sonet, 10-gigabit Ethernet WAN PHY, or 10-gigabit Ethernet LAN PHY.

This product allows Cypress to tick another box on its product bingo card. It sees the expansion of its portfolio to include all the chips on a line card as an essential strategy if it is to compete with the likes of Applied Micro Circuits Corp. (AMCC) (Nasdaq: AMCC) and PMC-Sierra Inc. (Nasdaq: PMCS).

Indeed, AMCC and PMC-Sierra are the main competitors to Silicon Packets. PMC has developed a multiprotocol product family called Xenon (see PMC-Sierra Touts Flexible 10-Gig Chip), while AMCC has a competing chip called Khatanga (see AMCC Launches 10-Gig 'Khatanga').

Charubin reckons Silicon Packets is one of the most advanced startups making framer chips. "We talked to a lot of people for a long time before we placed our bets," he says. And its products compare favorably to those from the big chip guys, he contends. For example, it implements the phase 2 version of the SPI 4 interface, while products that have been around longer implement the older SPI 4.1 interface.

From Silicon Packets' point of view, the acquisition makes sense because it gives the company a leg up with customers that might be reluctant to talk to a single-product startup.

Meanwhile, Cypress doesn't plan to stop shopping, according to Charubin. "I see no reason to stop acquiring companies. There are some very good deals around right now."

Cypress has got physical layer devices (PHYs), backplane transceivers, framers, and mappers covered, or at least partially covered, in its present portfolio. It lacks anything in switch fabrics, so a switch fabric startup could be a potential next acquisition, Charubin confirms. "The only thing we are shying away from at the moment is off-the-shelf network processors." In his view, there's too much uncertainty about the technology right now. "We'll let other guys duke it out, and we'll see who comes out victorious."

— Pauline Rigby, Senior Editor, Light Reading
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