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Velio Dealio Realio?

A deal for Velio Communications Inc. may be underway, as industry scuttlebutt says the chip startup is in talks to be bought by a public company.

Velio has been presumed to be on the block since the departure of CEO Raju Chekuri (see Chekuri Checks Out at Velio). The company was in negotiations for a sale late last week, sources say.

Sources couldn't pinpoint the potential buyer, but the popular favorite is Applied Micro Circuits Corp. (AMCC) (Nasdaq: AMCC), a company that's been on a buying streak lately (see AMCC Snacks on Cicada Scraps, AMCC to Buy JNI for $190M, and AMCC Switches On IBM's Fabric).

Some sources believe the acquisition is already completed, but if that's the case, it rules out AMCC. "We've looked at many companies over the past year, and the notion that we've closed a deal with Velio is not true," writes Joseph Vithayathil, AMCC senior vice president of business development, in an email.

That leaves open the possibility that AMCC is still negotiating with Velio, or that negotiations did happen but were called off. Vithayathil wouldn't comment on those possibilities. Velio, meanwhile, maintains a policy of not commenting on acquisition rumors.

It's not hard to see why Velio might want to be acquired, as OEMs continue to favor larger suppliers that are less likely to vanish from the scene. "In the universe you're talking about -- TDM switches and things like that for the telecom market -- there's so little business. No one's going to buy from a startup," says Arnab Chanda, analyst with Lehman Brothers.

Velio got off to a promising start, producing a grooming switch that packed 144 serializer-deserializers (SerDes) onto one chip. But the company's development may have gotten sidetracked when Cisco Systems Inc. (Nasdaq: CSCO) came around with a request for a customized chip. "Because they focused on the Cisco thing, they were dead in the water on the grooming switch," one source says. (See Velio Claims Switch Silicon Breakthrough and Velio Breaks Grooming Barrier.)

— Craig Matsumoto, Senior Editor, Light Reading

fw23 12/4/2012 | 11:20:55 PM
re: Velio Dealio Realio? Chekuri was a LOOSER and IN THE WAY of the DEAL.
With him gone, everyone is on the way to BIG
THINGS.

There is a whole BAG of CONTRACTS ready to be
signed as soon as the deal goes down. Two of
the contracts will be signed with companies
whose name starts with "C".

Velio is HOT-HOT-HOT. And far from putting them
on a SIDE->TRACK, cisco pointed them in the
right direction and gave them some precious
info about customers that they were
->LACKING<-.


AutoDog 12/4/2012 | 11:20:54 PM
re: Velio Dealio Realio? It's gotta be AMCC... The two companies entered into a stragegic partnership some time ago when it became clear that Velio's serdes parts were outpacing offerings from San Diego.

Ever since then they've been quite chummy in the press and when you talk directly to sales guys from either company. Should make a good match unless AMCC gets indigestion from all of the snacking its been doing as of late.

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sundevil 12/4/2012 | 11:20:43 PM
re: Velio Dealio Realio? Velio's fabrics are STS granularity TDM fabrics. The PowerPRS are packet fabrics.

If AMCC does acquire Velio my guess is that they will kill the STS fabric product line and instead use Velio's I/O technology in another market.
Xile 12/4/2012 | 11:20:43 PM
re: Velio Dealio Realio? Why would AMCC want to acquire Velio after buying IBM's PowerPRS Switch Fabric?
AutoDog 12/4/2012 | 11:20:37 PM
re: Velio Dealio Realio? Velio is more than just switch fabrics... They have a very strong multi-channel SerDes line. This would complement AMCC's big-iron SONET framers and FEC chips. The two go together like chocolate and peanut butter but AMCCs efforts in this arena (e.g. S2509) have been less than stellar vs. Velio.

In fact, IMHO that one of the reason for their strategic alliance... You can sell more framers if you can coninvingly tell the customer your parts play well with the best serdes out there.

Can't comment on the switch fabrics, however.

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