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Will the Microsemi-Vitesse merger succeed?

Posted: 19 Mar 2015     Print Version  Bookmark and Share

Keywords:Ethernet Everywhere  chip supplier  satellites  LAN  MIPS 

Microsemi Corp. rides the M&A wave among chip vendors with its plan to buy Vitesse Semiconductor Corp. for $389 million. However, not everyone is sold on the merger.

Microsemi is paying $5.28 a share in cash for each Vitesse share, which represents a premium of 36 per cent over Vitesse's Tuesday closing. Under terms of the deal, Vitesse has reportedly until April 8 to solicit a superior counterbid, in what is known as a go-shop provision.

The merger's focus is "communications semiconductors," with plans to direct the combined company at "carrier, enterprise and industrial Internet of Things markets," according to Microsemi's statements.

While the two insisted that they play in complementary fields, technically speaking, a MIPS versus ARM conflict is on the horizon. It's unclear how the new company will handle its separate processor cores—Vitesse' product family is based on Imagination Technologies' MIPS core and Microsemi's product line is based on ARM's Cortex M microcontroller core.

Microsemi is known as a chip supplier for military and commercial satellites and aircraft, wireless and wired LAN systems, oilfield equipment, and airport security systems. Microsemi CEO James Peterson explained what drove the deal was Microsemi's "continuing commitment to grow as a communications semiconductor company."

Vitesse, a self-styled "Ethernet Everywhere" company, designs, develops and markets chips for carrier and enterprise networking applications worldwide. In particular, Vitesse offers carrier Ethernet switch engines, including mobile access equipment, such as base stations, small cells, fibre and microwave wireless backhaul products.

In a statement, Chris Gardner, Vitesse's CEO said, "I believe Microsemi will be able to leverage Vitesse's Ethernet technology and capabilities further into the communications market and has the scale to implement the adoption of our industrial IoT strategy."

Good fit?

Not everybody is sold on the Microsemi-Vitesse merger plan. Gartner's Research Director Steve Ohr pointed out, "Vitesse told analysts in December that they would concentrate on high-end Ethernet, particularly the trunk line communications." However, he added, "Our assessment suggests that's not a thriving business, and how they intended to make money from it was a mystery."

Can Microsemi save the day for Vitesse, then?

- Junko Yoshida
  EE Times

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