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Avago agrees to buy LSI for $6.6 billion

Avago agrees to buy LSI for $6.6 billion

Avago looks to ride the wave of growing mobile traffic with LSI acquisition

Semiconductor company Avago Technologies has agreed to buy storage and networking company LSI for US$6.6 billion in an effort to expand its data center offerings.

The deal involves Singapore-based Avago paying $1 billion in cash, an equity investment of $1 billion by Silver Lake Partners and $4.6 billion in term loans from banks.

The combined company will be positioned for growth in the data center business with mobile traffic increasing at a fast pace, the companies said in a joint statement.

The growth in mobile traffic has increased the demand for networking equipment, with more of the data processing load falling on data centers.

Avago is mainly known for its equipment such as actuators and microelectromechanical systems (MEMS) used in industrial, automotive. lighting and consumer equipment, but also offers embedded chips for wireless base stations and networking equipment in data centers. Some of Avago's competitors include Texas Instruments, Analog Devices and Fairchild Semiconductor.

LSI already offers hardware equipment for data centers, including flash storage, network processors, controllers and other products, with Mellanox and Intel being top competitors.

The acquisition of LSI also helps Avago expand its offerings in the wired infrastructure of data centers, said Hock Tan, president and CEO of Avago, in a statement.

But wireless networking assets seem to be a big focus. Earlier on Monday Intel acquired the wireless networking assets of MindSpeed Technologies for an undisclosed sum.

The Avago-LSI deal is expected to close in the first half of 2014 and is subject to customary conditions and regulatory approvals.

Agam Shah covers PCs, tablets, servers, chips and semiconductors for IDG News Service. Follow Agam on Twitter at @agamsh. Agam's e-mail address is agam_shah@idg.com

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