Menu
Chip deal: LSI Logic buys Agere for US$4 billion

Chip deal: LSI Logic buys Agere for US$4 billion

Semiconductor manufacturer LSI Logic said on Monday it would acquire Agere Systems creating a combined chip-making company with enough scale to compete for greater market share in segments including hard disks and digital media players.

LSI, of Milipitas, California, will trade stock worth US$4 billion for Agere, of Allentown, Pennsylvania. The move will push LSI to double its size, growing to 9,100 employees and an estimated $3.5 billion in annual revenue.

LSI hopes to use the deal to extend its market in storage and consumer electronics by adding Agere's expertise in storage, mobility and networking, according to a statement by Abhi Talwalkar, president and chief executive of LSI. Agere's top 10 customers are Apple, Cisco, Hitachi, Lucent, Maxtor, NEC, Nokia, Samsung, Seagate and Toshiba, the company's web site says. Those customers use Agere chips in hard drives for laptop and desktop PCs, infrastructure for storage and wireless networks, and cell phone handsets.

In comparison, LSI drew most of its revenue in the past four quarters from enterprise storage, earning $1.4 billion in sales to customers like Brocade Communications Systems, Hewlett-Packard, IBM and Seagate Technology .

The two companies will also be more streamlined, saving $125 million per year starting in 2008 through increased efficiencies in manufacturing and operating expenses. The companies did not say whether that plan included layoffs.

LSI expects the transaction to close in the first quarter of 2007, pending approval by regulators and by the shareholders of both companies.

The acquisition marks another step by LSI to focus the company on more profitable sectors. In the past seven months, the company has sold its semiconductor manufacturing plant in Gresham, Oregon, and its ZSP digital signal processing unit. With the $118 million gained from those deals, LSI acquired StoreAge Networking Technologies, of Nesher, Israel, and Metta Technology, of Pune, India.

At the same time, Agere has been struggling to stay afloat. The company recently celebrated fiscal 2006 as its first profitable year as a publicly traded company, and was about to enter the third stage of its turnaround plan, Agere Chief Executive Richard Clemmer said in a conference call with analysts regarding the acquisition. By merging with LSI, Agere saw a chance to boost its profits faster than following the rest of its corporate reorganisation.


Follow Us

Join the newsletter!

Error: Please check your email address.

Tags Applesamsungagere SystmesciscolucenthitachilSI LogicNEC

Featured

Slideshows

A snapshot of the Kiwi partners set to shine at the Reseller News Awards

A snapshot of the Kiwi partners set to shine at the Reseller News Awards

With the 2017 Reseller News ICT Industry Awards only weeks away, Reseller News profiles the power line-up of partners set to dominate the biggest night on the channel calendar. ​Ranging from the enterprise, down through the mid-market and small business sectors into the heart of the start-up scene, the end result is the most diverse and wide-ranging partner line-up in the history of the Awards, playing host to the leading innovators of the past 12 months.​

A snapshot of the Kiwi partners set to shine at the Reseller News Awards
Show Comments