Macom, a US supplier of analogue RF, microwave, and photonic semiconductors, has agreed to acquire Applied Micro Circuits, a US company that makes networking and computing solutions for datacentres. The transaction will be for approximately $770 million in diluted equity value, or approximately $688 million net of AppliedMicro's cash position of approximately $82 million as of September 30, 2016.
Macom intends to divest the well-positioned but non-strategic compute business within the first 100 days of closing. AppliedMicro has been exploring options for the compute business and there is known strategic interest among several potential buyers and investors.
Commenting on the transaction, John Croteau, president and CEO, stated: "This transaction will accelerate and expand Macom's breakout opportunity in enterprise and cloud datacentres. Macom will now be able to provide all the requisite semiconductor content for optical networks - analogue, photonic and PHY - from the switch to fibre for long haul, metro, access, backhaul and Data Center. AppliedMicro's 100G to 400G single-lambda PAM4 platform should perfectly complement Macom's leadership in analog and photonic components for datacentres.
He added: "Notably, the IEEE recently recommended the adoption of AppliedMicro's single lambda PAM4 solution to be an industry standard for enterprise and Data Center connectivity, positioning this technology as the solution of choice going forward. Additionally, AppliedMicro's Connectivity business aligns well with Macom's differentiated, high-growth business model, offering non-GAAP gross margins well in excess of Macom's long term target operating model, long product life cycles, and sticky customer relationships."
"AppliedMicro also provides value-added technologies including SerDes, high speed analogue-to-digital and digital-to-analogue converters with industry-leading engineering competencies and long product lifecycles. Importantly, we expect that this transaction will establish Macom with an incumbent position supplying strategic components and enterprise and cloud datacenter customers."
"This is an exciting day for AppliedMicro, and we are pleased to be joining forces with Macom. The transaction affirms the value that our employees have created and provides a strong path forward for our Connectivity business while delivering AppliedMicro stockholders a robust premium," said Paramesh Gopi, President and CEO, AppliedMicro.
"This transaction will create an industry powerhouse with the scale, deep customer relationships, innovative technology, and enabling products that will help deliver explosive growth in Enterprise and Cloud Data Centers. In addition, this agreement provides a promising path forward for the Compute business, which is in the process of bringing AppliedMicro's highly-competitive third-generation X-Gene processor to market. X-Gene is well-positioned to address the large opportunity for mainstream server processors with its proven high performance cores, scalable interconnect and high per socket memory capabilities."