Banking & Finance  May 29, 2015

Avago may absorb more chip-making competitors

Global semiconductor firm Avago Technologies Ltd., with operations in Fort Collins and Longmont, reportedly wants to acquire some of its chip-making competition, which includes another Longmont company, Xilinx Inc.

The big question in Northern Colorado and the Boulder Valley is how an acquisition would affect Avago’s Colorado operations.

Officials at Avago, which has dual headquarters in San Jose, Calif., and Singapore and 4,700 employees worldwide, and Xilinx, with 3,500 workers throughout the globe, are keeping mum on the subject. Xilinx’ headquarters also is in San Jose.

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Earlier this month, news agency Reuters cited unnamed sources who said Avago has reached out to acquisition targets Xilinx and chipmakers Maxim Integrated Products Inc. in San Jose and Renesas Electronics in Japan, but none of its offers has yet led to advanced discussions.

The report said Avago has about $10 billion to spend. Xilinx has a market cap pushing $12 billion. Maxim’s market cap is about $9.6 billion, and Tokyo-based Renesas is valued at close to $13 billion.

Reuters reported that Avago has spoken to private-equity firm Silver Lake Partners about partnering on an acquisition.

Avago has been on an acquisition binge, acquiring LSI Corp., PLX Technology and Emulex Corp. in the last two years. Its bid for Freescale Semiconductor Inc. fell through when Freescale agreed to merge with NXP Semiconductors.

Avago's 1-year stock performance

During the past year, Avago’s stock increased 103 percent, from a low of $66.92 per share to a high of $136.28. It was trading at $132.21 on May 26.

Shares in Xilinx (Nasdaq: XLNX) and Maxim (Nasdaq: MXIM) jumped after the report hit in mid-March. Xilinx closed with a 2.9 percent gain at $44.99 that pushed its market valuation to $11.6 billion; Maxim increased 4.9 percent to $34.10 a share, which made its market capitalization $9.7 billion.

Avago’s largest campus is in Fort Collins, where it manufactures wireless components. It is in the process of adding 150 jobs to its 1,300 person workforce there.

In Longmont, Avago has an 80-person workforce, which it acquired when it bought data-storage solutions firm LSI Corp.

Xilinx’ Colorado operation in Longmont employs 200 people, mostly software engineers and technical writers who work on programmable chips.

Avago makes a variety of analog and mixed-signal chips used in automotive, industrial and communications applications. It also makes custom-designed chips known as ASICS, which would explain the interest in Xilinx, which makes custom-designed chips that are also programmable.

The types of chips that Xilinx makes are gaining ground in data centers as companies such as Microsoft and Facebook experiment with custom and programmable chips for certain types of changing computing jobs, according to a report in Fortune magazine.

Xilinx helped pioneer malleable chipsets known as field programmable gate arrays, or FPGAs, which have proved popular in everyday gadgets that control home appliances through the Web, referred to as the Internet of Things.

Analysts say that the maturation of the semiconductor business has created a need for larger companies, as the decline of the personal-computer industry creates growth issues and the lower margins of the mobile-device industry squeeze profits. By teaming up and cutting staff, chip companies are realizing economies of scale to fight those trends and expand their potential customer base.

“I would say almost anyone who hasn’t done a deal at this point has either got to be thinking about selling themselves or being acquisitive,” Gavin Slader of JMP Securities recently told Bloomberg News.

Avago (Nasdaq: AVGO) is set to release its second-quarter 2015 earnings data May 28. Analysts expect Avago to post earnings of $2.01 per share and revenue of $1.63 billion for the quarter. The company had revenue of $1.66 billion during the previous quarter.

Doug Storum can be reached at 303-630-1959, 970-416-7369 or dstorum@bizwestmedia.com.

Global semiconductor firm Avago Technologies Ltd., with operations in Fort Collins and Longmont, reportedly wants to acquire some of its chip-making competition, which includes another Longmont company, Xilinx Inc.

The big question in Northern Colorado and the Boulder Valley is how an acquisition would affect Avago’s Colorado operations.

Officials at Avago, which has dual headquarters in San Jose, Calif., and Singapore and 4,700 employees worldwide, and Xilinx, with 3,500 workers throughout the globe, are keeping mum on the subject. Xilinx’ headquarters also is in San Jose.

Earlier this month, news agency Reuters cited unnamed sources who said Avago has…

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