Avago, Fort Collins growing together

FORT COLLINS — In November, the third largest primary employer in Fort Collins announced that it has purchased an additional site for manufacturing operations in Eugene, Ore.

“We were told that Eugene would not impact expansions in Fort Collins,” assured a spokesperson for the city of Fort Collins.

As economic policy and project manager, SeonAh Kendall focuses on business retention and expansion of primary employers for the city. Her work includes helping businesses be successful in ways that benefit both the company and Fort Collins.

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The success of Avago Industries, a semiconductor designer, developer and supplier, has benefited the local economy in numerous ways. One of the company’s latest boosts, for example, is a plan to spend $57 million for an expansion.

The building permit was issued this summer to start construction, according to Noah Beals, senior planner-zoning for the city.

The result will be an addition of 121,767 square feet to Avago’s current 1.2 million-square-foot facility at 4380 Ziegler Road.  The new space will include a one-story warehouse connected to a three-story building, which would contain offices and a non-hazardous clean-room testing space.

It also will include a link to one of the existing buildings and a connecting bridge, according to Beals.

Purchase of the new plant site in Eugene actually is in line with how well Avago Industries is faring in the marketplace. The company’s profit and loss statement shows a worldwide revenue of $6.82 billion for 2015 – a growth of $2.56 billion over 2014.

Its net revenue for the fourth quarter fiscal year 2015 was $1,840 million, an increase of 6 percent from $1,735 million in the previous quarter and an increase of 16 percent from $1,590 million in the same quarter last year.

Avago’s cash balance at the end of the fourth fiscal quarter was $1,822 million, compared with $1,354 million at the end of the prior quarter.

At the rate its going, Avago’s revenue for the first quarter of fiscal year 2016 is on target for a projected $1.8 billion.

Avago (Nasdaq: AVGO), which has co-headquarters in Singapore and San Jose, Calif., designs, develops and supplies analog, digital, mixed-signal and optoelectronics components. That market includes making microchips for cell phones.

The company employs 8,400 employees globally and about 1,300 in Fort Collins.

Primary employers create products or services that are principally sold outside of the region. In Fort Collins, Avago exports at least 50 percent of its goods.

The benefits of primary employers include generation of new money and profits. Primary jobs create disposable income that feeds local retail, entertainment and service sectors.

Primary employers don’t include government, education and health fields, Kendall added.

The top primary employer in Fort Collins is Hewlett-Packard, with Woodward, Inc. second.

Avago was once part of Agilent Technologies, which spun off from Hewlett-Packard in 1999. The company went public in 2009 after incorporating in Singapore.

“Avago is a good partner with the city,” Kendall said.  “Its employees are active in the community and contribute back into it.”

Avago’s local workforce volunteers with nonprofit organizations such as United Way and also works with science, technology, engineering and math (STEM) initiatives in local schools.

In a win-win exchange, the city of Fort Collins negotiated two incentive packages for Avago.  Those packages have included two expansions.

The expansions and retrofits covered a new wafer fabrication facility and added space for a clean-room facility in 2011 and 2012.  The manufacturing use tax rebates came to a little more than $1 million, according to Kendall.

Avago also receives a rebate over a 10-year period of up to half the city’s portion of the business personal property tax on manufacturing equipment. That amount is capped at $3.8 million.

In exchange, the company initially agreed to hire a certain number of employees with a certain range of salaries, Kendall said. The two packages required a total of 227 jobs, which include operator, engineering and technician positions.

“The employment numbers have been exceeded,” Kendall said.

In comparison with its 1.2 million (and growing) square footage in Fort Collins, the property Avago is purchasing for $21 million in Eugene is 1.2 million square feet.

The site is a 17-year-old Hynix semiconductor factory that was shut down in 2008.

“The facility has been vacant for about eight years, so we couldn’t be more excited for a company of the quality of Avago to purchase and use it for its intended purpose,” said Dave Hauser, president and chief executive of the Eugene Area Chamber of Commerce.

While neither the details of how much Avago will invest in getting the Hynix site up and running  nor how many jobs the new plant will offer the area have been spelled out, Eugene is looking forward to a boost to its economy.

“Our understanding is that the planning, design and implementation for this facility is an intricate process,” Hauser said. “But the facility may be available for production by late 2017 or early 2018.”

The new facility will be used by Avago’s wireless semiconductor division to manufacture components used in mobile phones. This plant will be the second production site for the division headquartered in San Jose, which also utilizes the manufacturing site in Fort Collins.

The Hynix site is in Eugene’s enterprise zone. That area allows a three-year property tax abatement for companies that add to local jobs and capital investments.

Avago’s growth comes from a variety of sources, including mergers and acquisitions. The company bought one of its primary competitors, Broadcom, in a cash and stock deal that totaled about $37 billion, and will adopt the Broadcom name. The acquisition, the biggest technology acquisition to date, is expected to close in the first quarter of 2016.

One of the benefits to Avago in making the acquisition is that it will help the company lower the cost of manufacturing and stretch its reach.

In May 2014, Avago also acquired LSI Corp. in an all-cash transaction valued at approximately $6.6 billion. The acquisition expanded Avago’s product offerings and added expertise to its wired infrastructure market.

Additional deals Avago has made include the acquisition of storage networking technology leader Emulex for about $606 million on Feb 25.

Avago company officials were not available for comment.