Macom Technology Solutions said it will acquire Applied Micro in a deal valued at $770 million. The deal highlights how the semiconductor industry is consolidating.
The strategic rationale behind the deal is combining Macom's analog processors with Applied Micro's connectivity chips for cloud data centers. Macom plans to sell Applied Micro's compute business, which includes server on a chip processors. Applied Micro is among the early movers in an effort to bring ARM-based servers to the data center.
John Croteau, CEO of Macom, said he was optimistic that Applied Micro's compute business will be sold within 100 days. By acquiring Applied Micro, Macom will focus on all the processors for optical networks from switch to fiber optic networks to data centers.
Under the terms of the deal, Macom will pay Applied Micro shareholders $8.36 a share with $3.25 a share in cash and the remainder Macom shares. The price tag is a 15.4 percent premium over Applied Micro's closing price of $7.25 on Friday.
Macom said it expects Applied Micro to add to non-GAAP earnings for the fiscal year ending in September 2017.
Next up is figuring out where Applied Micro's compute business is headed. Applied Micro was planning to launch its latest version of the X-Gene server on a chip processor to market.
The Macom-Applied Micro deal comes shortly after Broadcom bought Brocade and Qualcomm acquired NXP. Macom was also built by acquisitions including Aeroflex/Metelics, FiBest, BinOptics, and Mindspeed. Cisco and Huawei are among Macom's largest customers.