PMC-Sierra Nets Tachyon Biz

Monday Oct 31st 2005 by Paul Shread
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The chipmaker picks up the former HP/Agilent storage chip business.

PMC-Sierra has entered into an agreement with Kohlberg Kravis Roberts and Silver Lake Partners to acquire the storage semiconductor business of Agilent Technologies for about $425 million in cash.

The storage chip business is part of Agilent's Semiconductor Products Group (SPG), which KKR and Silver Lake Partners are in the process of acquiring.

PMC-Sierra said the acquisition strengthens its position in the storage semiconductor market and "creates one of the industry's most complete end-to-end enterprise storage silicon solutions."

The Agilent storage chip business, formerly part of Hewlett-Packard, has long been a leader in Fibre Channel protocol controllers with its Tachyon product line. The group is also developing next-generation multi-protocol controllers supporting Fibre Channel, SAS, SATA and iSCSI storage systems, in addition to other storage-related products.

On a conference call following the announcement, PMC-Sierra CEO Bob Bailey and CFO Alan Krock said the Agilent business has 240 employees and does more than $100 million a year in business. The deal could make industry heavyweights such as Cisco, EMC and HP 10%+ customers of PMC-Sierra, they said.

The move will alter PMC's business mix from 70% telecom and 30% enterprise to 50-50, company officials said.

"PMC-Sierra offers one of the most popular lines of Fibre Channel loop switches and SAS/SATA expanders and multiplexers," Bailey said in a statement. "Our products, architectures, and technology roadmaps are highly complementary with the storage semiconductor business of Agilent. ... For the customers, this combination is intended to improve time-to-market, tighten reference designs across a common software architecture, and lower overall cost of ownership."

"The management team of the storage semiconductor business supports this combination with PMC-Sierra as the most compelling way for us to accelerate product development," said Martin Scott, vice president and general manager of the SPG storage chip business.

Investors seemed to like the deal, sending PMC-Sierra shares 12% higher on Monday.

The deal is expected to close in January, about two months after the KKR-Silver Lake/Agilent deal is complete.

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