Leading analog semiconductor manufacturer, Avago Technologies Limited AVGO had earlier negotiated to acquire Freescale Semiconductor, Ltd FSL. However, it ended negotiations when Freescale’s share price surged and made the latter too expensive for Avago. Shares of Avago increased marginally on Mar 5 following this announcement
However, NXP Semiconductors NXPI, a Dutch chip maker, announced that it will be acquiring Freescale for $16.7 billion (including debt). After this merger, NXP will become the largest supplier of microchips in the automotive industry. As a result of merging operations, NXP will become a $40 billion company in the semiconductor space.
This is one of the major chip deals, following Avago Technology‘s $606 million bid for Emulex Corp. ELX. Avago and Emulex recently entered into an agreement to acquire Emulex – a leader in network connectivity, monitoring and management. Emulex is important to Avago’s enterprise storage businesses and aligns well with its business model. Also, Avago already has a diversified product line and it further diversified its existing business line from wired infrastructure, wireless and industrial businesses into the storage chip market with the acquisition of LSI Corp. LSI for $6.6 billion.
Acquisitions, over time, have been Avago’s most preferred ways of penetrating into unexplored markets. The company is continuously on a look out for other potential acquisitions to expand its offerings from analog semiconductors to radio frequency technology. The company’s focus on multiple target markets and geographies mitigates operating risks and lessens the exposure to volatility in any single market.
Avago is a premier designer, developer and global supplier of a broad range of analog, mixed signal and optoelectronics components and subsystems. Avago products serve three primary target markets: wireless communications, wired infrastructure and industrial and others.
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