Texas Instruments (TXN:NYSE) is close to buying Libit Signal Processing, an startup Israeli chip company, for more than $300 million, according to two sources, one with connections to TI and the other with connections to Libit.
The deal would seem to be small potatoes in the grand scheme of TI's aggressive and expensive acquisition binge. Watch this one, though, because it promises to pit one tech-stock darling, TI, against an even dearer tech-stock darling, Broadcom (BRCM:Nasdaq), the leader by far in supplying the semiconductor technology in the components for high-speed Internet connections over cable TV systems.
Though not well known outside the communications sector, privately held Libit is the No. 2 player in the space that's given Broadcom a value of $10.4 billion on 1998 revenues of $203 million. Its pairing with an ascendant Texas Instruments would all of a sudden create meaningful competition for Broadcom. Both companies' stocks have been on a tear. TI's shares, at 132 3/4, are up 55% year to date; Broadcom's, at 111 15/16, have nearly doubled in the same time frame. Both companies have soared in part because they focus on the market for communications chips instead of rapidly commoditizing microprocessors for PCs that Intel (INTC:Nasdaq) dominates.
It is still possible that TI's acquisition of Libit will fall through. After all, the Israeli media, which reported unofficial word of the transaction on Sunday, also reported weeks ago that Lucent Technologies (LU:NYSE) had agreed to buy Libit.
That deal never materialized. Intel (a Libit shareholder) and Analog Devices (ADI:NYSE) also have reportedly taken a harder look at Libit. The perpetually pending purchase of Libit is what one industry player calls "one of the most shop-worn deals on the Street."
A spokeswoman for TI, working late on Friday in Dallas, issued the customary refusal to comment on rumors. Ditto for Jacob Tanz, Libit's marketing vice president in Los Altos, Calif., who hinted that calling back at the beginning of the week could be fruitful.
TI has other options if it wants to tee off against Irvine, Calif.-based Broadcom. It could license technology from Stanford Telecommunication (STII:Nasdaq), a former defense contractor in Sunnyvale, Calif. Stanford Telecommunications is locked in a patent litigation with Broadcom.
For now, though, Broadcom is the company to beat. Its key customers include 3Com (COMS:Nasdaq), General Instrument (GIC:NYSE), Cisco (CSCO:Nasdaq) and Nortel Networks (NT:NYSE). Despite all the hullabaloo, Libit counts only Toshiba as a major, publicly disclosed customer. Marketing man Tanz hints, however, that the startup has won other big accounts it has yet to make public.
From the The Street.com |
