Meghan,
Something to perhaps alay your fears about the sale...
Tom
Electronic Buyers' News
March 30, 1998
ADI sells ASIC technology
by Ismini Scouras
Analog Devices Inc. finally freed itself from its unprofitable hard disk
drive IC business last week when it sold its read channel ASIC technology to
Adaptec Inc. for $34 million, plus R&D services payments and royalties.
The deal sharpens ADI's strategy concerning its core analog ICs and DSP
products business.
"What this allows us to do is basically free up R&D sources to be applied in
the area of analog IC and DSP-related ICs, where we believe our correct focus
is," an ADI spokesman said.
ADI, Norwood, Mass., should have been out of the business a long time ago,
said Nimal Vallipuram, an analyst at Bear Stearns & Co. Inc., New York. The
company has almost no market share against leading supplier Texas Instruments
Inc., Dallas, he said.
"It was impacting their bottom line, especially for the last nine months or
so," Vallipuram said. "Since it didn't have a large market share, and the disk
drive companies were not doing well, it was not a good situation to be in."
ADI generated little sales from the storage market in its first fiscal 1998
quarter, said Shekhar Wadekar, an analyst at Raymond James, St. Petersburg, Fla.
"I would estimate about half a million, tops."
But instead of incurring losses, ADI will receive $6 million for research and
development services during a transition period lasting 12 to 18 months, and
will gain up to $20 million in royalties based on sales by Adaptec that
integrate ADI's read channel ASIC technology.
For Adaptec, the deal strengthens its ASIC product offering to the storage
market. Adaptec already has the controller, DSP, and servo cores, a spokesman
said.
"This gives us the full package of ASICs that constitute the brains of
storage devices today," an Adaptec spokesman said. Despite current market
conditions, the company said that it needed to beef up its storage-IC business
in order to respond to expected improvements in the market.
In Adaptec's third fiscal 1998 quarter ended Dec. 31, the com-pany reported
an 8% sequential decline in sales, which reached $254 million, partly due to
decreased IC sales to disk drive customers, according to a Bear Stearns report. |
