Tony,
I just wanted to make sure you didn't miss the following article. I know how you like to hear both sides of the story before drawing any conclusions.
LSI Logic buys Symbios; analysts question move -- Entering a market hit by declining ASPs
Crista Souza
Silicon Valley- At first blush it looked like a positive move toward a new market, but LSI Logic Corp.'s surprise acquisition of Symbios Logic Inc. last week already has analysts questioning the wisdom of the merger.
The $760 million purchase of I/O-chip maker Symbios will boost LSI's share of the semiconductor market, creating a company with combined 1997 revenue of $1.9 billion. And it will give Milpitas, Calif.-based LSI an immediate-and growing-presence in the high-end computing and mass-storage arenas.
But several observers asked why LSI would enter a market that is being pounded by declining ASPs on the consumer side, and is dominated by the likes of Adaptec Inc., IBM Microelectronics, and Lucent Technologies Inc. at the high end.
"There must be more to this than meets the eye," said Jordan Shelburn, an analyst at San Jose-based Dataquest Inc. "It looks like they're just buying revenue, but what do they get by doing that?"
Part of the answer may lie with Symbios' mixed-signal designs and standard-cell libraries, which could enhance LSI's system-on-a-chip expertise in the long run, said Dan Niles, an analyst at BancAmerica Robertson Stephens, San Francisco.
"[But] in the near term, the weakness in the storage markets of Symbios and a weak advanced computing business of its own will create some challenges for LSI," Niles said.
Additionally, the translation of Symbios' intellectual-property and mixed-signal designs into LSI's manufacturing processes will consume a great deal of resources at a time when LSI can ill afford to be distracted, observers said.
"LSI must feel they're getting some real expertise there," said Bill McClean, an analyst at IC Insights Inc., Scottsdale, Ariz.
For cash-strapped Hyundai Electronics America, the sale of one of its last remaining profitable businesses will provide immediate relief. San Jose-based HEA is a U.S. subsidiary of South Korean memory manufacturer Hyundai Electronics Industries Co. Ltd., which is suffering from the double whammy of a depressed DRAM market and an ailing Asian economy.
LSI's bid for Symbios came just four days after Adaptec dashed its plans to acquire the I/O-technology company, when it learned that the Federal Trade Commission was preparing to block the merger.
Despite the timing, LSI's move was not a hasty one, the company said. In fact, LSI had planned to buy Symbios in January and had already completed due diligence when its bid was pre-empted by Adaptec, according to an LSI spokesman.
Symbios, based in Ft. Collins, Colo., is a leading supplier of SCSI and Fibre Channel chips and board-level products for high-end servers and workstations, and is recognized for possessing strong mixed-signal design know-how.
The company's Wichita, Kan.-based disk-drive-array business garnered $125 million in 1996 revenue and chalked up a 1.2% share of the disk-drive-array market, according to Disk/Trend Inc., a Mountain View, Calif., research firm.
The LSI-Symbios transaction is expected to be completed in the third quarter, at which time Symbios will become a wholly owned subsidiary of LSI. An LSI spokesman said the company has not determined whether or to what degree it will integrate Symbios' products and distribution strategy with its own.
LSI is distributed in the United States by Avnet Inc. and Wyle Electronics Inc.
Symbios maintains U.S. franchise agreements with Arrow Inc., Bell Microproducts Inc., and Pioneer-Standard Electronics Inc |
