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Wednesday June 2 12:30 AM ET
Intel To Buy Dialogic For $780 Million
By Therese Poletti
SAN FRANCISCO (Reuters) - Intel Corp. (Nasdaq:INTC - news), the No.
1 maker of computer chips, said Tuesday it agreed to acquire Dialogic Corp.
(Nasdaq:DLGC - news) for $780 million, the latest in a string of deals as it
seeks to diversify its core processor business.
Dialogic, based in Parsippany, N.J., makes hardware and software for building corporate
telecommunications systems that run on Intel-based network servers, instead of proprietary
communications systems.
Using Dialogic's technology, phone calls, voice mail, faxing, and other communications can be routed
through standard office computer networks instead of PBX systems.
Intel and Dialogic said they agreed to a deal in which Intel would pay $44 cash per Dialogic share in
a tender offer, representing a nearly 32 percent premium to the closing price of Dialogic stock
Friday.
Intel said the transaction would expand its business selling high-volume servers -- computers used to
manage networks of other computers -- into the multibillion-dollar office network and
telecommunications markets. Executives on a conference call said that 80 percent of all servers in
corporations are designed around Intel chip architecture.
''We see a very clear road map where the data and voice networks are converging into one data
structure,'' John Miner, vice president and general manager of Intel's enterprise server group, said
during a conference call. ''Our desire is to be a key ingredient supplier and in the converged
environment. This acquisition will provide the key ingredients.''
The acquisition of Dialogic is the latest in a slew of deals by Intel to bolster its position in the
converging voice and data communications markets and to diversify beyond its core microprocessor
business.
Already this year, the Santa Clara, Calif., company has agreed to pay $3.5 billion to buy Level One
Communications Inc. (Nasdaq:LEVL - news), a supplier of networking chips, and $180 million to
buy Shiva Corp., a maker of network access equipment.
Intel has also closed many smaller deals in the networking space and it recently announced plans to
develop and run server data centers, so small to medium-sized businesses can set up servers to run
electronic commerce activities.
''Intel has to look for growth in other places, for a diversification of revenues,'' said Dan Niles, a
BancBoston Robertson Stephens analyst. ''It makes a lot of sense.'' Meanwhile, Intel's shares
tumbled Tuesday after Niles made comments about the company's second quarter, saying Wall
Street analysts' estimates were probably too high and that Intel's second quarter would be a bit
lighter than expected, due to a bigger mix of its lower-cost Celeron chip in the total revenues. Intel
closed down $3.375 to $50.6875 on the NASDAQ.
However, Dialogic shares jumped $10.0625 on the news of the deal with Intel, closing at $43.4375
on the NASDAQ.
As part of the deal, Dialogic will become a wholly-owned unit within Intel's Enterprise Server
Group. Dialogic's 1,200 employees will stay on as employees of the new unit and no layoffs or
immediate changes to product lines are expected.
Dialogic was founded in 1983. Its 1998 revenues totaled $294 million. More than 90 percent of the
company's revenues come from computer hardware add-on boards composed of Dialogic software
and an array of computer chips.
These systems are inserted into network servers to enable telephone calls, voice messages, faxes,
speech recognition and other voice communications to be routed over office networks. The
equipment is also used by phone companies to provide functions like prompting services that tell
callers when a number listing has changed.
Dialogic said its board had approved a definitive merger agreement and had recommended that
Dialogic stockholders tender their shares to Intel. The closing is subject to regulatory approval,
customary closing conditions and acceptance by holders of a majority of Dialogic shares.
Earlier Stories
Intel To Buy Dialogic For $780 Million In Latest Expansion (June 1)
Intel Bid For Dialogic Eyes Telecom Markets (June 1)
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