Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Broadcom (BRCM) -- Ignore unavailable to you. Want to Upgrade?

To: Daniel Hsu who wrote (1018)	3/5/1999 4:06:00 AM
From: Thai Chung	Read Replies (2) \| Respond to of 6531

March 5, 1999 Intel to Acquire Level One, Expanding Push Into Chips for Communications By DAVID P. HAMILTON and DEAN TAKAHASHI Staff Reporters of THE WALL STREET JOURNAL Intel Corp. said it will acquire Level One Communications Inc., a maker of communications and networking chips, in a $2.2 billion stock swap. The deal marks an aggressive expansion of Intel's push into communications-related chips, a business that until now has mostly been the province of telecommunications-equipment makers and niche chip makers. And Intel doesn't look ready to stop; President and Chief Executive Officer Craig Barrett said the company will continue to look for new acquisition candidates in related businesses. "We're deadly serious about our network communications group," Mr. Barrett told reporters on a conference call. "Our strategy is to be a major building-block supplier" of chips for the networking and telecommunications markets. Under the terms of the deal, Intel, Santa Clara, Calif., will exchange 0.43 share for each share of Level One, an arrangement that values Level One at $48.75 a share based on Intel's closing price Thursday of $113.375, a drop of $1.3125 in Nasdaq Stock Market trading. That amounts to a hefty premium of nearly 80%, given that shares of Level One, of Sacramento, Calif., closed at $27.125, down $5.25, or 16%, also on Nasdaq. Intel plans to issue 18.6 million shares to cover the merger. The exchange rate and total number of shares will be adjusted for Intel's previously announced 2-for-1 stock split. Intel started its little-known networking business almost a decade ago developing chips for so-called network interface cards, which connect computers in local-area networks via cable. The company expanded that business a couple of years ago, clashing in the low end of networking with market leader 3Com Corp. Since then, Intel has steadily added additional businesses, mostly via acquisitions. Intel said its networking business accounts for between $500 million and $1 billion of its $26.3 billion in annual revenues, and added that networking-gear sales last year grew close to 50%. The company said it aims to make networking a multibillion-dollar business within the next few years. A year ago, Intel expanded further by tackling the small-business segment of the market for hubs and routers, devices that can connect a group of computers to the Internet. Intel also started a home-networking business for products that connect computers in consumers' homes, and it invested in home-networking technology companies such as Tut Systems Inc. and Sharewave Corp. Intel recently closed a deal acquiring Shiva Corp., a maker of gear for "virtual private networks," which allows employees to dial into a corporate computer network from the Internet, eliminating long-distance calls and slashing the costs of maintaining a network. Intel paid $181.9 million for Shiva, based in Bedford, Mass. Before that, in deals valued at about $150 million, Intel acquired networking-equipment makers Case Technology Ltd. and Dayna Communications Inc., and bought a minority stake in Xircom Inc. The acquisition of Level One will provide Intel with chip technology aimed to handle communications across local-area and wide-area networks, particularly those in small businesses. Intel is by far the biggest maker of microprocessor chips, but it has nowhere near that kind of dominance in the networking arena. And though its antitrust trial involving the Federal Trade Commission starts Tuesday, Mr. Barrett said he didn't expect any "regulatory roadblocks" to the acquisition, because the company faces aggressive competition from a wide array of companies, such as Broadcom Corp. and Lucent Technologies Inc. Henry Nicholas, CEO of Broadcom in Irvine, Calif., said his company has been taking market share from Level One. He said Intel's acquisition of Level One will effectively remove Level One chips from the open market, largely because Intel competitors like 3Com don't want to buy chips from Intel. "Overall, this validates the growth of the market," said Mr. Nicholas, who noted that networking chips account for about 40% of Broadcom's business. Level One was advised by Lehman Brothers Holdings Inc.