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Technology Stocks : PMC-Sierra (PMCS) -- Ignore unavailable to you. Want to Upgrade?

To: Billy Joe who wrote (2413)	3/24/1999 2:26:00 PM
From: tech101	Respond to of 3818

The New Gold Rush: Commun. Circuits Buying frenzy shows growth potential By Robert Ristelhueber (Electronic News) March 22, 1999 San Jose--A new silicon Gold Rush is in full swing as established semiconductor companies race to gobble up smaller firms to gain expertise and to carve out a place in what is seen as the last big silicon frontier - communications chips. Large chipmakers have paid premium prices to strengthen their positions in the communications arena in recent weeks, most notably the blockbuster $2.2 billion takeover of Level One Communications by Intel Corp. Other deals include LSI Logic Corp.'s acquisition of Seeq Technology Inc., and Lucent Technology's purchase of Sybarus Technologies and Enable Semiconductor. Royal Philips Electronics' hostile takeover attempt of VLSI Technology Inc. also is believed to be partly motivated by a desire to acquire additional communications chip know-how. An acquisition binge also is taking place at a lower level, as smaller communications chip companies merge to broaden and deepen their technology. Applied Micro Circuits Corp., for example, recently agreed to pay $115 million for Cimaron Communications Corp. in order to migrate to the next layer of the network protocol (EN, March 8), while Vitesse Semiconductor purchased Vermont Scientific Technologies last fall for the same reason. Booming wireless and networking equipment markets are the lure, as the chip business transitions away from a computer-centric model. "The semiconductor industry has been driven for the last couple of decades by the computing industry," noted Arun Veerappan, vice president and senior analyst for Robertson Stephens, San Francisco. "In the next couple of decades, the communications industry will drive growth." The urgency to gain communications expertise is reflected in the prices ponied up by the acquiring companies. "Intel paid $2.5 million per employee for Level One, and Lucent paid $1 million per employee for Enable," said Jeremey Donovan, senior industry analyst with Dataquest, San Jose. "It shows that the engineers in these companies have a lot of inherent value in them." The stunning success of the initial public offering of Broadcom Corp. also demonstrated the market's belief that communications is the road to El Dorado. That expectation also can be seen in the growing tendency of chip companies to define themselves as vendors to this industry. Recent spin-outs like Conexant and Infineon and even old hands like Cypress Semiconductor are spending much time touting their communications credentials. Nobody expects the buying spree to end soon. Much of the cutting-edge communications silicon technology today resides in small start-ups with bizarre names like XaQti, C-Port, and T.Sqware. Although some may grow into going concerns, like PMC-Sierra, others will undoubtedly be absorbed by chip heavyweights. The long-term impact of this trend on communications equipment companies could be profound. When circuits used in computers shifted from custom ASICs to commodity standard parts, it helped demolish the proprietary hardware model, with ruinous results for firms like Digital Equipment, Wang Labs and Data General. A similar earthquake could potentially crater the fat margins currently enjoyed by Cisco Systems, 3Com and the like. In the meantime, chip companies have their eye on what may be the last nearly untapped major silicon market. "If you want to be a multibillion dollar company, there are no applications like DRAMs or X86 processors left to get you there," said Elias Moosa, a communications analyst with Thomas Weisel Partners, San Francisco. "For mainline semiconductor companies, the communications industry is where the growth and future opportunities are." He believes that Intel bought Level One to protect its existing datacom business, where it is under competitive threat from 3Com and others. More acquisitions may be on the horizon for the microprocessor giant. "Level One has strong Ethernet capabilities, but Intel still needs to have a critical mass with SONET, ATM and certain other emerging transport areas." Intel also has a vested interest in greasing the data pipeline so that users will covet more powerful microprocessors, Moosa added. LSI wanted Seeq because "they're selling a lot of ASICs into just about every networking OEM," said Dataquest's Donovan. Communications intellectual property (IP) will be particularly valuable as the system-on-chip era broadens. Regarding future takeovers, Donovan contends that, "anyone is up for grabs," but suggested that a new class of chip called a network processor could attract particular attention from acquirers. Vendors of those circuits include C-Port Corp., SiTera Inc., XaQti Corp., and T.Sqware.

To: Billy Joe who wrote (2413)	3/24/1999 3:01:00 PM
From: tech101	Read Replies (1) \| Respond to of 3818

The New Gold Rush: Commun. Circuits Buying frenzy shows growth potential By Robert Ristelhueber (Electronic News) March 22, 1999 San Jose--A new silicon Gold Rush is in full swing as established semiconductor companies race to gobble up smaller firms to gain expertise and to carve out a place in what is seen as the last big silicon frontier - communications chips. Large chipmakers have paid premium prices to strengthen their positions in the communications arena in recent weeks, most notably the blockbuster $2.2 billion takeover of Level One Communications by Intel Corp. Other deals include LSI Logic Corp.'s acquisition of Seeq Technology Inc., and Lucent Technology's purchase of Sybarus Technologies and Enable Semiconductor. Royal Philips Electronics' hostile takeover attempt of VLSI Technology Inc. also is believed to be partly motivated by a desire to acquire additional communications chip know-how. An acquisition binge also is taking place at a lower level, as smaller communications chip companies merge to broaden and deepen their technology. Applied Micro Circuits Corp., for example, recently agreed to pay $115 million for Cimaron Communications Corp. in order to migrate to the next layer of the network protocol (EN, March 8), while Vitesse Semiconductor purchased Vermont Scientific Technologies last fall for the same reason. Booming wireless and networking equipment markets are the lure, as the chip business transitions away from a computer-centric model. "The semiconductor industry has been driven for the last couple of decades by the computing industry," noted Arun Veerappan, vice president and senior analyst for Robertson Stephens, San Francisco. "In the next couple of decades, the communications industry will drive growth." The urgency to gain communications expertise is reflected in the prices ponied up by the acquiring companies. "Intel paid $2.5 million per employee for Level One, and Lucent paid $1 million per employee for Enable," said Jeremey Donovan, senior industry analyst with Dataquest, San Jose. "It shows that the engineers in these companies have a lot of inherent value in them." The stunning success of the initial public offering of Broadcom Corp. also demonstrated the market's belief that communications is the road to El Dorado. That expectation also can be seen in the growing tendency of chip companies to define themselves as vendors to this industry. Recent spin-outs like Conexant and Infineon and even old hands like Cypress Semiconductor are spending much time touting their communications credentials. Nobody expects the buying spree to end soon. Much of the cutting-edge communications silicon technology today resides in small start-ups with bizarre names like XaQti, C-Port, and T.Sqware. Although some may grow into going concerns, like PMC-Sierra, others will undoubtedly be absorbed by chip heavyweights. The long-term impact of this trend on communications equipment companies could be profound. When circuits used in computers shifted from custom ASICs to commodity standard parts, it helped demolish the proprietary hardware model, with ruinous results for firms like Digital Equipment, Wang Labs and Data General. A similar earthquake could potentially crater the fat margins currently enjoyed by Cisco Systems, 3Com and the like. In the meantime, chip companies have their eye on what may be the last nearly untapped major silicon market. "If you want to be a multibillion dollar company, there are no applications like DRAMs or X86 processors left to get you there," said Elias Moosa, a communications analyst with Thomas Weisel Partners, San Francisco. "For mainline semiconductor companies, the communications industry is where the growth and future opportunities are." He believes that Intel bought Level One to protect its existing datacom business, where it is under competitive threat from 3Com and others. More acquisitions may be on the horizon for the microprocessor giant. "Level One has strong Ethernet capabilities, but Intel still needs to have a critical mass with SONET, ATM and certain other emerging transport areas." Intel also has a vested interest in greasing the data pipeline so that users will covet more powerful microprocessors, Moosa added. LSI wanted Seeq because "they're selling a lot of ASICs into just about every networking OEM," said Dataquest's Donovan. Communications intellectual property (IP) will be particularly valuable as the system-on-chip era broadens. Regarding future takeovers, Donovan contends that, "anyone is up for grabs," but suggested that a new class of chip called a network processor could attract particular attention from acquirers. Vendors of those circuits include C-Port Corp., SiTera Inc., XaQti Corp., and T.Sqware.