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Strategies & Market Trends : Speculating in Takeover Targets
ULBI 11.92+1.2%3:59 PM EDT

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To: Glenn Petersen who wrote (3951)6/14/2015 5:02:23 PM
From: richardred  Read Replies (1) of 7075
 
I always like looking historically , before and sometimes after the fact. A acquisition in the group by a competitor sometimes gets the juices flowing in the group.

Here's why chipmaker Avago is reportedly looking at potential acquisitions



Look for consolidation in the chip market to continue.

Avago Technologies, a chip company formed after the spin out Agilent’s chip division, is seeking to expand its business with the acquisition of another semiconductor firm and has explored deals with Xilinx, Renesas Electronics and Maxim Integrated Products, according to a story in Reuters. The story cites people familiar with the matter and says Avago could spend up to $10 billion on the deal.

Avago makes a variety of analog and mixed-signal chips used in automotive, industrial and communications applications. It also makes custom-designed chips known as ASICS which would explain the interest in Xilinx, which makes custom-designed chips that are also programmable. The types of chips that Xilinx makes are gaining ground in data centers as companies like Microsoft and Facebook are trying out custom and programmable chips for certain types of changing computing jobs.

Reuters notes that Avago has also spoken to private equity firm Silver Lake Partners LP about partnering in a potential acquisition. Silver Lake has a long history with Avago, having helped create the company when it purchased the Agilent chip assets along with KKR & Co LP in 2005. It also has a seat on Avago’s board, but no longer has a stake in the company.

Avago is not the only chip firm looking for deals. The industry is experiencing a wave of consolidation as several trends converge. In the data center, there are fewer customers as more computing power is held in the hands of the large cloud computing providers and giants in the industry. They are designing and building their own equipment, causing pressure in the server manufacturing space, as well as dictating their semiconductor specifications and needs. This began in computing, but it will trickle down into components and communications gear as well.

In the industrial and consumer world, the Internet of things is pressuring chipmakers in a number of ways, even as it represents a huge opportunity to sell more silicon into more devices. Companies are trying to integrate microcontrollers and radios and sensors all on one chip, which means they are buying firms to bring that expertise in house. We’ll see more deals like NXP’s $11.8 billion planned buy of Freescale or Qualcomm’s $2.5 billion acquisition of Bluetooth radio firm CSR.


fortune.com
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