In a recent SEC filing, leading analog semiconductor
Avago Technologies Limited
) disclosed its intention to retrench a significant number of
employees following the completion of the acquisition of LSI
Corporation for $6.6 billion in cash. The gradual workforce
reduction will take place over the next six quarters and Avago will
record some charges related to the retrenchment in its quarterly
results, the amount of which is yet undecided.
Avago acquired LSI to diversify its existing business line from
wired infrastructure, wireless and industrial businesses into the
storage chip market. The strategic move was aimed at augmenting its
revenues, as the industry braces for more consolidation amid a
challenging macroeconomic environment.
The all-cash transaction was funded by a combination of $1.0
billion cash in hand, $4.6 billion term loan from a consortium of
banks, and $1.0 billion investment from private equity firm Silver
With annual revenues of approximately $5 billion, the combined
company is expected to be one of the behemoths in the semiconductor
industry offering a complementary yet diversified product portfolio
to a wider range of customers. Leveraging on economies of scale,
Avago is expected to benefit from rapid increases in data center IP
(Internet protocol) and mobile data traffic, to emerge as the
undisputed leader in the enterprise storage market.
In addition to cost synergies from a combined resource pool as the
cost of designing and building semiconductors rises, the
acquisition is likely to improve the operating margin of the
combined company, creating greater scale to further drive
innovation into the datacenter.
With expertise in compound semiconductor design and processing,
Avago is a premier designer, developer and global supplier of a
broad range of analog, mixed signal and optoelectronics components
and subsystems. The company boasts over 4,200 patents serving three
primary target market segments: wireless communications, wired
infrastructure, and industrial and other.
Avago presently has a Zacks Rank #2 (Buy). Other stocks that are
worth considering in the industry with a comparable Zacks Rank
Advanced Semiconductor Engineering Inc.
Alpha & Omega Semiconductor, Ltd.
Amkor Technology, Inc.
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