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PMC - Sierra, Inc. (PMCS)
Signing of Definitive Agreement to Acquire IDT's Enterprise Flash Controller Business Conference
May 29, 2013 5:00 pm ET
Gregory S. Lang - Chief Executive Officer, President and Director
Steven J. Geiser - Chief Financial Officer, Principal Accounting Officer and Vice President of Finance
Ruben Roy - Mizuho Securities USA Inc., Research Division
Harlan Sur - JP Morgan Chase & Co, Research Division
Kevin E. Cassidy - Stifel, Nicolaus & Co., Inc., Research Division
Sundeep Bajikar - Jefferies & Company, Inc., Research Division
Previous Statements by PMCS
» PMC-Sierra's CEO Hosts 2013 Annual Shareholder Meeting (Transcript)
» PMC-Sierra Management Discusses Q1 2013 Results - Earnings Call Transcript
» PMC-Sierra Inc. Presents at Goldman Sachs Technology & Internet Conference 2013, Feb-13-2013 03:20 PM
Good afternoon, and thank you for joining us today to discuss our announcement of the definitive agreement to acquire IDT's Enterprise Flash Controller business. The press release announcing the transaction was issued after market close today and is available on our website at www.pmcs.com, along with a companion slide deck to reference during management remarks. With me on the call today are Greg Lang, President and CEO; and Steve Geiser, Vice President and CFO.
Before we begin, I would like to point out that during the course of this conference call, we will be making forward-looking statements, including statements regarding the expected benefits of the transactions to the company, market segment expectations and the company's plans for the acquired business that are subject to risks and uncertainties. Actual results and events may differ materially from these projections. The potential risks and uncertainties include, among others, that the transaction may be delayed or may not be consummated at all, the company may not successfully integrate the acquired business or its personnel, that relevant market segments may not develop as expected and that the company's offerings may not prove attractive to customers in those market segments.
During the call, there are also risks and uncertainties regarding any forward-looking statements that management may make in response to questions. The company's SEC filings describe factors that may affect the company's business and results generally, including PMC's limited revenue visibility due to variable customer demand, market segment growth or decline, orders with short delivery lead times, customer concentration and other items. The company does not undertake any obligation to update the forward-looking statements.
At the end of management's prepared remarks today, we will open the call up to questions. Thank you, and I'll now turn the call over to Greg Lang.
Gregory S. Lang
Good afternoon, and thank you for joining us on short notice. I'm very pleased to announce that we signed a definitive agreement to purchase the Enterprise Flash Controller business and certain PCI Express Switch assets from IDT. We believe that this acquisition is a game-changing event that will accelerate PMC's entry into the rapidly growing SSD marketplace and will position PMC as the market -- as a market leader in enterprise SSDs. I'd like to first summarize the key points of the announcement, then we'll provide more detail about the team and products we're acquiring, as well as the value we believe we can create for our shareholders. During our call, I'll be referring from time to time to the slide presentation that we posted to our website.
So on the announcement. Under the terms of definitive agreement, PMC will require IDT's Enterprise Flash Controller business and products, PCI Express Switch technology and intellectual property and approximately 75 patents related to both Flash controller and switch IP. Additionally, we will be offering jobs to approximately 50 employees, the majority of which are currently based in San Jose. This acquisition complements PMC's organic efforts in the 12 gig SAS Flash controller market segment and then accelerates our time to market in PCI Express Flash Controller segment by approximately 2 years, and that leverages a $40 million to $50 million R&D investment already made. The team, as we'll describe you today, secured several impressive design wins for their award-winning PCI Express controllers, and these wins are in marquee accounts that span the hyperscale data center, NAND vendor, SSD vendor and OEM customer basis. We believe this business will be a strong complement to our existing 12 gig SAS SSD controller offerings and a combination of newly acquired IP with PMC's existing storage IP will open up the potential to participate in new markets.
As most of you know and know well, there's a major disruption underway in storage driven by the increased use of Flash technology, perhaps the biggest in a decade. At the core, this disruption is a dramatic increase in performance that Flash memory of forward system designers when compared to traditional rotating disks, delivering about 2,000x performance in I/Os per second and 100x improvement in latency. You can see this dramatic performance improvement on Slide # 4 of the slide presentation. The NAND industry exploded with the emergence of the iPad, followed by mass adoption of Flash-based smartphones. It has continued to grow into the mobility space with the pioneering use of SSDs in notebooks and now the broader ultrabook segment.
In terms of market size, IDT projects the worldwide of SSDs to total more than -- to more than double from $6.7 billion in 2012 to $13.7 billion in 2016. Of that $13.7 billion in 2016, roughly half of the revenue is forecasted to ship into enterprise applications. These are the applications that map directly in the PMC's target markets, storage systems and servers, and we view this is a huge opportunity for us.