Microsemi to Boost Communications Suite with Vitesse Buy - Analyst Blog

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Microsemi CorporationMSCC announced that it will buy Vitesse Semiconductor Corp., a California-based provider of high-speed networking semiconductors, for about $389 million in cash.

Founded in 1984, Vitesse's high speed networking semiconductors cater to the fastest-growing network infrastructure markets including mobile access/IP edge, enterprise cloud access and industrial-IoT networking.

Microsemi will pay $5.28 per share for Vitesse, a 32% premium to its average closing price during the last 30 trading days ended Mar 17. The deal is expected to close in the third quarter of fiscal 2015, ending Jun 28.

Following the news, shares of Vitesse Semiconductor surged 37.28% to $5.34, while Microsemi share price jumped 2.42% to $34.68.

The acquisition will enhance Microsemi's portfolio of communications products. It will allow the company to take advantage of Vitesse's technology suite and increases traction in carrier, enterprise and industrial-IoT markets, thereby expanding its revenues and customer base.

Additionally, once the deal closes, the acquisition is expected to add 16-20 cents per share to earnings in the first fiscal year.

Microsemi is a designer, fabricator and supplier of analog, mixed-signal and discrete semiconductors. The company's portfolio consists of semiconductor and system solutions for defense & security, communications, aerospace and industrial markets. Last year, the company acquired Centellax, a California-based provider of high-speed semiconductor products, to broaden its product portfolio.

Microsemi reported decent first-quarter fiscal 2015 results with both the top and the bottom line matching the respective Zacks Consensus Estimate. However, the company's continuous investments in FPGAs and mixed signal RF product offerings will likely increase the expenses, in turn impacting operating margins in the near term.

Currently, Microsemi has a Zacks Rank #4 (Sell). Some stocks that are performing well at the current levels include Microchip Technology Inc. MCHP , NXP Semiconductors NV NXPI and Analog Devices ADI . While Microchip and NXP Semiconductors sport a Zacks Rank #1 (Strong Buy), Analog Devices has a Zacks Rank #2 (Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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