Today: Avago is considering a bid for Silicon Valley chip firms Xilinx or Maxim Integrated, Reuters reports, after the HP spinoff helped launch a wave of consolidation in the semiconductor sector. Also: Apple denies report of HomeKit delay. Also: Apple denies report of HomeKit delay.
The Lead: Avago considers bid for Xilinx or Maxim, Reuters reports
A year and a half after helping to launch a wave of consolidation with its purchase of a Silicon Valley chip company, Avago is reportedly looking at two other Bay Area semiconductor manufacturers for possible acquisitions.
Reuters reported Thursday afternoon that the Singapore-based chip company has reached out to at least three potential acquisition targets, including two of Silicon Valley’s largest semiconductor manufacturers: Xilinx and Maxim Integrated Products, both based in San Jose. Tokyo-based Renesas is also on Avago’s list of targets, according to the report.
“It’s our policy not to comment on rumors or speculation,” Maxim spokeswoman LuAnn Jenkins Walden said in an email Thursday. Xilinx also declined to comment.
Avago is the product of Hewlett-Packard’s semiconductor ambitions, and was spun off as part of Agilent in 1999 before being spun off again as an independent company in 2005. The company was an early entrant in a wave of mergers in the chip sector when it announced in late 2013 the purchase of Fremont’s LSI for $6.6 billion.
Since that purchase was cleared in 2014, Cypress Semiconductor has merged with Spansion, combining two of Silicon Valley’s largest chip firms, and Cypress doesn’t appear to be done: The San Jose company offered to buy Milpitas-based Integrated Silicon Solution on Wednesday for $19.75 a share, trumping an earlier offer from a Chinese investment group. San Jose’s Micrel agreed to be purchased by Arizona-based Microchip Technology earlier this month after an activist investor agitated for the move.
Intel was reportedly in talks to buy San Jose chipmaker Altera for what would have been the Santa Clara company’s largest acquisition ever, but the deal fell apart; Intel, the world’s largest chipmaker, is believed to still be on the hunt for a large acquisition, however. Outside of Silicon Valley, NXP Semiconductors is in the process of acquiring Freescale Semiconductor for more than $16 billion, among other deals.
Analysts say that the maturation of the semiconductor business has created a need for larger companies, as the decline of the personal computer industry creates growth issues and the lower margins of the mobile-device industry squeeze profits. By teaming up and cutting staff, chip companies are realizing economies of scale to fight those trends and expand their potential customer base.
“I would almost say anyone who hasn’t done a deal at this point has either got to be thinking about selling themselves or being acquisitive,” Gavin Slader of JMP Securities recently told Bloomberg News.
Maxim was actually out in front of the trend, purchasing Fremont rival Volterra Semiconductor for more than $500 million in 2013. The growth in revenues from that purchase has made Maxim and Xilinx very similar companies: Xilinx was the seventh-largest chip company in Silicon Valley in 2014 with $2.43 billion in sales, while Maxim was 8th with $2.4 billion. Both are among the 35 largest public technology companies in the Bay Area.
The two companies are different in terms of products. Xilinx, an Altera rival, helped pioneer malleable chipsets known as field programmable gate arrays, or FPGAs, which have proved popular in everyday gadgets connected to the Web, referred to as the Internet of Things. Maxim is a specialist in analog chips, which are used in cars, communications equipment and data centers.
Shares in Xilinx and Maxim jumped after the report hit Thursday afternoon. Xilinx closed with a 2.9 percent gain at $44.99 that pushed its market valuation to $11.6 billion; Maxim increased 4.9 percent to $34.10 a share, which made its market capitalization $9.7 billion. Reuters reported that Avago is willing to spend more than $10 billion on a takeover.
SV150 market report: Apple denies report HomeKit is delayed
Wall Street experienced gains Thursday for the first time this week, pushing the Standard & Poor’s 500 to a record high as Apple led Silicon Valley tech stocks to a 1.7 percent daily leap.
Apple gained 2.3 percent to $128.95 despite a report that its HomeKit software platform for the Internet of Things would be delayed. Fortune reported that HomeKit, which Apple announced nearly a year ago, would not launch until later this summer, but Apple disputed that report after the market closed and said the first HomeKit devices would hit stores in June as planned.”We already have dozens of partners who have committed to bringing HomeKit accessories to market and we’re looking forward to the first ones coming next month,” Apple spokeswoman Trudy Muller told the Wall Street Journal. After announcing HomeKit at last year’s Worldwide Developers Conference, Apple is expected to introduce a new streaming-music service at this year’s WWDC, and a Thursday report said Apple will bring back elements of Ping, a social-media experiment in iTunes that was not well-received.
Cisco Systems dropped 1 percent to $29.05 after divulging quarterly earnings ahead of the departure of CEO John Chambers, who shot down rumors that Cisco was making a bid for FireEye; Milpitas-based FireEye fell 2.5 percent to $42.39. In Thursday afternoon’s earnings reports, Symantec fell in late trading following a report that was short of expectations in performance and forecast; Applied Materials gained after-hours following its report; and Arista Networks lost even more than its strong daily gains. eBay announced more plans for its PayPal split, and the San Jose company’s stock gained 2.2 percent to $60.10. Google gained 1.7 percent to $538.40 while facing calls for more “Right to be Forgotten” transparency, and GoPro added 1.5 percent to $50.62 after launching sales in China via Alibaba’s Tmall.
Up: Facebook, Adobe, Apple, Symantec, Gilead, EA, eBay, Workday
Down: FireEye, AMD, LinkedIn, Twitter, Yelp, Cisco, SunPower
The SV150 index of Silicon Valley’s largest tech companies: Up 29.3, or 1.67 percent, to 1,784.38
The tech-heavy Nasdaq composite index: Up 69.1, or 1.39 percent, to 5,050.79
The blue chip Dow Jones industrial average: Up 191.75, or 1.06 percent, to 18,252.24
And the widely watched Standard & Poor’s 500 index: Up 22.62, or 1.08 percent, to 2,121.1
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