More on Intersil-Techwell

Contact: Brenon Daly

We looked at Intersil’s purchase of Techwell on Thursday, primarily from the perspective of the senseless lawsuits that are swirling around the transaction. But fittingly for the largest acquisition of a US-based chip company since mid-2007, there’s a lot more that’s noteworthy about the deal. (Note: The equity value of the transaction is actually $450m, while the $370m figure in the announcement is the enterprise value.)

For starters, Intersil’s pickup of Techwell, which is expected to close in two months or so, is the sixth deal the chip company has inked in the past year and a half. (In another report, we noted some similarities in a pair of purchases that Intersil did back in 2008.) At $450m, the buy is the largest that Intersil has announced in a half-decade. The acquisition gets Intersil into two new markets: video security surveillance systems, where Techwell gets about 70% of its sales, and automotive displays, which accounts for the remaining 30%.

Also, the planned sale of Techwell represents the second exit at an above-market multiple in just three weeks for Technology Crossover Ventures (TCV). A late-stage investment firm, TCV owned chunks of both Techwell and RiskMetrics Group, which sold to MSCI Barra for $1.55bn at the beginning of March. TCV holds nearly 4.3 million shares of Techwell, according to the latest 13F filing with the SEC, meaning the firm stands to enjoy a $79m payday when the deal closes.

Like Intel, Microsoft buys scraps of parallel-processing startup

Contact: John Abbott

Despite a fair bit of talk about how important it is to demystify the art of parallel programming now that multiple cores and threads have become mainstream in x86 computing platforms, the actual level of activity has been surprisingly low. Over the last few years we’ve identified no more than a dozen small development tools vendors active in this area – some of them focused on the high-performance computing (HPC) sector – that appeared to have some prospect of success. And the companies with the most at stake in seeing better performance levels from new-generation CPUs (notably Intel and Microsoft) don’t seem to have been working particularly hard on the problem, either.

Perhaps, however, that’s starting to change. True, the number of startups is declining rather than expanding, but as they fail their assets are being acquired by larger vendors. One of the first to go was PeakStream in June 2007, snagged by Google after raising $22m in VC funding. But Google had no interest in sharing what it had bought. It withdrew PeakStream’s commercial product and began using it internally to boost the performance of its own software. Just last month Intel – currently in the process or rolling out six- and eight-core microprocessors – revealed that it had quietly picked up two small companies: RapidMind and Cilk Arts. And now Microsoft has announced, equally quietly, that it has purchased the technology assets of Interactive Supercomputing (ISC).

ISC had raised around $18m in VC funding over its four years of life, from Ascent Venture Partners, CommonAngels, Flagship Ventures, Fletcher Spaght and Rock Maple Ventures. It’s perhaps a bit of a stretch to call what ISC was doing mainstream, since it was focused on the HPC market. Its Star-P development environment let users create software models on their desktops using off-the-shelf packages from which parallel code could be automatically generated. The company claimed it could cut months from software development lifecycles. But Microsoft is talking about integrating ISC’s technology into its own products and using it for desktop computing as well as clusters. ISC CEO Bill Rock will bring over a team of experts to join Microsoft’s New England Research & Development Center in Cambridge, Massachusetts. Microsoft says it will continue to support existing Star-P users but won’t continue to sell the product in its current form.

Intersil: Doubling down in Austin

Contact: Brenon Daly

Intersil’s purchase of Zilker Labs last week had more than a few echoes of its pickup of D2Audio last July: same buyer, same banker, same backyard and even a shared backer at the acquired company. Both Zilker Labs and D2Audio are based in Austin and drew venture money from Dallas-based Sevin Rosen. (We understand that Al Schuele, Sevin Rosen’s lone VC in Austin, participated in funding both companies.) On the exit, boutique firm Pagemill Partners advised both Zilker Labs and D2Audio.

Despite the similarities between the exits of Zilker Labs and D2Audio, the companies had virtually nothing to do with each other up until that point. D2Audio makes digital audio power amplifiers, and primarily serves the consumer market. We estimate that Intersil paid around $25m for D2Audio. Intersil’s more-recent purchase of Zilker Labs added power-management technology to its existing portfolio. We estimate that Intersil paid about $18m for Zilker Labs, which raised some $33m in backing.

Intersil’s 2008 acquisitions

Date Target Target’s headquarters
December 18, 2008 Zilker Labs Austin
September 30, 2008 Kenet Woburn, Massachusetts
July 28, 2008 D2Audio Austin

Source: The 451 M&A KnowledgeBase

Marvell in the land of milk and honey

Contact: Brenon Daly, Gilad Nass

Having already handed over some shekels for Israeli companies in the past, Marvell Technology Group has reportedly gone on another shopping trip in the country. Israeli newspapers reported recently that Marvell has acquired Iamba Networks in a scrap sale. (Iamba, an optical semiconductor company, has its headquarters in Cupertino, California, but maintains a large R&D presence in Israel.) Reports put the purchase price of Iamba, which raised some $30m in funding, at $10m.

The pickup of Iamba, which Marvell declined to confirm, marks the company’s third purchase in Israel in recent years. In February 2003, Marvell paid $50m for Radlan Computer Communications. But Marvell’s big deal in the country came in late-2000, when it used a slug of its freshly minted IPO shares to buy Galileo Technology in a transaction initially valued at $2.7bn.

By the time the Galileo acquisition closed in January 2001, however, Marvell shares had lost more than half of their value. In fact, Marvell shares (on a split-adjusted basis) are currently trading only slightly above where they were when the company inked the Galileo purchase. Marvell shares closed at $5.09 on Tuesday, valuing the company at just slightly more than 1x its trailing sales.

RFMD takes a timeout

-by Thomas Rasmussen

RF Micro Devices is taking a break from M&A. The radio frequency semiconductor company told us after an investor conference last week that it will sit on the sidelines until at least the second quarter of 2009. The pause comes after a pair of tuck-ins (its $25m acquisition of Filtronic’s semiconductor business and its $24.1m purchase of Universal Microwave) and its $900m bet on Sirenza Microdevices late last year. The company plans to use the next six months to digest its earlier acquisitions.

As it holds off on inorganic growth, RFMD may need to focus on organic growth. Revenue has flatlined at about $1bn in the company’s past two fiscal years and it has lost money in three of its last four quarters. Meanwhile, its cash flow has dried up substantially. In its most-recent four quarters (ending June 30), RFMD reported negative EBITDA of $8m, which is down from a positive EBITDA of $175m in the year-earlier period. That slump has weighed on shares, which have shed two-thirds of their value so far this year. And that has not only cost the company, it has also cost the shareholders of Sirenza, who took two-thirds of their payment in RFMD shares.

Chipping away

It’s one down and (at least) one to go for AMD. The battered chip maker moved earlier this week to dump its digital TV (DTV) chip business to longtime partner Broadcom. AMD will pocket $193m in cash from the divestiture. Although the unit had been on the block for some time, AMD got a decent price for the cast-off. We understand the DTV unit was generating in the neighborhood of $150m in sales, meaning AMD got more than the typical ‘1x and done’ divestiture multiple. Further, we would note that the valuation of the DTV business at 1.3x sales is about twice AMD’s own price-to-sales valuation.

With one of the legacy ATI Technologies businesses off the books, AMD can move on to unwinding yet another part of that disastrous acquisition. (Since AMD spent $5.4bn in cash and stock on graphics chip company ATI two years ago, shares of the second-largest chipmaker for computers have plummeted 70%.) The next unit on the auction block: Processors for multimedia applications that run on mobile phones. Rival Intel made a similar move two years ago, selling its communications processor unit to Marvell Technology for $600m, which valued the unit at an estimated 1.5x sales. We suspect AMD would be perfectly happy with that kind of valuation in any divestiture of its mobile business. As to who might be on the other side of the deal, two companies come immediately to mind: Qualcomm is always on the lookout for more IP, and communications chipmaker Atheros has done three acquisitions in the past two years and is said to be looking for more.