August 24, 2007 – Maxim Integrated Products has agreed to acquire a portion of Vitesse Semiconductor’s storage products business for $63 million in cash, plus up to $12 million in performance incentives, in a deal that bolster’s Maxim’s storage portfolio and lets Vitesse focus on its networking/Ethernet business.
The deal absorbs Vitesse’s Serial Attached ATA and SCSI, products, as well as products for enclosure and baseboard management, with a projected “served available market” topping $300 million by 2010, Maxim noted. About 50 employees will be offered new jobs with the company, which says the new business will be accretive to earnings in 2008.
“In addition to their high performance silicon content these products have a significant software and firmware component critical to the end customer,” said Maxim president/CEO Tunc Doluca, in a statement. He praised Vitesse’s development status and engineering credibility and design expertise in SoCs, storage, and firmware, adding that organically building such a lineup would have been “difficult and time-consuming.”
For Vitesse, the deal will allow it to focus on its core networking and Ethernet markets, and reduce quarterly operating expenses by about $2.5 million. The storage lines accounted for about $20 million of the company’s “consumption” in 2Q07. “This sale allows us to focus all our attention on the many growth opportunities we see in our core Networking and Ethernet IC businesses,” stated CEO Christopher Gardner.
Related to the deal, Vitesse has also signed a four-year, $30 million loan with Whitebox VSC, with options for an additional $15 million, secured “by substantially all of Vitesse’s assets.” About $15M of the loan will be used to pay back a credit facility with affiliates of Tennenbaum Capital Partners, which has liens on the storage products assets being sold. Additionally, “in combination with our positive cash flow from operations, this transaction will allow Vitesse to selectively invest in areas where we believe we can generate solid returns,” noted CFO Rich Yonker.