MediaTek Inc., a fabless semiconductor company for wireless communications and digital media solutions, announced that it has signed a definitive agreement to acquire the assets related to the Analog Devices Inc. Othello® radio and SoftFone® baseband chipset product lines, as well as certain cellular handset baseband support operations, for approximately US$350 M in cash. These product lines represented approximately US$230 M in revenue for ADI, based on fiscal year 2006 financial results.
Through this acquisition, MediaTek's wireless handset division gains: a global team of approximately 400 experienced product development and customer support professionals; an established customer base around the world; new radio transceiver and baseband chipset products, including GSM, GPRS, EDGE, WCDMA, and TD-SCDMA chipsets, to further strengthen its existing portfolio; and key patents and intellectual property to increase MediaTek's competitiveness.
ADI plans to continue to invest in the wireless handset market by focusing on developing high performance analog, micro-electromechanical systems (MEMS), and programmable digital signal processing (DSP) products that enhance the audio, video, connectivity, and power efficiency capabilities in a range of wireless multimedia devices.
According to Jerald G. Fishman, ADI's president and CEO, "This transaction will allow ADI to focus our resources in areas where our signal processing expertise can provide unique capabilities and earn superior returns. In addition, it unlocks the value of the Othello and SoftFone operations by creating the scale needed to support the R&D investment required for sustainable, long-term success."
"This is a winning transaction for customers of both companies," said JiChang Hsu, general manager of MediaTek's wireless business. "With these added resources, our customers will be assured a roadmap of innovative solutions supported by a talented team that is focused on the needs of the wireless handset industry. Moreover, this acquisition will also bolster MediaTek's global operations and development in converging consumer solutions."
In ADI's recently completed third quarter of fiscal year 2007, revenue from these product lines represented $43 M, or 6 percent of revenue. ADI plans to account for the divested operations as a discontinued operation. Excluding these operations, ADI estimates that its third quarter of fiscal year 2007 gross margin as a percentage of revenue would have been approximately 170 basis points higher, operating margin as a percentage of revenue would have been approximately 200 basis points higher, and diluted earnings per share would have been approximately $0.01 higher.