Semiconductor developer Inphi has agreed to buy Cortina Systems’ high-speed interconnect and optical transport product lines for $52.5 million (€39.2 million) in cash and $73.5 million (€54.9 million) in stock.
The acquisition does not include Cortina’s access and digital home business, which will continue as an independent company.
In an investor conference call, Inphi’s chief executive officer Ford Tamer called the acquisition “strategically and financially compelling”. He expects the acquisition to increase operating revenue by more than 50% compared to Inphi as a standalone company and to “supersize” the standalone operating margins.
The product ranges of the two companies are highly complementary. In networking interconnect, Inphi is known for its high-speed SerDes and clock-data recovery silicon, while Cortina sells 10G/15G/40G physical layer chips. In the optical transport segment, Inphi’s 100G amplifiers and drivers are balanced by Cortina’s 10G/40G/100G framer mapper products.
The combined company will command more than 70% of forecasted revenue from the communications chip market, Ford asserts.
The two companies have similar cultures, he adds. Inphi was founded in 2000 and Cortina in 2001, drawing on engineering talent from the likes of Nortel and Cisco. Together, the product development teams will create what they claim will be a world-leading R&D organisation in high-speed analog circuits, signal integrity, digital signal processing, complex digital architectures and algorithms, low power mixed signal expertise, high-speed packaging and manufacturing at advanced semiconductor process nodes. The company has its sights set on the 400G and terabit markets.
“We are truly excited about the interconnect market leader this merger creates for service provider and data centre customers,” said Tamer. “We are excited to add Cortina’s industry-leading products to our portfolio and talented employees to our team. We believe the combined entity will bring financial efficiencies in revenue, gross margin and operating income, that we expect will deliver significant value for our shareholders.”
The combined company will have 400 employees. Hojjat Salem, Cortina’s vice president and general manager, will join Inphi’s executive team.
The agreement was signed 29 July. The transaction is expected to close in late September or October subject to shareholders and regulatory approvals and other customary closing conditions.
By Pauline Rigby