Applied Micro Circuits Corp. to acquire MMC Networks Inc. for 64.19 times revenue

Applied Micro Circuits Corp. to acquire MMC Networks Inc. for 64.19 times revenue

The Deal: The Applied Micro Circuits Corp. has agreed to purchase MMC Networks Inc. for $4.5 billion in stock. The deal is one of the largest in the history of the semiconductor– components industry and unites two of the leading technology suppliers in the growing optical networking segment. AMCC will offer 0.619 share for each outstanding share of MMC. After news of the acquisition was announced, shares of AMCC fell $1.38 to $188.56, while MMC dropped $1.06 to close at $78.25.

Discussion: MMC Networks Inc. produces high-performance, software-programmable network processors that form the core silicon “engines” of network switches and routers. MMC designs and markets chips for asynchronous transfer mode, Fast Ethernet, Gigabit Ethernet and frame switching networking platforms. Cisco accounts for about half of sales. MMC has 90 percent of it’s operations in the United States, with the remainder in Israel. The company outsources its manufacturing. Higher sales to Intel, 3Com, and Nortel Networks are offsetting the loss of IBM, which accounted for 20 percent of sales.

Applied Micro Circuits Corp. makes high-performance, high-bandwidth integrated circuits used to control the highspeed flow of transmissions through fiber-optic telephone networks worldwide. The company’s communications products, used in LANs and WANs, account for 55 percent of sales. AMCC’s chips are also used in automated testing equipment, high-speed computing, HDT and military applications. The United States accounts for about 60 percent of sales.

Copyright, Inc. Sep 4, 2000

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