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Silicon Labs buys SpectraLinear

Mark LaPedus

1/26/2011 1:22 PM EST

SAN JOSE, Calif. - Silicon Laboratories Inc. has aquired SpectraLinear Inc., a supplier of integrated timing solutions, for approximately $40 million.

But is Silicon Labs itself a takeover target? ''Stepping back, while Silicon Labs is a great company with tremendous mixed-signal technologies and products, and could be an attractive acquisition target for Texas Instruments or other large firms,'' said Craig Berger, an analyst with FBR, in a research note prior to the results and acquisition announcement. 

In any case, the deal with SpectraLinear represents Silicon Labs' second acquisition in the IC timing arena in recent times. SpectraLinear’s clock products complement Silicon Labs’ existing timing product line by adding a broad family of ICs that Silicon Labs believes will accelerate penetration of the approximately $500 million opportunity in high-volume applications.

SpectraLinear’s products are optimized for consumer electronics and embedded applications, such as portable media players, residential gateways and digital cameras.

SpectraLinear is based in Santa Clara, Calif., with design centers in Bangalore, India, and Istanbul, Turkey. The acquisition will bring 19 patents issued or pending and a team of 44 employees to Silicon Labs. The acquisition is expected to be accretive to earnings, excluding the amortization of intangibles, in its first full quarter of operations in 2011.

In 2006, SpectraLinear acquired Cypress Semiconductor's PC clock division, establishing itself as a pure-play integrated timing device company.

Silicon Laboratories, a supplier in high-performance, analog-intensive, mixed-signal integrated circuits (ICs), also reported its results. Fourth quarter revenue of $112 million exceeded guidance and represented a 7 percent sequential decrease.

It reported a net of $12.883 million, or $0.28 a share, in the quarter, compared to $40.251 million, or $0.84, a year ago. The company guided revenue for the first quarter in the range of $116 to $122 million.

Commenting on the results, Ian Ing, an analyst with Gleacher & Co., said: ''SLAB reported a $0.09 EPS beat largely on tax reversal and revenue above the guided range, but offset by a weak gross margin as TV tuners ramp in initial volumes. Revenue guidance was above the Street, but leverage comes out of many models due to 1) gross margin guided to lower-end of the 62-65 percent target range, and 2) operating expense climbing 6 percent or $4 million q/q on SpectraLinear acquisition (silicon clocks) and FICA tax/merit raise impacts. Full year segment guidance implies revenue growth in the high single-digits, as the video business grows to roughly $60 million from $20 million on ramps in TV tuner ICs.''

Silicon Labs has been on an acquisition spree. In April of 2010, Silicon Laboratories announced the acquisition of Silicon Valley-based Silicon Clocks, an early stage company creating microelectromechanical system (MEMS) technology. Silicon Clocks’ CMEMS (CMOS+MEMS) technology is aligned with Silicon Labs’ efforts to leverage its CMOS-based timing products into high-volume applications such as consumer electronics.

In October, Silicon Laboratories announced the acquisition of Ireland-based ChipSensors Limited, an early stage technology company creating single-chip CMOS sensors designed to detect temperature, humidity and gases. ChipSensors’ technology complements Silicon Labs’ touch, proximity sensing and recently acquired MEMS technology, expanding the company’s capabilities in CMOS-based sensors.

''Clocks are big business; in fact, timing grew by 70 percent for us in 2010, and is now more than 10 percent of our revenue,'' according to a spokeswoman for Silicon Labs.  ''We acquired Silicon Clocks for their CMOS-based MEMS technology, which we’re applying initially to timing. And then we announced the acquisition of SpectraLinear, a revenue generating private company  that sells clocks into high volume embedded and consumer applications. Both acquisitions target a part of the market we had previously not addressed, allowing us to really become a one stop timing supplier.''