Avago to Divest LSI's Axxia Networking Business to Intel

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Leading analog semiconductor manufacturer Avago Technologies Limited (AVGO) recently inked a definitive agreement with Intel Corporation (INTC) to divest one of its operating units and related assets for $650 million in cash. The transaction is expected to augment Avago’s liquidity to capitalize on potential future acquisition opportunities.

Avago will sell the Axxia Networking Business of LSI Corporation, which it acquired in May this year, to Intel. Avago acquired LSI to diversify its existing business line from wired infrastructure, wireless and industrial businesses into the storage chip market. The strategic move was aimed to augment its revenues, as the industry braced for more consolidation amid a challenging macroeconomic environment.

Employing about 650 people, Axxia Networking Business focuses on System on Chip (SoC) technology for mobile network infrastructure. The unit generated $113 million in revenues in 2013. With the deal, Intel is likely to gain a compelling product line to bolster its presence in the wireless service-equipment manufacturing business.

The transaction is expected to close by the fourth quarter of calendar 2014, subject to mandatory closing conditions and regulatory approvals. The deal, however, has received the go-ahead from the respective management teams.

With expertise in compound semiconductor design and processing, Avago is a premier designer, developer and global supplier of a broad range of analog, mixed signal and optoelectronics components and subsystems. The company boasts over 4,200 patents serving three primary target market segments: wireless communications, wired infrastructure, and industrial and other.

Avago presently has a Zacks Rank #3 (Hold). Other stocks that are worth considering in the industry include Advanced Semiconductor Engineering Inc. (ASX) and Amkor Technology, Inc. (AMKR), each carrying a Zack Rank #2 (Buy).

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