Cirrus Logic Takes Two -- Wireless Networker, Chipmaker
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DSP chip solution provider Cirrus Logic Inc. (NASDAQ:CRUS) Thursday acquired wireless home networking mainstay ShareWave Inc. and fellow chipmaker LuxSonor Semiconductors Inc. for a combined $157 million in stock.
Under terms of the separate agreements, the Austin, Texas-based firm will pay $92 million in stock for El Dorado Hills, Calif.'s ShareWave and $65 million in stock for Fremont, Calif.'s LuxSonor. Both deals are due to be done by August and will be accretive to pro forma EPS within three quarters following the closing.
With ShareWave, which boasts a IEEE 802.11-based technology called Whitecap that allows audio and video to be streamed throughout the home, Cirrus hopes to gain home connectivity strength in its chips to target audio, video and Internet entertainment applications in the consumer electronics market. Sharewave's products were designed to allow MP3 audio files to be played on a home stereo instead of PC speakers, or watching DVD videos on multiple TV sets throughout the house. An ace in ShareWave's deck is that it offers "interference immunity" with its Channel Agility and FEC (Forward Error Correction) technology, which it said battles microwave oven and cordless phone interruptions.
Despite chip-making bellwether Intel Corp.'s (NASDAQ:INTC) tough going in and the overall decrease in semiconductor demand in recent months, Cirrus feels crafting chips home networking silicon will sell well. Research by Allied Business Intelligence may bear this out; the research firm forecasts that worldwide revenues from wireless, powerline and phoneline home networking chips, driven by embedded implementations, are poised to grow from $49 million in 2000 to $887 million by 2006, an average annual growth rate of 62 percent. Leading the charge will be wireless integrated circuit specialists, such as ShareWave, which by 2006 will account for 48 percent of all home networking chipsets shipped, and 66 percent of all revenue.
"The prospect of strong growth in the home networking IC market has attracted a number of silicon suppliers, especially in the wireless and powerline segments," stated Navin Sabharwal, ABI Vice President of Residential and Networking Technologies and author of the report. "Innovation and fierce competition is expected to drive down chipset prices, which in turn will spur greater market penetration."
Yet in order for home networking silicon to sell, the public has to help out. According to IDC, the number of networked homes is expected to grow from 4.1 million in 2000 to 18.9 million in 2004, and the number of networked devices will increase from 13.9 million to 106.8 million.
David D. French, president and chief executive officer of Cirrus Logic, agreed.
"We believe there is a fast-growing market opportunity for consumers to wirelessly connect many of the entertainment devices in their home," French said. "ShareWave's technology already is shipping in products from Panasonic and NETGEAR, and the company has strong relationships with other major industry players such as Cisco in the consumer, set-top box and networking equipment markets."
Privately held ShareWave will continue to operate as a Cirrus Logic division from its current location in El Dorado Hills, Calif. Amar Ghori, ShareWave vice president, chief technology officer and a co-founder, will become general manager of the ShareWave division, reporting to David French.
As for privately-held LuxSonor, which specifically makes DVD video processors and audio/video semiconductors, Cirrus hopes to make its entertainment solutions even better. It seems to be a perfect match, as Cirrus Logic's specialty for movie-watching is a front-end DVD optical controller, back-end video processor and TrueDigital Class D power amplifiers.
Cirrus, of course, is banking on a DVD player explosion, which has yet to, well, explode.
According to the Consumer Electronics Association (CEA), about 14 million DVD players have been sold in the United States, versus an existing base of about 150 million VCRs. Cirrus believes consumers craving better visual and audio quality will eschew the VCRs for DVD players. The Bank of America estimates this represents a market opportunity valued at $20 billion.
LuxSonor will become an operating unit within the Crystal product division of Cirrus Logic. The five-year-old firm has branch offices in Taiwan, Hong Kong and Shenzhen, China. Its product lines include integrated circuits (ICs) for CD-based MP3/WMA decoding, VideoCD, Super VideoCD, DVD, and ICs for Internet appliance products such as Internet set-top boxes, Internet TVs and Internet-enabled DVD players (iDVD).