Applied Micro Scoops Up IBM’s PowerPC Assets

Applied Micro Circuits Corporation (AMCC) has agreed to acquire some of the intellectual property and technology assets of IBM’s 400 series of embedded PowerPC chips for $227 million in cash.

The San Diego, Calif., chipmaker, which will also acquire a Power
Architecture license in the deal, said it values the PowerPC 403, 405 and 440 chips for their ability to power applications for wide-area network and storage markets.

The deal, announced Tuesday, confirms Big Blue’s plans to build on its Power Everywhere initiative it announced last month, in which the company pledged to broaden the influence of its chip architecture.

In Tuesday’s agreement, IBM will manufacture the PowerPC products for AMCC, which will now be able to access IBM’s CMOS process and systems-on-a-chip (SoC) design method. IBM will also continue to develop PowerPC 400 series embedded processor cores for application specific integrated circuits (ASICs).

AMCC makes chip solutions and software for WANs, Fibre Channel host bus adapters (HBAs) for storage area networks (SAN), and hardware and software for growing storage markets such as Serial ATA (SATA) RAID.

“This acquisition is a major step in our strategy to gain scale and
diversification, providing new growth vehicles in both AMCC’s WAN and
targeted storage markets with innovative embedded solutions targeted at multiple applications,” said Dave Rickey, chairman, president and CEO of AMCC, during a conference call. “PowerPC 400 allows us to address a large and growing market and is highly synergistic with our existing WAN and Storage IC portfolio.”

The CEO also said the deal would place AMCC more squarely in competition with chipmaker Motorola, which makes a communications processor brand called PowerQUICC that competes with the PowerPC 400 series.

As a result of the deal, AMCC will also now compete with MIPS Technologies, a maker of MIPS-based processor architectures and cores for digital consumer and business applications.

Rickey said 70 current IBM employees would join AMCC should the deal close this quarter as expected.

While AMCC will clearly gain more purchase in the market for powering WAN and storage applications, the deal marks a milestone for Big Blue’s Power Everywhere initiative, in which IBM agreed to open up access to its Power Architecture for researchers and electronics makers.

Armonk, N.Y.’s IBM is looking to extend the tendrils of its Power chips to make them as pervasive as possible. The sale of its customized semiconductor products to AMCC, which caters to data center, storage and wireless infrastructure markets, underscores that strategy.

Illuminata analyst Gordon Haff agreed.

“This is certainly an example of IBM broadening POWER’s reach — while not incidentally continuing to reap profits from manufacturing the chips,” Haff said. “The products involved in this deal may not be quite as cutting edge as some in the POWER family, but they’re part of broadening the architecture’s reach beyond POWER’s high-end strengths. TiVO PVRs [personal video recorders] use PowerPC 403’s, for example.”

Pervasive and embedded semiconductor markets, which include chips that power mobile devices, are areas where IBM is looking to gain traction because leading
chipmaker Intel is not as interested in the market for powering embedded applications, analysts have said.