Xilinx (XLNX) Seen as Possible SoftBank Takeover Target
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Shares of Xilinx (NASDAQ: XLNX) have been active Tuesday on renewed takeover speculation. The latest round of speculation was sparked by a Detwiler Fenton note to clients which highlighted that there was a lot of discussion at the ARM Techcon about the company being the next takeover target in the sector. SoftBank was mentioned as a likely suitor.
"The company Xilinx (XLNX) was brought up on more than one occasion, especially after the SoftBank (TYO:9984) and ARM keynote where SoftBank's CEO Masayoshi Son laid out his vision for the two companies," the analyst noted.
The analyst noted that Xilinx offers the following that fits into SoftBank's vision of the future:
- Zynq UltraScale+ MPSoC – Ultra HD Video Processing
- Zynq UltraScale+ MPSoC – Powered Robotics
- Dense Optical Flow & Stereo Vision Example Designs Built Using the SDSoC– Vision Algorithms
These are all technologies that are required to make Son's vision into a reality.
The analyst said separation between Altera (now Intel) and ARM was quite apparent at ARM TechCon. "ARM has always maintained a level playing field for competing ecosystem companies, Altera and Xilinx in particular, since they are very public enemies," the note. "After Intel's (INTC) acquisition of Altera, ARM ensured the relationship with Altera would not change, even though Intel and ARM are public enemies. FPGA designers did not believe this would hold. So if their design was dependent on ARM IP, Xilinx was the wiser choice."
The recent quarterly numbers from Intel / Altera and Xilinx are telling. Xilinx had revenue of $579 million, up 1% sequentially and up 10% from $528 million LY. Altera had revenue of $425 million, down 9% sequentially, but up 6% to LY.
The analyst notes that Altera just released 14nm part samples, and the word on the street is that they are not meeting expectations. They see this as a little too late, given that Xilinx sampled its 16nm part a year earlier with it now in high volume manufacturing with more than 200 customers.
Commenting on what's next on the the manufacturing side, the analyst said "Xilinx is skipping Taiwan Semiconductor's (TSM) 10nm process in favor of an early 7nm release. The word at ARM TechCon is that Xilinx will tapeout the first 7nm chip this quarter, with samples scheduled for early 2018. Altera, on the other hand, will use Intel's 10nm. It is not clear when samples will be available, but expectations are 2019. This equates to about a year delay to Xilinx sampling 7nm parts. As history has shown the FPGA Company that is first to the new nodes gets majority market share and that is Xilinx at 20nm, 16nm, and again at 7nm."
The analyst bottom lined it, "Industry discussion is that Xilinx has been holding acquisition conversations since Intel acquired Altera at a significant premium. Now that SoftBank is in the mix, we see the potential for a Xilinx acquisition at a premium price as more likely, which bodes the question how much of a premium is warranted?"
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