MaxLinear (MXL) to Acquire Physpeed in $11M Deal

MaxLinear (NYSE: MXL) announced that it has signed a definitive agreement to acquire Physpeed Co., Ltd., a privately held developer of high-speed physical layer interconnect products addressing enterprise and telecommunications infrastructure market applications.

Headquartered in Camarillo, Calif., Physpeed develops a range of advanced technology solutions including optical physical medium devices (PMDs) and clock data recovery (CDR) devices at line-rate speeds ranging from 10Gbps to 100Gbps today, and 400Gbps in the future.

The acquisition of Physpeed significantly accelerates MaxLinear’s total addressable market expansion efforts into infrastructure for data center, as well as metro and long-haul telecommunications operators. Consistent with third party market research, MaxLinear estimates the total available market for 40G and 100G optical integrated circuits to be approximately $500 million in 2014, with a growth opportunity resulting in a market size in excess of $1.5 billion over the next four years.

“Physpeed’s expertise in high-speed analog design, combined with MaxLinear’s proven low-power digital CMOS mixed signal-integration and DSP capabilities, will bring to market solutions that will uniquely enable the explosive data traffic growth generated from smartphones and tablets, and over-the-top (OTT) streaming video, in addition to cloud computing and data analytics in hyper-scale data centers,” said Dr. Kishore Seendripu, CEO of MaxLinear.

“We believe that the unique engineering capabilities which enabled MaxLinear to pioneer Full-Spectrum Capture (FSC™) technologies in cable and satellite broadband communications markets, ideally position us to develop world-class high speed physical layer interconnect devices which will drive the migration of data center and telecommunication markets from 100Gbps to 400Gbps links,” he said.

At closing of the acquisition, MaxLinear expects to pay approximately $11.0 million in cash in exchange for all outstanding shares of capital stock and equity of Physpeed. A portion of the consideration payable to the shareholders will be placed into escrow pursuant to the terms of the definitive merger agreement. In addition, the definitive merger agreement provides for potential earnout consideration of up to $750,000 for the achievement of certain 2015 and 2016 revenue milestones.

The boards of directors of each of the companies have approved the merger. The closing, which is expected to occur during MaxLinear’s fourth fiscal quarter ending December 31, 2014, remains subject to customary closing conditions, including the approval of Physpeed’s shareholders. MaxLinear may record a one-time charge for purchased in-process research and development expenses related to the acquisition in its fourth fiscal quarter of 2014. The amount of that charge, if any, has not yet been determined. Physpeed is in early production with a key tier-1 customer, and excluding any one-time charges referenced above, MaxLinear currently expects this transaction to be 1 to 2 cents dilutive to GAAP and non-GAAP earnings per share over the next several quarters and to become accretive to GAAP and Non-GAAP earnings per share in 2016.

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