Virage is on a roll right now. Originally a standard cell and memory company, it recently acquired a microprocessor line with ARC and now it has acquired another big increase in its size by taking on a lot of the analog IP from NXP and a large development group in Eindhoven. An off-topic aside: if you ever go to Eindhoven (or the Netherlands in general) make sure to have Indonesian food. It’s wonderful and really flavorful, and the local Dutch food sets a low bar to clear. Rijstafel is the magic word.
Ron Wilson’s take on the acquisition is here.
I have been predicting that once the integrated device manufacturers (IDMs) give up on their fabs that they will turn out to be the wrong groupings of product lines. NXP already sold their wireless business to ST (who then merged it with Ericsson Mobile Platforms to create, wait for it, ST-Ericsson). NXP’s core differentiation, or a major one anyway, has always been its strength in analog. So this doesn’t seem quite as much like rearranging product lines as selling the family silver. On the other hand, perhaps the analog isn’t that differentiating any more. There’s a lot of it around (Synopsys for one has a big portfolio).
NXP was taken private by a consortium of private equity groups in 2006 for about $10B, which is way more than the company is worth today (even taking the sale of the wireless biz into account for $1.5-2B depending on how you count). The company is losing money and nobody is going to be lending them any in the current environment, so they have reduce their expense run-rate. So, they give this group of 160 people to Virage in exchange for stock worth around $15M today, and then spend $60M over the next 3 or 4 years licensing it back for use in NXP. Not so much selling the family silver as paying the scrap guy to take it away.
But they do reduce their run-rate quite a bit. They pay $60M over 3.5 years, save $30M per year approximately, and get $15M in equity that should become worth more if Virage is successful at pulling these two big acquisitions together. Overall NXP is getting $60M for the technology. Looks like a sweet deal for them. But big acquisitions like this have a poor track record and Virage certainly will have their hands full.