Intel Corporation (NASDAQ:INTC) said Wednesday that it has agreed to acquire networking business assets from Avago Technologies Ltd (NASDAQ:AVGO) for $650 million in cash. The deal is expected to bolster Intel’s offerings in networking chips.
Avago Technologies Ltd (NASDAQ:AVGO) has agreed to sell LSI’s Axxia Networking business to the chip maker, as Avago has been divesting units to focus on the fast-growing storage chip market.
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Avago’s LSI acquisition
In December of last year, in the biggest acquisition in the history of Avago Technologies Ltd (NASDAQ:AVGO), the semiconductor company announced the acquisition of LSI Corp (NASDAQ:LSI) for $6.6 billion with the help of a former owner. Avago Technologies is the former HP semiconductor division and was part of the business spun out as Agilent Technologies in 1999. It went public in 2009 and was one of the most successful IPOs after the financial crisis.
The acquisition of LSI was designed to create a highly diversified semiconductor market leader with approximately $5 billion in annual revenues by adding enterprise storage to Avago Technologies Ltd (NASDAQ:AVGO)’s existing wired infrastructure, wireless and industrial businesses.
Avago trims to counter volatility
Avago Technologies Ltd (NASDAQ:AVGO) has been moving to divest some assets after it acquired LSI Corporation. The deal announced Wednesday would give Intel a unit that had originally been part of LSI Corp.
Expressing confidence in the deal, Intel Corporation (NASDAQ:INTC) said the Axxia deal would it help play a greater role in equipment used to deliver wireless services. Intel’s data center group and general manager of its communications and storage infrastructure group said: “With this acquisition, Intel gains a compelling product line and talented team to continue to deliver on this long-term vision”.
Although Intel Corporation (NASDAQ:INTC) already supplies roughly 97% of the microprocessors used in server systems, it’s trying to move its technology into other areas of corporate data centers, including data storage systems and networking devices.
The deal has been approved by the boards of both companies and is expected to close in the fourth quarter of this year.
Avago Technologies Ltd (NASDAQ:AVGO) has also divested some of its assets to Seagate Technology PLC (NASDAQ:STX) as the latter announced in May it was signing a definitive agreement with Avago to acquire the flash storage business of LSI.