Cypress will combine the new wireless chips with its low-power programmable chips and microcontrollers, which are widely used in consumer electronics and automobiles. (Image courtesy of Ford).
Cypress Semiconductors has agreed to buy Broadcom Limited's wireless Internet of Things business for $550 million, further pushing its integrated chipsets into things like wireless sensors, smart home devices, and industrial equipment.
Under the terms of the deal, Cypress will absorb Broadcom’s Wi-Fi, Bluetooth, and ZigBee products and intellectual property. The company will also acquire the WICED developer platform, a software development kit for building internet-connected sensors. Cypress is planning to target Broadcom chips mainly at consumer electronics and connected and autonomous vehicles, the company said.
T.J. Rodgers, chief executive of Cypress, stressed that the deal would enable the development of end-to-end embedded systems. Along with the announcement, Cypress outlined plans to combine the new wireless chips with its low-power programmable chips and microcontrollers, which are already used in consumer electronics and automobiles.
“With our IoT connectivity products, Cypress will be able to provide the connectivity; the MCU, system-on-chip, module and memory technologies; and the mature developer ecosystem,” Stephen DiFranco, Broadcom’s IoT general manager, said in a statement.
Broadcom’s wireless IoT products were only a drop in the bucket of the company's entire business over the last year. Those products earned only $189 million in revenue during that time, according to the company's financial results. Once the deal has closed, Broadcom will have further trimmed down its encyclopedia of products, formed after the merger with Avago Technologies last year.
Broadcom said in a statement that it would continue making wireless chips for markets unrelated to the Internet of Things, including set-top boxes, wireless equipment, laptops, and smartphones. The deal, which has been approved by both Cypress and Broadcom boards, is expected to close in the third quarter of 2016.
The agreement came on the heels of Cypress’s first quarter earnings results. The company reported revenues of $425.2 million on $0.07 earnings per share, a decline of 6.8% from last quarter. In recent months, the company has been running wafer production lines slower than actual demand in an attempt to burn off excess inventory. It has also struggled to integrate several new manufacturing plants acquired from Fujitsu, the company said.
Since the company merged with Spansion last year, Cypress has introduced two new 40-nm, ARM-based microcontrollers, one designed for automobiles and the other for cheap, high-volume consumer electronics. Over the last year, the company has introduced 2,472 new products, most of which are automotive and industrial versions of 44 new chip lines.
Coinciding with the Broadcom deal was the announcement that Rodgers would step down as Cypress's chief executive after 34 years in the position. Rodgers, who founded the company in 1982, will remain on Cypress’s board of directors and lead several technical projects. The company said it would begin an internal and external search for his replacement.
“I have always planned not to be spending most of my time in the last decade of my career immersed in the details of the operations,” he said in a statement. “And, to be completely candid, the board and even the executive staff have urged me to bring new blood into operations.”
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