Day Not Feeling the Weight of Chasing Record
Conexant Systems Inc., the Newport Beach computer chip maker, said Thursday that it acquired a small British networking company in a stock swap valued at $128 million.
Conexant said the purchase price of Microcosm Communications could reach up to $180 million, based on possible payments tied to future performance. Microcosm, a 50-person engineering firm in Bristol, England, makes networking chips for high-speed fiber-optic equipment.
The transaction is the second major deal recently in Conexant’s strategy to bolster its product line and presence in the competitive networking market, said Dwight Decker, chief executive of the Orange County firm.
“The acquisition of Microcosm is a key next step in our strategy of accelerating the growth,” Decker said.
In November, Decker said Conexant was in “serious, near-term discussions” with a number of companies that have revenue near $50 million. But the price tag for those companies was much larger than expected.
Yet in a deal that raised eyebrows because of its price, Conexant spent $990 million in stock last month for a small Massachusetts networking technology firm, Maker Communications Inc. The purchase of Maker, which has 85 employees and sales of $13.6 million, was the first significant acquisition for Conexant.
Like the Microcosm deal, Maker filled a hole in the company’s lineup of telecommunications products. Microcosm’s chips work with optical, or light-based, technology.
“There is all this fiber-optic being stretched out around the world for building up high-speed networks,” said Richard Irving, whose London venture capital firm held a 20% stake in Microcosm.
“But the problem with optical networks is you’re dealing with data that are bursts of light, not digital streams of ones and zeros.”
Microcosm, he said, builds chips that help “translate” the light bursts into electrical form so that computers can understand and work with the data. It had about $3 million in revenue for the fiscal year that ended March 31, Irving said.
Conexant said it expects the acquisition of Microcosm to bring revenue of its optical networking group to $50 million for this fiscal year and more than $100 million for fiscal 2001.
Microcosm, launched in 1995, has been seeking outside funding to help it expand.
Though outside investors, such as Irving’s Pond Venture Partners, owned a chunk of the company, Microcosm’s staff held a “significant piece,” Irving said.
Thursday’s all-stock transaction was approved by the boards of directors of both companies and closed “in about a month,” Decker said.
At least 1.9 million Conexant shares will be issued to Microcosm investors, based on value of $66.48 per share--the average price of Conexant’s stock during the 10 trading days ending Jan. 4.
Microcosm officials could not be reached for comment.
