Categories: Capital Markets, Chips

Mindspeed to buy Picochip in big bet on small cells

Mindspeed to buy Picochip in big bet on small cells

California’s Mindspeed Technologies (Nasdaq: MSPD) is making a big investment in small cells — the company is buying Picochip for $51.8 million in cash and stock, plus up to $25 million in earnout payments payable in the first quarter of next year.

Mindspeed designs, develops and sells semiconductor solutions for wireline and wireless network infrastructure. Picochip designs semiconductors, software, and system-on-chip solutions, specializing in femtocell basestations and WiMAX infrastructure. The company also designs chipsets and software for LTE femtocells, and was the first to launch a femtocell modem.

The two companies say their union will allow them to offer a full suite of base station semiconductor solutions.
Mindspeed CEO Raouf Halim says the deal “positions Mindspeed as the clear leader in small cell base station technology,” a market he says will be worth $3 billion by 2016. With an estimated 3 in 4 mobile broadband connections made indoors, demand for small cells is expected to skyrocket in the years ahead. A recent NPD study forecast that by 2015, more than 30 million residential femtocells will be shipped each year.

Mindspeed expects the acquisition to add to non-GAAP income by the second half of next year. In the near term, however, Mindspeed is trimming its revenue forecasts. The company expects revenue for its fiscal first quarter, which ended Dec. 30, to be about $33.3 million, $3 million less than the consensus forecast. Because revenues will be lower than expected, Mindspeed cut its gross margin projection to 58%. Its stock was down about 2% this morning.

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