LSI, Agere Get Together

Storage chipmaker LSI Logic has agreed to purchase rival Agere Systems for $4 billion in stock.

The combined company, to be called LSI Logic Corporation, will offer chips and software for enterprise storage and wireless networks and consumer electronics products.

LSI specializes in serial-attached SCSI (SAS) and SCSIchip controllers for hard disk drives, said Phil Brace, senior vice president of corporate planning and marketing for LSI. Seagate and other HDD makers pop LSI chip controllers into their machines to keep them running.

On the consumer-driven side, LSI also makes chips and software to power DVD players and set-top boxes.

Brace said Agere is well known for a broad portfolio of electronic components, including pre-amplifiers, motor controllers, read-write channels for the desktop, consumer and mobile space.

Agere chips are found in everything from cell phones, PCs and hard disk drives to wireless networks, including chips for GPRS, EDGE and satellite radio systems.

“This combination allows us to grow in the storage market because we’ll have complementary products in our hard drive controllers and their consumer components,” said Brace.

With Intel and AMD leading the market for server and desktop processors, LSI will continue to plug away at the multi-billion-dollar market for chip systems and software, competing with rivals such as Broadcom and Marvell.

Agere shareholders will receive 2.16 shares of LSI for each share of Agere, valuing the Agere shares at $22.81 each. Shares of LSI closed at $10.56 on Friday; Agere closed at $17.79.

Shares of LSI were down $1.22 to $9.34, while shares of Agere rose $1.88 to 19.67 on the news Monday morning.

The companies, which had a combined revenue of $3.5 billion from September 2005 to September 2006, will boast a combined workforce of roughly 9,100 employees.

LSI President and CEO Abhi Talwalkar will retain his roles for the new company, which will be headquartered in Milpitas, Calif.

The company will maintain a significant presence at Agere’s current headquarters in Allentown, Pennsylvania, with various other locations worldwide.

LSI non-executive chairman James Keyes will continue as non-executive chairman of the board of directors of the new company; the board will include nine members, six from LSI and three from Agere.

LSI expects the deal to close in the first calendar quarter of 2007.

The deal is the first buy for LSI since it acquired storage management software provider StorAge Networking Technologies for $50 million in cash in October.

Article courtesy of InternetNews.com