Wednesday, April 16, 2008

Intel Sells Off Enterprise and Storage Assets to Emcore

Intel Corp., the largest maker of x86 microprocessors in the world, and Emcore Corp., a leading provider of compound semiconductor-based components and subsystems for the broadband, fiber optic, satellite and terrestrial solar power markets, said on Thursday that they had reached a definitive agreement for Emcore to acquire enterprise and storage assets of Intel’s Optical Platform Division as well as the Intel Connects Cables business.

“Customers are driving consolidation and vertical integration in the optical communications market segments. We will work together to complete a smooth transition of these businesses, building upon the experience in the telecom optical components acquisition,” said Doug Davis, vice president, Intel digital enterprise group and general manager of embedded and communications group.

Emcore will issue 3.7 million shares of restricted stock for the acquisition, with certain adjustments based on Emcore’s stock price twelve months after the closing of the transaction. The assets include intellectual property, inventory, fixed assets and technology relating to optical transceivers for enterprise and storage customers, as well as optical cable interconnects for high-performance computing clusters. The transaction is expected to close in Q2 2008.

The acquisition further enhances Emcore’s presence in the optical communications market segments, especially in the areas of 10Gb Ethernet and storage area network transceivers. This allows Emcore to provide a more complete product offering to a broad range of customers.

“Following the successful acquisition of the telecom-related assets of Intel’s optical platform division, this second acquisition from Intel enables Emcore’s Fiber Optics to be a significant supplier for both telecom and datacom products. This acquisition will provide additional manufacturing efficiencies through economies of scale and vertical integration, benefiting our enterprise, storage, telecom, cable and high-performance computing customers,” said Reuben F. Richards, executive chairman at Emcore.

The sale of these optical-related assets will enable Intel to focus its investments on core communications and embedded market segments in line with its platform strategies. Intel will continue its efforts on the universal serial bus 3.0 specification, which is slated to support optical, and silicon photonics research and development.

“Emcore projects this asset will add $45 million in revenue for the next 12 months, increase gross margin from 23 to 29% and be accretive to earnings. The Intel Connects Cables business provides an innovative solution for high-performance computing cluster interconnect applications, using embedded parallel optical transceivers with a multi-mode fiber ribbon. Emcore expects this business to have gross margins exceeding 50% and to be the fastest growing segment of the acquired assets,” Mr. Richards added.

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