Yesterday Dialog Semiconductor agreed to acquire Atmel in a $4.6 billion cash and shares deal. The deal will transform Dialog "into a global leader in both Power Management and Embedded Processing with $2.7 billion of combined revenues," boasts the press release. Importantly it will create a company with a diversified customer base spanning the smartphone power, IoT and automotive markets.
Dialog Semiconductor is a German-listed UK-based company which provides standard and custom ICs for smartphones, tablets, IoT, smart home and Led lighting products. Its leadership position is in power management ICs. Atmel is in a similar business but is US listed and based. Atmel is said to be a worldwide leader in microcontroller design and production, capacitive touch, advanced logic, mixed-signal, non-volatile memory and radio frequency (RF) components. Importantly Atmel also possesses one of the industry's broadest IP technology portfolios.
According to a Reuters report on the deal, Dialog's income has become heavily reliant on business coming from smartphone titans Apple and Samsung. So if either of those companies switched supplier, or vertically integrated to make its own competitive components, then it would have been a massive blow for Dialog. Another observation is that the smartphone business growth is slowing, yet the IoT market is expected by everyone to be one of the fastest growing tech sectors in the coming months/years. Atmel is strong in IoT, and in automotive, so can help broaden and strengthen Dialog's base.
In an interview, Jalal Bagherli, Dialog's Chief Executive, said that while the two companies are complementary they only have a five per cent overlap in operations. "By bringing together our technologies, world class talent and broad distribution channels we will create a new, powerful force in the semiconductor space," claimed Bagherli. Following the acquisition, which should close in Q1 2016, Dialog expects to enjoy an earnings boost and annual cost savings of $150 million within two years.