Intersil targets analog market with Xicor deal

Smart battery ICs and expertise in data conversion were among the assets that made Xicor Corp. a key acquisition for Intersil Corp., executives from both companies said.

In an effort to reposition itself in the market for analog building blocks, Xicor has quietly made several acquisitions. It was an expertise in a/d converters that made Xicor a worthy prize, the principals, Rich Beyer of Intersil and Lou DiNardo of Xicor said in an interview.

Earlier this year, Intersil whose quarterly revenues presage a $600-million annual run rate, announced plans to purchase Xicor in a cash-and-stock transfer deal valued at roughly $529 million. Since Xicor's own annual run rate is roughly $55 million, some observers wondered whether Intersil was paying too high a price for the analog component maker. The same question was raised when Texas Instruments Inc. used $7.2 billion in stock to purchase Burr-Brown, a company valued at $300 million.

"Analog companies are very expensive," said Gary Vick, senior analyst and power management research director for iSuppli Corp. Some of iSuppli's clients are quietly looking to buy analog IC makers, he added. "It's a sellers' market for analog: The multiples are very high."

Intersil's interest in Xicor (both companies are based here) revealed its ability to reposition itself as a nonvolatile memory maker to a player in the analog community. Xicor, under president and CEO DiNardo (a veteran of Linear Technology Corp. and Analog Devices), worked to increase its analog business. Its engineering ability to memory-trim control circuits was transformed into a thriving business in digitally-controlled potentiometers.

With a mix of microprocessor supervisory circuits (a type of power-on reset controller) and assorted analog front ends, Xicor's analog revenues increased from roughly 35 percent in 2000 to 75 percent in 2003. They are projected to be roughly 80 percent this year. Gross margins have been better than 50 percent for the past year.

DiNardo "was the architect, he is the leader." Intersil president and CEO Beyer said. "The two of us were on the same wavelength." DiNardo will become Intersil's executive vice president in charge of standard linear IC once the acquisition is approved.

Both companies were rebuilding when they decided to merge, Beyer said. The re-adoption of the Intersil name, and the acquisition of op-amp maker Elantec positioned Intersil as an analog component supplier.

The company's most controversial move was the July 2003 sale of its IEEE802.11 wireless LAN components unit to Globespan, which was later acquired by Conexant. Though thriving, the WLAN components business had taken on the characteristics of a custom circuits business, with a smaller number of customers demanding lower prices for higher levels of integration.

The analog IC business, by contrast, typically services a broad base of customers with multipurpose building blocks. It was the market where Intersil felt most comfortable.

While the sale of the WLAN business left Intersil in a good cash position, volatility in that market masked several years of consistent growth in analog ICs, Beyer said. Intersil's strong suits include switch-mode and multi-phase voltage regulators used to power Intel Pentiums along with high-performance operational amplifiers. The company's newest product thrusts are intended to increase market share in laser drivers and interface components like line drivers and receivers.

Xicor had roughly 3,000 customers for its analog building blocks, and 30 sales and field applications engineers to support them. Intersil has 20,000 customers and a field staff of 130. The combined company's goal is to broaden the market opportunities with product offerings competitive with broadline analog suppliers like National Semiconductor and Linear Technology Corp.

- Stephan Ohr

EE Times