According to the Wall Street Journal, Skyworks will spend $2.75 billion to acquire the related business of Silicom Labs, the main purpose of which is to divest the company from its dependence on Apple. Wall Street believes this, and chipmakers are haggling.
Skyworks, which specializes in radio-frequency Chips that filter out interference to smartphones and other wireless devices, is spending a lot of cash to acquire infrastructure and automotive businesses from Silicon Laboratories. The deal will give Skyworks more opportunities in popular markets such as electric vehicles, 5G equipment and data centers. It will also reduce exposure to smartphones (especially Apple). The U.S. tech giant accounted for 56 percent of Skyworks’ revenue in the fiscal year ended Oct. 2.
But diversity has its price. The deal, Skyworks’ largest-ever acquisition and more than double its last reported cash balance of $1 billion, requires the now-debt-free chipmaker to redouble its efforts.
Still, the acquired businesses deliver operating margins close to 40%, for which Cowen’s Karl Ackerman expects the deal to boost Skyworks’ earnings per share by about 5% over the next year. The company told analysts on Thursday that it expects to deleverage rapidly in the first 18 months after the deal closes.
Plus, the deal doesn’t need to seek Chinese approval — which has been a major hurdle for chip mergers involving U.S. companies. Shares of Skyworks rose 4.1% on Friday.
It’s certainly not bad to be a major supplier to Apple. The wildly popular new iPhone 12 lineup helped Skyworks record revenue of $1.5 billion in the first quarter ended Jan. 1, up 69 percent from a year earlier and the company’s best growth rate in 18 years. Analysts expect the company’s second-quarter revenue to rise 50% year over year, which will be reported on Thursday.
But that also makes Skyworks a highly seasonal business. 62% of 2020 revenue came from the first half. And, just as other chipmakers regularly engage with one of the world’s most valuable public companies, Skyworks has been plagued by threats that Apple’s growing in-house chip work will one day replace it. Apple is known to be developing its own modem chips, and some analysts believe that the kind of radio frequency chips sold by Skyworks, Qorvo and Broadcom could come in second place. If that doesn’t happen at all, that could be years away. However, Skyworks is wise not to shop around for answers.
According to the Wall Street Journal, Skyworks will spend $2.75 billion to acquire the related business of Silicom Labs, the main purpose of which is to divest the company from its dependence on Apple. Wall Street believes this, and chipmakers are haggling.
Skyworks, which specializes in radio-frequency chips that filter out interference to smartphones and other wireless devices, is spending a lot of cash to acquire infrastructure and automotive businesses from Silicon Laboratories. The deal will give Skyworks more opportunities in popular markets such as electric vehicles, 5G equipment and data centers. It will also reduce exposure to smartphones (especially Apple). The U.S. tech giant accounted for 56 percent of Skyworks’ revenue in the fiscal year ended Oct. 2.
But diversity has its price. The deal, Skyworks’ largest-ever acquisition and more than double its last reported cash balance of $1 billion, requires the now-debt-free chipmaker to redouble its efforts.
Still, the acquired businesses deliver operating margins close to 40%, for which Cowen’s Karl Ackerman expects the deal to boost Skyworks’ earnings per share by about 5% over the next year. The company told analysts on Thursday that it expects to deleverage rapidly in the first 18 months after the deal closes.
Plus, the deal doesn’t need to seek Chinese approval — which has been a major hurdle for chip mergers involving U.S. companies. Shares of Skyworks rose 4.1% on Friday.
It’s certainly not bad to be a major supplier to Apple. The wildly popular new iPhone 12 lineup helped Skyworks record revenue of $1.5 billion in the first quarter ended Jan. 1, up 69 percent from a year earlier and the company’s best growth rate in 18 years. Analysts expect the company’s second-quarter revenue to rise 50% year over year, which will be reported on Thursday.
But that also makes Skyworks a highly seasonal business. 62% of 2020 revenue came from the first half. And, just as other chipmakers regularly engage with one of the world’s most valuable public companies, Skyworks has been plagued by threats that Apple’s growing in-house chip work will one day replace it. Apple is known to be developing its own modem chips, and some analysts believe that the kind of radio frequency chips sold by Skyworks, Qorvo and Broadcom could come in second place. If that doesn’t happen at all, that could be years away. However, Skyworks is wise not to shop around for answers.
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