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Cypress buys Broadcom wireless IoT business for $550m

Steve Rogerson
May 4, 2016
 
Cypress Semiconductor is to acquire Broadcom's wireless IoT business and related assets in an all-cash transaction valued at $550m. Cypress will acquire Broadcom's Wifi, Bluetooth and Zigbee IoT product lines and intellectual property, along with its Wiced brand and developer ecosystem.
 
Broadcom's IoT business unit, which employs approximately 430 people worldwide, generated $189m in revenue during the past twelve months. The acquisition strengthens Silicon Valley-based Cypress' position in key embedded systems markets, such as automotive and industrial, and establishes it in the high-growth consumer IoT market, a segment that includes wearable electronics and home automation.
 
"Cypress is a significant player in the IoT today because of our ultra-low-power PSoC programmable system-on-chip technology, but we've only been able to pair it with generic radios so far," said Cypress president and CEO TJ Rodgers. “Now we have the highly regarded Broadcom IoT business – state-of-the-art Wifi, Bluetooth and Zigbee RF technologies – that will transform us into a force in IoT and provide us with new market opportunities as well. What we bring to the party is over 30,000 customers worldwide who need advanced, ultra-low-power wireless communications but only can absorb it in the form of an easy-to-use programmable embedded system."
 
The transaction, which has been approved by the board of directors of Cypress and Broadcom, is expected to close in the third quarter of 2016, subject to customary conditions and regulatory approvals. Cypress expects the transaction to be accretive within a year of closing and to improve its gross margin, earnings and long-term revenue potential.
 
"We are thrilled to be joining forces with Cypress to address the fast growing IoT market," said Broadcom IoT general manager Stephen DiFranco. "With our IoT connectivity products, Cypress will be able to provide the connectivity; the MCU, system-on-chip, module and memory technologies; and the mature developer ecosystem that IoT designers require, creating an end-to-end portfolio of embedded solutions and a single IoT design platform."
 
Broadcom will continue to focus on wireless connectivity for the access and mobility segments that are not IoT related, including serving set-top box, wireless access, smartphone, laptop and notebook customers. Cypress will capitalise on the rapidly growing Wifi and Bluetooth connectivity markets in consumer, industrial and automotive IoT segments.
 
"The robust, ready-to-scale Wiced brand and developer network of module makers, value-added resellers, technology partners and ODMs who are already working with its technology will give us immediate revenue growth capability in new channels," Rodgers said. "Cypress will continue to support and grow this network and to provide it with future generations of innovative, disruptive connected products. Cypress will also bring these new technologies to the automotive market, where we are already number three worldwide in microcontrollers and memories, and where the connected car boom has just started."
 
Greenhill served as lead financial advisor, Bank of America Merrill Lynch served as financial advisor and is providing committed debt financing, subject to customary conditions, and Wilson Sonsini Goodrich & Rosati acted as legal counsel to Cypress for this transaction.