It’s official. Looks like Cortina acquired a digestible portion of Intel’s (INTC) comm semi product line, forgoing the network processors that would bring high SG&A overhead. They focused on the parts they could plug into the company to generate cash flow.
Cortina acquired products in two areas:
No figures were given on purchase price or product line revenue magnitude.
It’s pretty clear to me what is going on. Cortina investors want to juice up the company with more revenue and more cash flow in order to build critical mass. It obviously makes a liquidity event easier, and is in effect a spin-off of a small Intel unit. At the right price, it makes business sense too…
But as I stated earlier, it is unfortunate that the Telecom components were not rolled into a larger entity like Applied Micro (AMCC) or PMC-Sierra (PMCS). Those two companies could have taken these products on with virtually no incremental R&D or SG&A. I hope Intel was paid well by Cortina’s investors, because it appears to me that larger, more established component companies might have milked the cow more efficiently, and therefore paid more. It would have also been a step towards the consolidation the industry needs.
Intel should divest their optical module business to Finisar (FNSR), and avoid putting those components in weak hands.
Update- Venturebeat indicates the purchase price was $115M.