ADI sells CPU voltage, PC thermal monitoring line to ON Semi

By Suzanne Deffree, News Editor -- Electronic News, 11/8/2007

Analog Devices Inc. (ADI) today announced that it will sell its CPU voltage regulation and PC thermal monitoring product line to ON Semiconductor Corp., furthering its efforts to slim down its divisions. 

The product line, which represented approximately $80 million in revenue for ADI during its fiscal year 2007, closed November 3, consists of core voltage regulator products for CPUs in computing and gaming applications, along with temperature sensors and fan-speed controllers for managing the temperature of the CPU.

Withholding specific details, Norwood, Mass.-based ADI said it will sell to Phoenix-based ON certain assets and intellectual property related to the product line and will enter into a one-year manufacturing supply arrangement for a total consideration of approximately $185 million in cash.

The sale is consistent with ADI's ongoing transition of its power management portfolio to high-performance products that complement its portfolio of signal-processing solutions for industrial, medical and scientific instrumentation, as well as communications infrastructure and consumer electronics.

"This agreement allows us to further focus our power management team on areas such as portable medical devices, wireless infrastructure equipment, and digital TVs," said Peter Henry, ADI's VP for power management products, in a statement. “With a complementary portfolio of power management products, ADI can help customers innovate and achieve new levels of differentiation from their signal processing subsystems.”

ADI’s recent divestitures have gained approval from some Wall Street watchers. Indeed, when ADI signed an agreement to sell its wireless chipset division to MediaTek Inc. for $350 million in September, Lehman Brothers concluded it would allow the company to “better focus” on its core general purpose DSP and analog product lines and seemed pleased with the move, both in terms of ADI and the baseband industry. That sale included ADI's Othello radio and SoftFone baseband chipset product lines, as well as certain cellular handset baseband support operations along with patents and other IP, product lines that represented approximately $230 million in revenue for ADI, based on fiscal-year 2006 financial results. As part of the transaction, MediaTek assumed about 400 ADI employees.

While neither company confirmed staff transfers with today’s acquisition, ON said the employee base associated with ADI’s CPU voltage regulation and PC thermal monitoring product line was a significant part of the deal.

“The technical expertise of the staff is a critical aspect of this transaction,” said Keith Jackson, ON president and CEO, in a separate statement. “This additional talent will help ON Semiconductor expand its overall computing power management business and accelerates our notebook power management revenue growth. Along with the products and technology, this team complements ON Semiconductor’s existing computing products group and will provide increased value-add and scale to our customers.”

ON said it will also acquire several ADI issued patents and patent applications related exclusively to the business and receive appropriate IP licenses from ADI in order to continue to conduct and grow the business.

“Based on our third quarter 2007 results, our computing products group is running at an annualized revenue run rate of approximately $375 million,” Jackson said. “The customers and products associated with this end-market are a critical component to our ongoing success and strategy. Once completed, the purchase of the voltage regulation and thermal monitoring business from ADI is expected to accelerate our technology, resources and development capabilities in the computing and related end-markets and will enable ON Semiconductor to develop a larger mix of high-performance analog and power products for our customers. While the manufacturing supply arrangement will help enable the smooth transition of the product portfolio into ON Semiconductor, we believe that over time, the business will benefit greatly from the capabilities of our Gresham wafer fabrication facility.”

The boards of directors of both companies have approved the transaction, which is expected to close in December. ADI said it will discuss the transaction in more detail during its fiscal 2007 Q4 earnings call, scheduled for November 27. In related news, ON's Jackson is set to will preside over the opening bell at the Nasdaq Friday morning.