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LSI to Acquire Hyundai Electronics' Symbios Unit

June 30, 1998|From Bloomberg News

LSI Logic Corp., the No. 1 maker of computer chips used in networking equipment, on Monday agreed to buy Hyundai Electronics America's Symbios unit for $760 million in cash to acquire more high-end products.

Last week, Adaptec Inc. scrapped plans to buy Symbios for $775 million, citing concerns that the Federal Trade Commission would block the sale.

Milpitas-based LSI will take an undisclosed charge in 1998 to buy Symbios, whose adapter cards and chips link expensive computer servers to networks. LSI said the price includes the assumed liabilities of Symbios, though it didn't give details.

The acquisition, LSI's largest ever, gives LSI a product line that is more profitable than the chips it now offers in the computing and data-storage market. LSI, which saw profit drop 21% last quarter because of falling semiconductor prices, hopes to use Symbios' products to expand its customer base.

"They're trying to position themselves as a bigger player when the [semiconductor] market rebounds," said Shekhar Wadekar, an analyst at Raymond James & Associates. He expects the market to start improving next year.

The acquisition will create a company with 6,800 employees, LSI spokesman Kevin Brett said. Brett said it was "too early to tell" whether there will be any management changes or firings at Symbios.

Wadekar said that though LSI got a "fire-sale price" for Symbios, it will face significant challenges in integrating the two companies and using sales of Symbios' products to boost its earnings by next year.

About a third of Symbios' revenue comes from sales of computer-storage devices, where it competes with IBM Corp. and other large rivals. Another third comes from adapter-card sales, a market with "acute pricing pressure" similar to the semiconductor market, Wadekar said.

LSI shares rose 19 cents to close at $23.31 on the New York Stock Exchange, while Adaptec shares fell 53 cents to $14.22 on Nasdaq.

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