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Texas Instruments to buy National Semiconductor for $6.5 billion

TI and National each make chips used in consumer electronics and industrial equipment, but their individual products don't overlap much, experts say.

April 05, 2011|By Shan Li, Los Angeles Times

Texas Instruments Inc., seeking to grow its semiconductor chip business by acquisition, plans to buy Santa Clara, Calif.-based National Semiconductor Corp. for $6.5 billion.

Dallas-based TI and National Semiconductor each make chips used in consumer electronics — including cellphones and tablet computers — and in industrial equipment. But their individual products — TI makes about 30,000 items and National Semiconductor makes about 12,000 — don't overlap much, experts said.

"Quite often their chips can almost be identical, with slight differences, or fit next to each other in the same device," said technology analyst Doug Freedman at Gleacher & Co. "It's really about getting more product differentiation."

Both companies, for example, manufacture amplifiers that use analog chips to convert real-world sounds into digital forms that computers can read, said Brian Matas, vice president of market research at IC Insights. But the chips are subtly different to meet the needs of their target markets.

TI's chief executive, Rich Templeton, said the differentiation of the products made the acquisition attractive.

"There is minimal product overlap with National," Templeton said Monday in a conference call to investors. "This combination means we can engage with customers where we had minimal" dealings with them before.

Over the last decade, TI has expanded its reach into the chip business as some of its other technology has floundered, Matas said. TI was a leading proponent of digital light processing technology that was popular in HDTVs before the rise of LCD flat panels.

The deal, announced Monday after the close of trading, is subject to the approval of National Semiconductor shareholders, who under the current agreement would get $25 a share. National stock closed at $14.07 and then soared in after-hours trading as high as $24.30. TI closed at $34.11 and dropped as low as $33.58 in after-hours trading.

The deal is also subject to regulatory approval. In a statement, TI said it expected the deal to close within nine months.

National has about 5,700 employees; TI has about 28,400. Templeton said that there were no plans to cut research and design teams at either company but that there could be cuts to the sales staffs.

Freedman said TI probably would acquire more companies.

"TI has continued to execute the strategy of buying companies to gain market share," he said. "It's a pretty sound strategy."

shan.li@latimes.com

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