PMC-Sierra to Acquire Passave Inc. to Address Rapidly Growing Fiber to the Home Access Market
April 04 2006 - 4:05PM
Business Wire
PMC-Sierra expects Q1/06 business results in-line with mid-quarter
update provided Feb 27/06 PMC-Sierra, Inc. (NASDAQ: PMCS), a
leading provider of broadband communications and storage
semiconductors, today announced that it has entered into a
definitive agreement to acquire Passave Inc., a leading developer
of system-on-chip semiconductor solutions for the Fiber To The Home
(FTTH) access market. Based on analyst estimates and service
provider announcements, it is estimated that between 45 and 60
million homes worldwide will be connected using Passive Optical
Networking (PON) technology by 2010. The acquisition price of
approximately $300 million is expected to be paid through the
issuance of PMC-Sierra common stock. The deal is expected to close
within April 2006 and is conditioned upon the receipt of normal
governmental rulings. PMC-Sierra expects the acquisition will be
neutral to earnings in the near term and accretive in three
quarters based on expected revenue growth. "Our acquisition of
Passave brings PMC-Sierra an experienced and highly innovative team
with clear market share leadership in Passive Optical Networking
solutions. This acquisition fits with our strategic intent to
address the high-growth Fiber Access market and is aligned with
PMC's developments in Customer Premises Equipment," said Bob
Bailey, Chairman and CEO. "PON is the ultimate Triple Play access
technology and is key to the build-out of the second generation
FTTH-based broadband infrastructure." Passave's solutions enable
Service Providers to offer so-called "Triple Play" services (voice,
video and data) at up to 1Gbps over PON-based equipment. The
Passave product line includes system-on-chip solutions for Optical
Line Terminals (OLTs) for the Central Office, Optical Network
Terminals (ONTs), and Optical Network Units (ONUs) solutions for
residential termination equipment. Passave has delivered two
million ONU devices that have been deployed in NTT's Fiber To The
Home broadband access network. "FTTH is a key enabler for Triple
Play and Digital Home applications. As these significant
opportunities unfold worldwide, we are excited to join forces with
a public company with such an established international presence in
the communications semiconductor market," said Victor Vaisleib, CEO
of Passave. "There are natural synergies between our products,
technologies and channels, and PMC-Sierra's capabilities will
enhance the product offering, quality and support we are offering
our customers," he added. Passave employs approximately 150
employees worldwide and has facilities in Herzliya, Israel; Santa
Clara, California; and Tokyo, Japan; and regional sales offices in
Korea and China. First Quarter 2006 Business Update On February 27,
2006, PMC-Sierra's revenue outlook for the First Quarter of 2006
was expected to be in the range of $85 to $88 million as provided
on the Company's mid-quarter update conference call. The revenue
range provided at that time was based on the outlook for
PMC-Sierra's existing business (revenue range: $78 to $80 million)
as well as its recently acquired storage semiconductor business
(revenue range: $7 to $8 million). As of this date, the Company
expects the business results for the First Quarter to be in-line
with the outlook provided on February 27, 2006. Conference Call on
April 4, 2006 Management will be hosting a webcast conference call
today, April 4, at 2:00 p.m. PDT that will be accessible on the
Company's website under the Financial Events and Calendar section
at http://investor.pmc-sierra.com/. To listen to the conference
call live by telephone, dial 913-981-4905 approximately ten minutes
before the start time. A telephone playback will be available after
the completion of the call and can be accessed at 719-457-0820
using the access code 5860433. A replay of the webcast will be
available for five business days. Safe Harbor Statement
PMC-Sierra's forward-looking statements regarding PON market
growth, closing of the transaction and the transaction's effect on
PMC-Sierra's earnings per share, involve risks and uncertainties.
Actual results may differ from projections for varied reasons.
Projected market growth in FTTH from an estimated four million
subscribers in 2005 is dependent upon many factors including
service provider capital expenditures, consumer adoption of
FTTH-based services and government policy. The timing of
developments in the North American PON market is less certain than
in Asian markets. The transaction's closing date depends on Israeli
government approvals and other customary conditions. Whether and
when the transaction becomes accretive depends on growth in both
Passave's and PMC-Sierra's business. Both companies' financial
results can be affected by a wide range of risks detailed in
PMC-Sierra's Securities and Exchange Commission filings, including
changes in semiconductor market conditions, demand for
semiconductor products, the level of orders that are placed and
shipped within the quarter, the impact of competitive products and
pricing, and technological and product development risks.
PMC-Sierra does not undertake any obligation to update the
forward-looking statements. About PMC-Sierra PMC-Sierra(TM) is a
leading provider of high-speed broadband communications
semiconductors, storage semiconductors and microprocessors for
enterprise, access, metro, storage, wireless infrastructure, laser
printers and customer premises equipment. The company offers
worldwide technical and sales support, including a network of
offices throughout North America, Europe and Asia. The company is
publicly traded on the NASDAQ Stock Market under the PMCS symbol
and is included in the S&P 500 Index. For more information,
visit www.pmc-sierra.com. About Passave Inc. Passave is a leading
supplier of gigabit FTTH (Fiber To The Home) semiconductors for the
broadband access network. Passave FTTH products use the
field-proven GigaPASS(TM) FTTH architecture to provide the
bandwidth and feature sets that enable service providers to deliver
Triple Play services -- integrated data, IPTV and voice -- over
Passive Optical Networks. The GigaPASS architecture integrates
Gigabit PON to Ethernet interfaces, wire-speed protocol processing
and programmable features, delivering high-performance, low-cost
FTTH solutions. Passave's system-on-chip FTTH solutions are
open-source software platforms with flexible hardware features
giving system OEMs the ability to differentiate their products with
application-specific features. Passave maintains offices in Santa
Clara, California, Herzliya, Israel, Tokyo, Japan and Seoul, Korea,
with customer support teams in China. For more information about
Passave, visit www.passave.com. For white papers on Fiber To The
Home and Passive Optical Network solutions, visit
http://www.passave.com/tech_whitepapers.cfm. (C) Copyright
PMC-Sierra, Inc. 2006. All rights reserved. Tachyon is a registered
trademark of PMC-Sierra, Inc. PMC, PMCS, PMC-Sierra, and "Thinking
You can Build On" are trademarks of PMC-Sierra, Inc. All other
trademarks are the property of the respective owners.
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