Maxim to Acquire Digital Video Leader; Earnings Preview

| About: Maxim Integrated (MXIM)

Maxim Integrated Products (NASDAQ:MXIM), a company that designs and manufactures high-performance semiconductor products, has entered into a definitive agreement to acquire Mobilygen Inc., a privately held company with a leading technology in developing H.264 video compression chips. In addition to expanding Maxim’s portfolio, the move brings the H.264 video compression technology to the fold and helps Maxim become a key supplier to the video security semiconductor market.

In a statement, Vijay Ullal, Maxim's group president said:

Video security is an important growth market for Maxim. The overwhelming majority of security cameras installed today are analog, whereas recording, storage, analytics, and IP streaming are digital. Video compression is therefore a strategic technology for Maxim in the analog-to-digital video signal path.

According to a report from MultiMedia Intelligence, a leading firm in the market for video surveillance semiconductors, the market for silicon content in security equipment will surpass $2 billion by 2012. The increase is attributed to top-line unit growth in surveillance equipment and a gradual shift from analog systems to mixed signal and networked solutions.

Maxim expects the served available market for H.264 compression in IP cameras and Digital Video Recorders to be in excess of $200 million in the company’s 2012 fiscal year.

Sunnyvale, California-based Maxim said it expects to report at 5:00 pm eastern on Oct. 29. It expects net revenue of $500 million to $502 million and earnings per share of $0.19 to $0.22 for the quarter ended Sept. 27. Figures will include pre-tax expenses of approx. $35 - $40 million in stock-based compensation and $30 - $32 million in pre-tax expenses primarily related to a recent restatement and the ramp-down of some wafer fabrication facilities. Net income is expected to be 4% - 4.3% on a year/over/year basis. The company has authorized the repurchase of up to $750 million of its common stock, but it continues to evaluate various capital structure alternatives and may increase the aggregate repurchase authorization to $1.5 billion.

Maxim did not disclose financial terms of the deal with privately held Santa Clara Company.

Mobilygen will become accretive to Maxim’s earnings in fiscal 2010. The transaction is expected to close in Q4′08.

Disclosure: None