SiRF: Merger or Acquisition?

Last week, Michael Canning resigned as the CEO of SiRF Technology Holdings (SiRF), the leading GPS silicon provider. Besides the events leading up to it, the announcement itself reaffirms my belief that SiRF’s end-game, whether it likes it or not, is to merge or get acquired.

As early as last summer, when SiRF’s shares were soaring, I questioned its strategy of focusing on stand-alone GPS solutions unmindful of the bigger trends towards integration and convergent connectivity solutions in the mobile world. Mobile companies like Broadcom (BRCM) and NXP (which recently got acquired by STM) acquired smaller GPS companies. SiRF, on its part, did not attempt to pair up with WLAN or Bluetooth solution providers but instead focused on a DVB-H product for mobile broadcasting. Contrast this with Atheros (ATHR), a WLAN provider with comparable market cap last year, which has expanded its portfolio to have Bluetooth, GPS and Ethernet over the past couple of years and you will notice a flaw in SiRF’s thinking so far. You can read my thoughts on the Broadcom’s Global Locate acquisition here, and Atheros’ GPS moves here.

Despite the booming GPS market and its acquisition of Centrality last year, SiRF may have just let the mobile market slip away from its hands. Broadcom especially seems to be doing a stellar job in stealing customers away from SiRF. The loss in market share led to bad quarters and the company’s share price has since tumbled to its nadir. While I think that this price drop is a little harsh, it does surprise me that most people did not see this coming. Your can find more of my insights and explanations about the SiRF strategy here and here.

Now, with Qualcomm (QCOM), Broadcom, STM-NXP and Texas Instruments (TXN) having GPS capabilities, SiRF has limited room to maneuver in the mobile space. Additionally, companies like Atheros and CSR are broadening their portfolios to fill in the gaps. Faced with the increased possibility of being marginalized, it looks like SiRF will have to align itself with the others who have a realistic chance in the mobile space or with a microprocessor/computer chipset company to sell with laptops.

So far, the deterrent for most companies trying to get SiRF was the latter’s huge market capitalization. That is not true any more. Besides, the company is now on its back-foot. A company like Intel (INTC) can easily grab the company. But of late, I feel that a merger with Marvell (MRVL) is also a good possibility. I will let you think about this for now - check back to find out my reasons why.

Disclosure: The author was long SiRF at the time of writing.