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| Monday, December 04, 2006 |
LSI Logic Corp. shares plummeted in Monday morning trading after the company agreed to acquire competitor Agere Systems Inc. in a $4 billion stock swap, in a move to take market share from Marvell Technology Group.
LSI Logic said it will issue about 379 million shares to purchase Agere, which makes integrated circuits used in data storage and wireless network equipment.
Caris & Co. analyst Shebly Seyrafi argued the deal could be a negative for Marvell Technology Group Ltd., which has been gunning for new business from hard disk drive maker Seagate.
"LSI and Agere will share Seagate as a top customer," Seyrafi wrote in a note to investors. "Agere sells desktop and mobile drive Systems On Chips (SoC), but Marvell sells enterprise read channel chips to Seagate."
"It has been speculated that Marvell will displace LSI at Seagate in selling enterprise hard disk controllers, but the combined LSI-Agere entity may now have an improved chance of increasing its involvement with Seagate in that market due to the amount of business it will have from Seagate."
At least one analyst thought it was possible, though, that Marvell could grow its business with Seagate if there are any hiccups in the LSI-Agere merger.
"Mergers of this size are always difficult to pull off, though with Seagate the top customer for both LSI Logic and Agere, we would think great care would be taken to meet the needs of that customer," wrote CIBC analyst Allan Mishan in a note to investors. "Still, even with strong customer service, a focus on integrating the roadmap will be needed to fend off a very aggressive Marvell over the next 12 months."
Shares of Marvell, which have traded between $15.91 and $36.84 over the last year, were up 49 cents at $20.69 on the Nasdaq.
LSI shares fell $1.21, or 11.5 percent, to $9.35 in morning trading on the New York Stock Exchange. Meanwhile, Agere shares, which have traded between $11.94 and $18.90 over the last year, surged $2.01, or 11.3 percent, to $19.80 and earlier hit a new high of $20.40. |
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