Monday, Broadcom Corp. (BRCM), a producer of semiconductors for wired and wireless communications, revealed a definitive agreement to acquire Dune Networks, a privately-held company that develops switch fabric solutions for data center networking equipment for $178 million. Broadcom credited Dune Networks as having developed a scalable chipset that supports bandwidth speeds of up to 100Gbps per port and can connect more than ten thousand servers or ports in a single deployment.
Data centers are scaling to provide significantly more bandwidth to meet the requirements of cloud computing, where computing resources, products and services, such as Software as a Service or SaaS, can be delivered real-time over the Internet.
"Dune's massively scalable interconnect fabric, combined with our Ethernet products, augments our portfolio of solutions for data center networking equipment," said Martin Lund, vice president and general manager, Broadcom's Network Switching line of business. Broadcom indicated the technology as well suited to meet the emerging requirements for cloud computing networks on a large scale, and would enable the company to address new market applications for Ethernet in the data center.
"Dune Networks' distributed connection fabric is a complement to Broadcom's existing product suite," said Eyal Dagan, chief executive officer, Dune Networks. Dagan believes the companies joint customers will be able to bring to market low cost, high performance data center switching that will enable end users to build next-generation cloud computing networks.
Broadcom said it expects to pay approximately $178 million, net of cash assumed from Dune Networks, to acquire all of the outstanding shares of capital stock and other rights of Dune Networks. The company said that it would pay the purchase price in cash, except that a portion of such purchase price attributable to unvested employee stock options will be paid in Broadcom restricted stock units.
The company also stated that a portion of the cash consideration payable to the stockholders will be placed into escrow pursuant to the terms of the acquisition agreement. Excluding any purchase accounting related adjustments and fair value measurements, Broadcom expects the acquisition of Dune Networks to be neutral to slightly accretive to earnings per share in 2010.
The merger has been approved by the board of directors of both companies. The closing is expected to occur by the end of Broadcom's first quarter ending March 31, 2010, subject to customary closing conditions.
BRCM closed Monday's trade at $29.20, up $0.23 or 0.79%, on the New York Stock Exchange.
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