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AMCC Acquires IBM’s PowerPC 400 Business: What Changed in 2004

AMCC acquired IBM’s PowerPC 400 standard-product portfolio in 2004, while IBM continued manufacturing the products and retained custom-design rights.
From TheFinanceBase Team2 min to read
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AMCC acquired intellectual property, products and related assets tied to IBM’s PowerPC 400 standard-product line in a deal announced April 13, 2004, and completed May 5. IBM did not simply hand over chip manufacturing: it continued making the standard products for AMCC and retained the ability to use PowerPC 400 cores in custom designs.

What AMCC acquired from IBM

The transaction covered the intellectual property and a portfolio of products and other assets associated with IBM’s 400-series embedded PowerPC standard products, as well as a Power Architecture license. It was therefore more than a license to use processor technology, but it was not a straightforward transfer of all IBM manufacturing or custom-chip operations.

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AMCC focused on the standard-product portfolio and its fit with networking and storage chips. IBM provided access to its CMOS process technology and system-on-chip design methodology, and remained involved in production.

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When the deal was announced and completed

Date

Event

What was disclosed

April 13, 2004

Agreement announced

AMCC and IBM announced a definitive agreement covering PowerPC 400 embedded IP and related assets, products and a Power Architecture license. The announced price was approximately $227 million in cash. SEC-hosted announcement

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May 5, 2004

Acquisition completed

AMCC announced completion of the acquisition of the IP, product portfolio, other assets and license. AMCC completion release

May 5, 2004

Closing consideration reported

AMCC’s Form 8-K reported aggregate purchase consideration of $235 million in cash under the operative agreements. AMCC Form 8-K

Why the announced and closing prices differ

The two figures refer to different stages of the transaction, not necessarily competing accounts of the same final amount. The April announcement described the consideration as approximately $227 million; the closing Form 8-K later reported aggregate consideration of $235 million. When referring to the deal’s announced value, use the approximate $227 million figure; for the aggregate price disclosed at closing, use $235 million.

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Who manufactured the PowerPC 400 products afterward?

IBM continued manufacturing the standard PowerPC products for AMCC. IBM also retained the right to use PowerPC 400 embedded cores as components in custom ASICs, systems-on-chip (SoCs) and other customized logic. AMCC’s acquisition thus shifted the standard-product business without ending IBM’s use of the underlying cores in custom silicon.

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A contemporaneous EE Times report said IBM would refer sales opportunities for standard PowerPC 400 products to AMCC. That division aligned AMCC with the standard-product portfolio while IBM continued to pursue core-based custom designs.

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How the acquisition fit AMCC’s business

AMCC described the PowerPC 400 portfolio as complementary to its WAN and storage integrated circuits. The processors served internet, communications, data-storage, consumer and imaging applications. AMCC’s stated longer-term direction was to combine the PowerPC core with its network-processing products for communications processors aimed at data-center, storage and wireless-infrastructure markets.

Did IBM employees transfer to AMCC?

Yes. In a later SEC filing, AMCC said it had acquired IBM’s Embedded PowerPC business in May 2004 and reported that 51 of IBM’s PowerPC employees in France transferred to AMCC in connection with the transaction. That later disclosure adds personnel context; the deal’s closing terms are set out in the 2004 Form 8-K. AMCC 2006 Form 10-K

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