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Lattice Semiconductor announced on December 10, 2001 that it would buy Agere Systems’ FPGA business for $250 million in cash. The transaction was not a purchase of Agere Systems as a whole: it was an asset and business acquisition covering Agere’s ORCA FPGA and field-programmable system chip (FPSC) lines, related tools and intellectual property, and approximately 100 employees. Lattice completed the deal on January 18, 2002.
The distinction matters financially. Lattice paid Agere $250 million, then estimated another $6.3 million in direct acquisition costs, producing a preliminary accounting purchase price of approximately $256.3 million.
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Transaction at a glance
| Item | Detail |
|---|---|
| Buyer | Lattice Semiconductor Corporation |
| Seller | Agere Systems Inc. |
| Asset purchase agreement | December 7, 2001 |
| Public announcement | December 10, 2001 |
| Regulatory notice | Listed in the FTC’s January 14, 2002 early-termination notice |
| Closing | January 18, 2002 |
| Cash consideration | $250 million, funded from Lattice’s cash on hand |
| Estimated direct acquisition costs | Approximately $6.3 million |
| Preliminary accounting purchase price | Approximately $256.3 million |
| Employees transferred | Approximately 100 product-development, marketing and technical-sales employees |
| Main assets | ORCA FPGA products, FPSC products, design tools, selected cores and patents, and related rights |
Terms and closing details are documented in Lattice’s SEC-annexed announcement and Form 8-K/A.
What Lattice actually bought
ORCA FPGA products
ORCA was Agere’s general-purpose FPGA family, introduced in 1994 and used in applications including communications equipment such as routers and switches. The acquisition gave Lattice an established FPGA product line rather than only an internal development project.
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FPSC devices
FPSC meant field-programmable system chip. These devices combined programmable FPGA logic with comparatively fixed-function circuitry aimed at communications protocols and high-speed input/output. They were intended for system designers who wanted FPGA flexibility alongside application-specific communications functions, not simply another generic FPGA option.
Tools, intellectual property and people
The package included Agere’s related FPGA software, certain FPGA-related intellectual-property cores and patents, and approximately 100 employees. The agreement also created a cross-license: Lattice received rights to specified Agere intellectual property for current and future FPGA and FPSC products, while Agere retained access to ORCA technology for use in its system-on-chip products. It therefore transferred an operating capability, not just a list of device part numbers.
Timeline: announcement to completed acquisition
- November 2001: Lattice disclosed plans to enter the FPGA market with an internally developed architecture.
- December 7, 2001: Lattice and Agere signed the asset purchase agreement.
- December 10, 2001: The companies announced the $250 million cash transaction.
- January 14, 2002: The Federal Trade Commission’s early-termination notice listed the transaction. (FTC notice)
- January 18, 2002: Lattice completed the acquisition.
The announcement projected a closing in the first quarter of 2002; the later SEC filing establishes the actual January 18 closing date. The headline wording “to acquire” describes the December announcement, not the final status of the transaction.
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Why Lattice wanted Agere’s FPGA operation
Lattice was best known for complex programmable logic devices (CPLDs), which generally served lower-density control and timing functions. FPGAs offered substantially more logic capacity for larger data-path and system workloads. Lattice viewed the categories as complementary because customers often used CPLDs and FPGAs in the same design.
Buying Agere offered a faster route into a market then dominated by Altera and Xilinx. Lattice obtained shipping or established products, communications-oriented FPSCs, experienced staff, customer relationships, software and specialized IP while continuing its own FPGA architecture effort. Contemporary coverage described this as a three-part strategy: retain the CPLD business, develop an in-house FPGA family, and add Agere’s ORCA and FPSC lines through acquisition. (EE Times, December 11, 2001)
Lattice’s announcement also presented communications functionality and high-speed I/O as differentiation. Those were management’s strategic claims, not proof that the products were objectively superior to every competing device.
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Why Agere sold the business
Agere, formerly associated with Lucent Microelectronics, was restructuring and concentrating on communications-system integration. Selling the FPGA operation allowed it to narrow that focus while giving Lattice the opportunity to operate the product line. The legal seller in the transaction was Agere Systems Inc.; describing the deal as a sale by “Lucent” without that qualification is inaccurate.
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Unifying design software
Lattice planned to bring Agere products into its ispLever design-tool flow. EE Times reported that Agere’s tools were considered strong in place-and-route but less strong in timing simulation and verification. Lattice said ispLever could accommodate different place-and-route engines, but reconciling the flows could take one or two years. Customers therefore could not assume an immediate, seamless tool environment. (EE Times report)
Maintaining customers and road maps
Transferring about 100 employees required preserving application support, sales coverage and product knowledge. Lattice also inherited unfinished ORCA and FPSC development. Later filings identify projects such as ORCA 4 and ORCA 5 as in-process or planned technologies at the acquisition date; they should not be treated as completed products merely because they appear in accounting disclosures. (Lattice quarterly filing)
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Market and manufacturing exposure
The filing’s risk disclosures identified regulatory approval, integration, product acceptance, competitive pricing, technology development, semiconductor demand and manufacturing dependencies. Communications-equipment spending was cyclical, and Lattice had less FPGA-selling experience than Altera or Xilinx. Those conditions made execution as important as the acquired technology.
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Cash price versus accounting cost
The headline number was $250 million in cash. Lattice’s preliminary purchase-price accounting added approximately $6.3 million of estimated direct acquisition costs, for an accounting total of approximately $256.3 million. The filing allocated that amount among technology, in-process research and development, a noncompete agreement, licensed technology, inventory, backlog, property and equipment, assumed liabilities and the excess of purchase price over acquired net assets. Those allocations were estimates and were refined in subsequent filings; they are not a permanent market valuation of each asset.
Sales comparison
EE Times reported that the acquired FPGA and FPSC products had generated approximately $70 million in the preceding fiscal year. A simple comparison puts the $250 million cash payment at roughly 3.6 times that reported sales figure. This is only a historical ratio: it excludes the value of employees, software, patents, cross-license rights, future products, integration costs and assumed liabilities, and the $70 million figure is contemporary trade reporting rather than an independently presented audited standalone metric.
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Forecast earnings effect
Lattice said the acquisition was expected to be accretive to 2002 pro forma earnings before goodwill. That was a forward-looking expectation in the announcement, not evidence of a realized earnings outcome.
Was this a whole-company acquisition?
No. Lattice bought Agere’s FPGA business and related assets, not Agere Systems or its entire semiconductor operation. Calling it an acquisition of “Agere” obscures the transaction’s scope and Agere’s broader communications business.
What the transaction changed strategically
The acquisition accelerated Lattice’s entry into FPGAs without abandoning internal development. It supplied an immediate product portfolio, communications-focused FPSCs, engineering and commercial staff, selected IP and a route to a broader programmable-logic offering. In exchange, Lattice accepted the cost and uncertainty of merging product road maps, software flows and sales support while competing against larger FPGA incumbents.
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Lattice’s later filings record acquired technology and in-process R&D, confirming that the purchase involved significant development assets as well as mature products. They do not, by themselves, prove that every strategic benefit forecast in December 2001 was achieved. (Lattice 2002 Form 10-K)
Bottom line
Lattice’s Agere transaction was a completed January 2002 business acquisition, not merely a proposal and not a takeover of Agere Systems. The $250 million cash payment bought ORCA FPGAs, communications-oriented FPSCs, software, selected IP, customer and engineering capability, and approximately 100 employees. The broader accounting cost was about $256.3 million after estimated direct acquisition costs. Strategically, Lattice bought speed and differentiation for its FPGA expansion; operationally, it inherited the difficult work of integrating products, tools, people and unfinished technology into a business facing Altera, Xilinx and a cyclical communications market.
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