RF Micro Expands Beyond Handset Chips

SAN FRANCISCO -- Moving to diversify its dangerously lopsided stable of customers and to play in more lucrative markets, RF Micro Devices(RFMD Quote) announced plans to acquire a maker of wireless chips.

RFMD said Monday that it will spend $900 million in cash and stock to acquire Sirenza Microdevices(SMDI Quote). The deal values Sirenza's stock at $16.64, representing a 17% premium over the closing price of Sirenza's stock on Friday.

The price looks somewhat more expensive on a sales basis, with RFMD paying 6.5 times Sirenza's $136.6 million in annual revenue last year.

RFMD said the deal creates the world's largest maker of radio frequency chips and said the two businesses are highly complementary in terms of customers, markets, products and manufacturing expertise.

"Our combination will create an RF market leader with breadth, scale and capabilities that are unrivaled," said RFMD CEO Bob Bruggeworth in a statement.

Sirenza's stock jumped 7.4%, or $1.05, to $15.22 in recent trading Monday.

Shares of RFMD were trading down 2.6%, or 16 cents, at $6.05.

Broomfield, Colo.-based Sirenza makes radio frequency chips for transmitting wireless data and posted $136.6 million in sales last year. The company's chips are used in cell-phone network infrastructure equipment, as well as in various military and aerospace applications.

Those are desirable businesses for RFMD, which sells its radio frequency chips primarily into cell-phone handsets, where profit margins tend to be lower. Last year, RFMD reported gross margin of 34.9% vs. 42.2% for Sirenza.