Updated from 3:53 p.m. EST
Shares in semiconductor company
jumped Friday after the company said it would buy two privately held semiconductor companies in stock deals totaling $1.3 billion.
PMC-Sierra's stock surged 15 9/16, or 8.4%, to close at 201.
PMC-Sierra, based in Burnaby, British Columbia, said it will purchase privately held fabless semiconductor company
for 4.8 million PMC-Sierra shares. Based on Thursday's closing price of 185 7/16, the purchase price would be $890.1 million.
Fabless companies design and market their products but contract out manufacturing.
AANetcom, which has 50 employees in locations in Allentown, Pa. and San Jose, Calif., makes chips that are used in telecommunications equipment and optical networking switches.
PMC-Sierra also said it acquired the privately held fabless semiconductor company
Extreme Packet Devices
for roughly $415 million in stock.
Kanata, Ontario-based Extreme Packet Devices was founded early last year as a system-on-a-chip semiconductor company that develops and markets devices for data communications.
PMC-Sierra's strong trading day after the deals were announced is somewhat unusual: Companies that dilute their stock to make acquisitions typically see their share prices fall after announcing them.
"You've gotten to the point that dilution of shares doesn't really bother investors if they believe the company is doing something to really grow," said Joseph Osha, analyst with
. In this case, the acquisitions are part of PMC-Sierra's stated objective to strengthen its presence in "really, really high-speed switching," Osha said.
"The reality is, PMC's acquisitions have worked out pretty well," Osha said. "They're being given the benefit of the doubt."
He rates the stock a buy; Merrill has not done any underwriting for the company.