- Justin Sullivan
Analog Devices has struck a deal to buy chipmaker Linear Technology, the companies announced on Tuesday.
The deal values Linear Technology at $14.8 billion, or $60 per share. The value of the combined enterprise will be $30 billion.
Shares of Linear Technology were halted for trade up about 29% at $62 per share after news of the deal was broken by Bloomberg. Analog Devices shares were up about 4%.
Stocks across the semiconductor space were broadly higher on Tuesday, with notable gainers including Maxim Integrated (+5%), NXP Semiconductors (+4%), Microsemi (+4%), and Semtech (+3%).
Texas Instruments, one of the closest competitors to a combined Analog-Linear, also jumped, with shares up more than 9%. On Monday, after the market closed, Texas Instruments reported earnings that beat expectations.
There has been a frenzy of multibillion-dollar deals in the tech industry over the past 18 months, including Intel’s takeover of Altera, Avago’s acquisition of Broadcom, and Dell’s $67 billion takeover of EMC.
More recently, Dutch chip-making company ASML bought Taiwan’s Hermes Microvision for $3.1 billion, and NXP Semiconductors sold its standard-products business to a group of Chinese investors for $2.75 billion.
What’s driving these deals
What’s behind many of these transactions are huge shifts in the way we capture and store data – be it cellphone, e-commerce, or any other computer data.
For years, computer data was stored on hard disk drives, which have a CD-like rotating disk. Western Digital, Seagate, and Toshiba all make these. But that technology is being displaced, and companies that pioneered it are watching sales struggle as less-bulky flash-memory chips, like those used in phones, become the norm.
- Thomson Reuters
One type of flash memory chip is called a NAND chip, and you can find it today in memory cards, USB drives, and “solid state” drives, which look a bit like disk drives on the outside but have no disk or other moving parts on the inside.
SanDisk makes these, so Western Digital went out and bought its way into the flash-memory market by buying SanDisk.
Companies are looking to buy what they don’t already build, and the changes mean that big tech deals are going to keep coming.
Dell’s megadeal has a similar rationale behind it. By acquiring EMC, a data-storage company, Dell is taking a big step toward cutting its reliance on personal computers – not to mention moving into the smarter data-storage market.
What about ‘the cloud’?
You may have heard that “cloud computing” is disrupting traditional data storage.
Yes, the cloud – meaning a network of servers that provide data storage and processing hosted on the internet instead of on local servers or computers – is part of the story. Public cloud providers like Amazon Web Services or Microsoft Azure are also moving toward solid-state technologies for their own facilities, and it all leads to tech-company mergers.
As we reported last year, we may see more flash-memory chip makers – like Micron, Hynix, or even Samsung or Intel – coming together with companies like Seagate. The shift is driven by the need to continue capturing, storing, and analyzing a growing amount of data.
Seen in that light, this story is not just about old technology coming together with newer technology. It’s about finding ways to continue providing cheap data services that we all use.