“The outcome of this deal is a measurable testament to the industry-leading solutions and strong financial performance the world-class infrastructure and automotive team delivered the last 25 years,” says Silicon Labs CEO Tyson Tuttle. Silicon Labs and Skyworks will collaborate to ensure a seamless transition for customers, suppliers and 350+ employees.
Silicon Labs’ two businesses, IoT and I&A, are fundamentally different – each with unique markets, customers, supply chains, R&D, and go-to-market strategies. After executing the I&A divestiture, Silicon Labs will be a pure-player of intelligent, wireless connectivity for the IoT. The company’s resulting focus on IoT comes at a time when the overall market and Silicon Labs’ growth opportunities are accelerating, as industry projections anticipate a multi-year ramp in connected devices.
“The massive growth in connected devices makes this the right time for us to exclusively focus on the large, diverse, growing IoT opportunity,” says Silicon Labs CFO John Hollister. “Our updated operating model for the IoT business indicates a long-term revenue growth rate of 20 percent, outpacing the forecasted industry CAGR of mid-teens for our combined target IoT end markets of Industrial & Commercial and Home & Life.”
With the investments Silicon Labs is making in the IoT business, the company expects to drive sustainable growth and deliver long-term 20-25 percent non-GAAP operating margin, demonstrating the inherent leverage potential as a standalone IoT-focused company.
Silicon Labs offers a comprehensive wireless portfolio, supporting the widest range of protocols, including Bluetooth, proprietary, Thread, Wi-Sun, Wi-Fi, Zigbee and Z-Wave, and major ecosystems, such as Amazon, Google, Tuya and Xfinity. Built on an integrated hardware and software platform specifically designed for IoT development, the company’s connectivity solution is the only wireless IoT offering to achieve ARM’s security PSA Level 3 certification.
Silicon Labs already serves tens of thousands of companies and brands, and thousands of applications, including working with organizations defining the next wave of technology such as Project Connected Home over IP and Amazon Sidewalk.
“We believe the growing demand indicates the power of the IoT to deliver real, measurable value, transforming industries, growing economies and improving lives,” adds Tuttle. “Customers are using our solutions to build a smarter, more sustainable, and more connected world.”
Silicon Labs expects to receive an estimated $2.3 billion in net proceeds after taxes and transaction fees. The company intends to return approximately $2.0 billion to shareholders through a combination of special dividends and/or share repurchases after the transaction closes. The boards of directors of both companies have approved the transaction, which is expected to close in the third quarter of 2021 subject to customary closing conditions and regulatory approvals in various jurisdictions. The company does not believe this transaction will require regulatory approval in China.
The company also provided preliminary revenue results for the first quarter ended April 3, 2021. Silicon Labs expects total Q1 revenue to be approximately $255 million. This represents an increase of roughly 5 percent sequentially and 19 percent year-over-year with the forecasted upside primarily due to solid growth in IoT, continued strength in bookings, and durable demand trends.
For Skyworks, the acquisition will accelerate its expansion into the industry’s most important growth segments, including electric and hybrid vehicles, industrial and motor control, power supply, 5G wireless infrastructure, optical data communication, data center, automotive, smart home and several other applications.
“Skyworks will be uniquely positioned to address a combined market opportunity approaching $20 billion annually,” says Mark Thompson, senior vice president of Silicon Labs and general manager of the Infrastructure & Automotive business, which will join Skyworks as part of the transaction, reporting directly to Liam K. Griffin, president and chief executive officer of Skyworks. In addition, approximately 350 employees, including the senior management team of the business, are expected to join Skyworks upon completion of the transaction.
“We are pleased to welcome the Infrastructure & Automotive team to Skyworks when this transaction is completed,” says Liam Griffin. “This acquisition will broadly expand our capabilities across high-growth end markets including automotive, communications and industrial, creating new and highly compelling opportunities for Skyworks. By leveraging our global sales channels, operational scale and deep customer relationships, Skyworks is well positioned to drive above-market growth, while diversifying revenues, expanding margins and delivering strong returns in earnings and cash generation.”
Skyworks expects the transaction to be immediately accretive and to accelerate the path to Skyworks achieving its target financial model. Skyworks expects to fund the transaction with a combination of cash on hand and committed debt financing arranged by J.P. Morgan.
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