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Vitesse Buys GigE Ammo

Chipmaker pays $66M for 'independent arms dealer' of Gigabit Ethernet interfaces

Vitesse Semiconductor Corp. (Nasdaq: VTSS), looking to take advantage of customers switching to Gigabit Ethernet as a network and storage transport option in late 2004, today announced plans to purchase startup Cicada Semiconductor Inc. for approximately $66 million in cash.

The deal, subject to approval from Cicada's directors, is expected to close in the first quarter of 2004. Vitesse has been selling Cicada's Gigabit Ethernet copper transceivers with its LAN switches for more than a year.

The move shows Vitesse's determination to benefit as its equipment-maker customers follow the trend from older Ethernet systems to faster ones that support Gigabit Ethernet. Cicada also is at work on 10-Gbit/s physical interface (PHY) chips, which are expected to be vital to data communications and storage networking in the future.

Vitesse CEO Lou Tomasetta said in a prepared statement that he expects the acquisition to double his company's LAN switch revenues. Most questions hover around Cicada, which fancies itself an "arms dealer" of copper Gigabit Ethernet PHYs.

Cicada raised at least $40 million in funding since it started in 1996. The startup battled giants Broadcom Corp. (Nasdaq: BRCM) and Marvell Technology Group Ltd. (Nasdaq: MRVL) in the GigE PHY market. Because Cicada has been selling its copper PHY transceivers to other companies, including VIA Technologies Inc. and SwitchCore AB (Stockholm: SCOR), the Vitesse deal could also cause some realignment of partnerships (see Cicada Clicks With GigE Controllers and Cicada, SwitchCore Partner).

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