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Texas Instruments buys chip company for $7.6 billion

Looking to boost its offerings of analog chips, the company says it will pay roughly $7.6 billion in stock to acquire Burr-Brown, a maker of chips that convert signals from analog to digital.

Looking to boost its offerings of analog chips, Texas Instruments said today it will pay roughly $7.6 billion in stock to acquire Burr-Brown, a maker of chips that convert signals from analog to digital.

Analog chips are the components that accompany TI's mainstay digital signal processors (DSPs) in cell phones and other high-tech gear. DSPs refine digital audio and video data so they can be efficiently sent across computerized networks.

"We are as serious about analog as we are about DSP," TI chief operating officer Rich Templeton said in a conference call with analysts. "This is an opportunity for TI to provide every analog component that touches a DSP."

TI said it will issue 1.3 shares of its common stock for each outstanding share of Burr-Brown common stock. The deal offers Burr-Brown shareholders a 56 percent premium based on today's closing prices for both companies.

Excluding transaction costs, TI said the acquisition is not expected to be material to TI's earnings per share in 2000 or 2001 and is expected to add to earnings after that. The companies expect the deal to close in the third quarter of this year.

TI is the undisputed leader in digital signal processors, with 48 percent market share, but it has been working to grow its slice of the analog market.

"In the analog market, we're No. 1 on a dollar basis, with about an 11 percent market share," Templeton said, adding that there is still no clear leader in either market share or customers' minds.

In the past 12 months, TI acquired two other analog chip companies, Unitrode and Power Trends.

Credit Suisse First Boston analyst Charlie Glavin said the deal should have relatively little impact on TI's earnings, given the similar profit margins of the two companies. Glavin said it will take time to see whether the broader offering of chips will help TI grow its attach rate--the rate at which it can sell analog chips into the products already using its digital signal processors.

"The biggest thing it does is it gains market share" for Texas Instruments, Glavin said.

Templeton said the deal will move TI from No. 5 to a "clear" No. 2 in data converters.