PairGain Sells Microelectronics Group in a $242.6-Million Deal

PairGain Technologies Inc., a struggling maker of telecommunications equipment, said Monday that it has sold its microelectronics group to a New Jersey firm for $242.6 million in stock and debt.

GlobeSpan Inc., which makes software and chips for high-speed Internet devices, agreed to turn over nearly 1.1 million of its shares and issue a $90-million note to the Tustin company to acquire the group. GlobeSpan stock, which has doubled in price this month, closed Monday at $141.13 a share, up $6.81.

PairGain officials said the sale, expected to close by the end of March, will let them focus on developing equipment that enables telecommunications carriers to handle various types of traffic, including voice and data.

Its microelectronics unit employs 40 engineers who design circuits and software tools for digital subscriber line services, known as DSL. DSL service packs data into existing copper wire lines more efficiently than traditional telephone dial-up modem connections and can be as much as 100 times faster.

GlobeSpan, once part of AT&T; Corp., is the industry’s largest provider of DSL chip sets. Its third-quarter revenue last year was $17 million--more than double the $7.8 million it earned the entire previous year.

No layoffs at the PairGain unit are anticipated, said Bob McMullan, GlobeSpan’s chief financial officer. The group, based in PairGain’s headquarters, will be relocated in the next few months to nearby offices.

“We want to keep them local because it gives us a Southern California location and presence, and lets us support our local customers in the area,” McMullan said. “We plan to expand the group as soon as possible.”

Both companies also said Monday they signed an agreement for GlobeSpan to sell DSL chip sets to PairGain.

The $90-million note, which is to be repaid within six months, will help offset any loss in the value of GlobeSpan stock should it fall dramatically before the deal closes, said Charles McBrayer, PairGain’s executive vice president.

“If their stock tanks, we’ve got a solid commitment for at least $90 million,” McBrayer said. “I don’t think that’s going to happen, but it helps protect us either way.”

PairGain, which warned investors twice last year that its earnings would miss forecasts, lost $4.2 million on revenue of $51.2 million for the third quarter last year. It said last month that it is shifting some manufacturing to Mexico and dismissing fewer than 100 of its 270 employees.

Its stock price rose 31 cents a share Monday, closing at $13.75.