Vitesse to Buy Cicada to Add Fast Switches

Vitesse Semiconductor Corp., whose chips are used in telecommunications gear, agreed to buy closely held Cicada Semiconductor Corp. to expand its lineup of products used for high-speed data transmission, the firm said Monday.

Camarillo-based Vitesse said the acquisition, for $66 million in cash, would double its revenue in the market for switches used in local-area networks and increase its overall 2004 revenue by about $10 million. Vitesse’s total sales were $156 million in its 2003 fiscal year ended Sept. 30.

Businesses are boosting the speeds of their data networks with gigabit Ethernet gear, which is made by Cicada and others. By adding Cicada’s gigabit transceivers to its product line, Vitesse will be better able to compete with larger rivals such as Irvine-based Broadcom Corp., said David Wu, an analyst with Wedbush Morgan Securities in Los Angeles.

“They have to have a more complete solution to compete against the likes of Broadcom,” said Wu, who has a “buy” rating on Vitesse and doesn’t own the shares. “This would give them the part they’re missing.”

For more than a year, Vitesse and Cicada have jointly sold gigabit switching products comprising Vitesse switches and Cicada transceivers.

Vitesse said the deal would add “slightly” to earnings in the second half of 2004. The company, which has lost money for the last three years as sales have sunk, is expected to earn 2 cents a share in fiscal 2004 and 13 cents in 2005, according to the mean estimates of analysts tracked by Thomson First Call.

Vitesse stock fell 1 cent Monday to $5.99 on Nasdaq. It has surged 174% from $2.19 at the start of the year. The price rose as high as $106 in 2000.