ADI swallows Hittite, gains acquisition skill
Mike Britchfield, recently appointed as vice president of European, Middle-east and Africa sales at Analog Devices, has provided eeNews Europe with some of the thinking that goes along with his company’s $2 billion acquisition of Hittite Microwave Corp (Chelmsford, Mass.) The deal was announced in June 2014 and closed a month later.
In short, Britchfield said, the deal was about high frequency electronics, which is going to become more common, even ubiquitous, across multiple markets that Analog Devices already serves. But it may also be about Analog Devices continuing to go after small and large acquisition targets and be an acquirer rather than an acquisition.
Analog Devices’ history is in data conversion and signal conditioning but with an increasing capability in radio frequency electronics. So not only has Analog Devices business gradually moved from being about generic building blocks to more application-specific sub-systems at the IC and packaged component level, but many of those applications are moving from single-digit gigahertz frequencies up to microwave and millimeter wave frequencies.
ADI, Hittite combination covers the spectrum. Source: Analog Devices.
"We could see a large jump in frequency was coming and the acquisition puts us in a position to do almost everything from antenna to bits," said Britchfield. Fabless Hittite has strength in the communications infrastructure and military-aerospace sectors, which is also complementary to ADI’s strength in automotive, industrial, healthcare and consumer electronics. The fact that Hittite is based close to ADI (Norwood, Mass.) and has a similar culture – both companies were founded by engineering graduates from Massachusetts Institute of Technology, should make integration go smoothly.
Hittite made a net income of $70.9 million on annual sales of $273.8 million in 2013. The sales were up by 3.6 percent from $264.4 million for 2012 and net come was up 3.4 percent from $68.6 million in 2012. For comparison Analog Devices made net income of $673.5 million on revenues of $2.63 billion in its 2013 fiscal year which ended on Nov. 2, 2013.
"Hittite has 25 years of RF and microwave design experience in gallium arsenide, silicon-germanium and gallium nitride, that is difficult to replicate organically," said Britchfield. "We bought revenue but most importantly we bought expertise and the potential for cross-fertilization with conversion," said Britchfield.
"At Analog Devices we are experts in our own processes and this acquisition helps develop the synergy to supply optimized chip sets and build from application knowledge."
Britchfield continued: "We have over $1 billion of annual sales in conversion products. With this acquisition we are building another pillar of the business in RF and microwave. This was a big decision for Analog Devices."
And it might not be the last Britchfield hinted: "Previously we grew through a combination of organic growth and acquisitions. We will continue with smaller acquisitions. But we need to be able to do an acquisition of the size of Hittite. It may take a year to fully integrate Hittite but this gives us the capability to do it again."
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