Business, Enterprise

MIPS Acquisition Drawing to a Close, BroadCom and ARM in Forefront?

One of worst kept secrets of Silicon Valley is that MIPS Technologies (NASDAQ: MIPS) is for sale. The company has a market cap of mere 400 million dollars and even at 2-3x premium, it would represent an easy capital investment for players such as AMD, NVIDIA, Qualcomm and the like. Even though this company has pioneering low-power 8-bit, 16-bit, 32-bit and 64-bit architectures, the tangled web of government contracts and lobbies made the acquisition difficult.

According to our sources, MIPS was a target of Chinese government for quite some time. Naturally, the Chinese government would not buy the company themselves, but rather exercise a long-term, zero-interest no-need-to-return lease to a Chinese company that would acquire the company. There were quite a lot of players interested in such development, with Loongson Technology being in forefront. However, due to sensitive nature of where MIPS architecture is being used (U.S. Army being the finest example – everything from F-16 airplanes to nuclear rockets uses MIPS microcontrollers); all the lobbying in the world yielded no positive result.

However, in the first half of this year, MIPS became quite serious about the acquisition. The company’s Board of Directors wants to capitalize on what seems to be the prime time for acquisition (ARM has issues with its 64-bit architecture, Apple, NVIDIA and Qualcomm are developing their own – MIPS launched their 64-bit architecture in 1991). The company elected J.P. Morgan as their M&A banker and opened the floor for bidding sometime in the second quarter 2012.

Speaking with people familiar in the situation, it is easy to learn that the culture inside MIPS grew to really paranoid levels, and the negotiations were moved out of Silicon Valley in order to preserve secrecy (it really isn’t difficult to find who is bidding when you take a look at people’s movements). We learned of a specific hotel in a Kingdom of Far Far Away where the company representatives negotiate with six bidders. At current point in time, we do not know the players sans Broadcom and ARM Holdings.

We are not in the liberty of saying how close to closure are these negotiations, but an announcement might come sooner than most people think.

BSN Take
We found presence of ARM Holdings in the bidders list quite intriguing, we think it would be possible for ARM to clear the takeover and capture two out of three dominating CPU architectures. Intel’s market cap and sheer revenue size would be an easy voucher for anyone to acquire MIPS instruction set, provided that governmental concerns end up being properly addressed. The biggest challenge for ARM would be the fact that it is a British company, rather than an American one. Then again, current U.S. position is that the Great Britain should be "awarded" for all the long-standing partnership and form a technology block against the Far East.

Editor’s Note: Gil Russell and Nebojsa Novakovic contributed to this report.