EZchip to add multi-core processors via Tilera acquisition

Network processor pioneer EZchip Semiconductor Ltd. (NASDAQ:EZCH) plans to expand its product portfolio via the acquisition of Tilera Corp. EZchip has signed a definite agreement with the privately held US-based company that would see EZchip pay Tilera stockholders up to $130 million in cash, with $50 million payable at closing and up to an additional $80 million payable subject to meeting future performance milestones.

The parties hope to close the deal in the third quarter of this year. Both boards have approved the transaction.

Tilera would bring 9-, 16-, 36-, and 72-core CPUs and a family of intelligent network interface cards and white-box appliances to the EZchip portfolio. EZchip believes the acquisition will open new markets, diversify its customer base and product lines, and double its target total addressable market (TAM) to about $2 billion. The company expects the acquisition to be neutral to slightly dilutive in 2014 and accretive in 2015 to earnings per share on a non-GAAP basis.

Devesh Garg, the CEO of Tilera, will serve as EZchip’s president in charge of all U.S. operations when the deal is consummated.

“The addition of a multi-core product portfolio to EZchip expands and diversifies our product offerings and addressable markets. While our NPU portfolio and in particular our new NPS targets high-end carrier and data center equipment in which a high-performance data-plane-only NPU is required, the Tilera multi-core CPUs address a wide range of data-center systems in which both data-plane and control-plane run on the multi-core CPU,” said Eli Fruchter, CEO of EZchip Semiconductor. “Furthermore, the combination of EZchip’s and Tilera’s market-proven leading technologies, in particular EZchip’s networking expertise and Tilera’s multi-core expertise, will enable us to develop new multi-core CPUs that uniquely integrate powerful networking capabilities with the highest number of processor cores addressing a wide range of applications and market segments.”

“With this acquisition, EZchip becomes one of the leading vendors of high-performance processors for networking,” opined Bob Wheeler, principal analyst at The Linley Group. “With the addition of Tilera, EZchip is broadening its product offerings to include not only network processors with unmatched flexibility, but also multi-core processors with unparalleled core-count and power efficiency.”

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