September 26, 2000 5:30 AM PDT

PMC-Sierra acquires SwitchOn Networks

Broadband chip maker PMC-Sierra (Nasdaq: PMCS) said Tuesday it will acquire privately held SwitchOn Networks in a stock swap valued at $450 million.

PMC-Sierra, which closed at 219 on Monday, said the acquisition will boost the company's ability to provide Web switching and security products.

The acquisition, which will be accounted for as a pooling of interests, will add 60 employees in Milipitas, Calif. and 30 employees in Pune, India.

PMC-Sierra, which competes with Lucent, Intel and Motorola, has been expanding via acquisitions. The company acquired Quantum Effect Devices (Nasdaq: QEDI) in July for $2.3 billion. In March, PMC-Sierra bought two companies in a deal valued at $1.3 billion.

SwitchOn Network's technology inspects data packets up to Layer 7, provides policy and content based networking and generates statistics for traffic monitoring and metering. PMC-Sierra said SwitchOn's capabilities will be used in next generation IP equipment such as edge routers, aggregation and POP switches, Web switches, network firewalls and intrusion detection systems.

In the second quarter, the company reported earnings of $39 million, or 23 cents per share, not including goodwill writedowns and one-time events. Including amortization, acquisition-related charges and stock sales, PMC-Sierra earned $49.9 million, or 30 cents per share.

Second quarter revenue increased to $134.1 million, a 30 percent gain sequentially and 124 percent improvement year-over-year. The company credited its sales growth to the growing deployment of broadband networks. In the third quarter, which will be reported in October, analysts are expecting a profit of 26 cents a share, according to First Call Corp.>

 

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