Broadcom in talks to buy Provigent for $300-400m
Marvell and Qualcomm are also interested in the systems-on-a-chip developer, chosen as "Globes" most promising Israeli start-up of 2010.
Five months ago, Provigent won first place in the "Globes" 2010 Journeys competition as Israel's most promising start-up. Founder and CEO Dan Charash said at the time, "We've been in the market for a decade now, we have patents and customers, and it is hard to see another company entering the market now and starting from nothing without making acquisitions."
Asked if Provigent was in the sights of one of the semiconductor companies, Charash carefully weighed his words and elegantly evaded a direct answer. Now we know why.
Provigent, which develops SoC solutions for broadband wireless networks, has been in talks with Broadcom for months, even as the company was preparing for an IPO on Nasdaq.
Provigent said in response, "The company does not comment on rumors."
Charash and Guy Reshef founded Provigent just over ten years ago. The company operates in the hottest segment of the cellular equipment market - the bottleneck between antennas and network cores - developing SoC solutions that function as a kind of modem for routing and transmitting data. This is the place where heavy smartphone users get stuck, forcing mobile carriers to invest heavily.
Provigent's business is growing; it posted $40 million revenue in 2010, 60% more than in 2009, and it has been profitable for 18 months. If it is sold, investors will make a handsome return on their investment, so small matter nowadays.
Provigent has raised $55 million from Pitango Venture Capital, Sequoia Capital, Delta Ventures, Magma Venture Partners, Lightspeed Ventures, Globespan Capital Partners, and Ascend Technology Ventures. The company also has several prominent private investors from the semiconductor industry, including Qualcomm founder and vice chairman Dr. Andrew Viterbi, Analog Devices founder and chairman Ray Stata (through Stata Venture Partners), and George Gilder.
Charash dreamed, at least until he opened talks with the semiconductor giants, of building a great company that would become an industry leader. He had another vision too: to build a company based on algorithms, which makes a link-up with Broadcom or Qualcomm appear natural.
Charash recently told "Globes", "Broadcom and Qualcomm's founders are experts in algorithms. This is Provigent's model - what these semiconductor companies did in their markets, we will repeat in our market."
Provigent's board of directors has been deliberating for a long time about the best way for the company to go. In recent months, its shareholders have been debating whether the company should go for a Nasdaq IPO this year or next, or whether to be satisfied with a respectable sale at a value of a few hundred million dollars. As a consequence, Provigent has been silent about its financial and strategic intentions.
During the autumn of 2010, Charash said, "There is a great deal of uncertainty, and I don’t know what will happen. We want to hold an IPO, but the market isn't ready." The climate in US primary market has apparently cleared since the beginning of 2011, and the window of opportunity for suitable companies seems to have opened.
For years, Provigent was careful about disclosing information about its customers and sales. The company reportedly has several key customers, beginning with China's Huawei Technologies Co. Ltd, and, far behind, Ceragon Networks Ltd. (Nasdaq: CRNT; TASE:CRNT). Other customers are known to be telecommunications equipment vendors, such as Ericsson AB (NYSE: SAX: ERIC) and Alcatel Lucent SA (NYSE; Euronext: ALU).
Provigent's directors, such as Pitango managing director Nechamia (Chemi) Peres, Sequoia partner Benny Hanigal, Magma partner Modi Rosen, and GLobespan managing director Jonathan Seelig, will have to decide which road to take.
A hookup with Broadcom or Marvell, if it comes to pass, is no small matter. Neither company, which develop computing and telecommunications processors, have an solutions for cellular networks, although they have close ties with major vendors that are customers or potential customers of Provigent.
Broadcom is very active in Israel, acquiring two companies in the past six months: Percello Ltd. for $86 million in October, and Sightic Vista Ltd. for $10-20 million in November. It also acquired US Beecem Communications Inc for $360 million last October. It has acquired seven Israeli companies to date.
Published by Globes [online], Israel business news - www.globes-online.com - on March 1, 2011
© Copyright of Globes Publisher Itonut (1983) Ltd. 2011
- Tel Aviv market report
- Tel Aviv Stock Exchange
- Israeli stocks in NY
- Arbitrage gaps for dual-listed stocks
- Israeli stocks in Europe
- Israeli stocks on other markets
- Tel Aviv 25 options
- Mutual funds
- Current representative shekel rates
- Historical representative shekel rates
- Bank shekel rates
- Shekel/dollar options