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Analog Devices Inc., a Norwood, company that makes a vast array of signal-processing microchips to power consumer electronic devices, is enlarging its product line in a big way, by purchasing Hittite Microwave Corp., of Chelmsford, for $2 billion in cash.

The acquisition is the biggest in ADI’s history. “It expands our reach, our capabilities,” said chief executive Vincent Roche, “and I think our customers are going to be very, very excited about it.”

ADI, which employs about 9,000 people worldwide, makes chips that enable digital processing of real-world data, such as movement, sound, and video, as well as analog radio transmissions. Analog’s chips are found in millions of consumer products, such as automobiles, personal computers, cellphones, and tablets.


Hittite specializes in chips that process very-high-frequency analog signals, such as those generated by radar systems. The company is a major supplier of chips for military and satellite communications systems.

“They’re stronger in these areas than we are,” Roche said. “There’s not a huge overlap’’ in the two companies’ product lines, he said.

In addition, the companies have very different manufacturing models.

ADI operates its own chip-manufacturing plants, or “fabs,” in Wilmington and in Limerick, Ireland. But Hittite is one of many chip companies that uses a “fabless” business model. Hittite engineers design chips then hire independent chip-manufacturing companies to produce them. This means the merged companies could begin making some Hittite products in ADI’s own fabs.

“Buying the company next door has certain advantages with regards to cultural fit [and] facility consolidation,” said James Kelleher, a senior analyst at Argus Research. About 70 percent of Hittite’s 500 employees are based in Chelmsford, so the workforces of the two companies are culturally compatible and will not have to relocate.

Stacy Rasgon, a chip industry analyst at Bernstein Research, said the deal could boost the performance of the merged companies’ stock.


“ADI’s been kind of growth-challenged,” Rasgon said. “So is Hittite.”

Growth in the value of each stock has trailed the Standard & Poor’s 500 index and has lagged far behind their giant rival Texas Instruments Inc.

Analog will pay $78 a share in cash for Hittite, a premium of 29 percent over the Friday closing price of Hittite stock, which was $60.56 a share. Analog, which has about $4.8 billion in cash and short-term investments on its books, will cover the cost partly through short-term borrowing, but expects to pay off the loans by year’s end.

On Monday, Analog stock closed at $55.31, up nearly 5 percent. Hittite closed at $77.90, up 28.6 percent.

The deal is one of three major chip company mergers in recent months.

In May, Avago Technologies Ltd., of San Jose, Calif., completed a $6.6 billion purchase of LSI Corp., a San Jose maker of networking and data storage chips.

And in February, RF Micro Devices Inc. in Greensboro, N.C., agreed to pay $1.5 billion for TriQuint Semiconductor Inc., a competing maker of digital radio chips in Hillsboro, Ore.

Hiawatha Bray can be reached at hiawatha.bray@globe.com. Follow him on Twitter @GlobeTechLab.