Network chip maker AMCC buys into SAN market

Network chip maker Applied Micro Circuits Corp. (AMCC) has bought its way into the storage area networking market by agreeing to buy JNI Corp. of San Diego for approximately $190 million in cash, the companies announced Thursday.

JNI makes Fibre Channel host bus adapters and a range of other hardware and software products used in storage area networks, or SANs, the companies said. Its brands include FibreStar, Emerald and EZ Fibre.

The acquisition will help San Diego-based AMCC to expand beyond its current business providing chips for wide area networks and into what it hopes will be a fast-growing and profitable market for SAN products.

Fibre Channel has achieved “mass market acceptance” and JNI is positioned well to take advantage of that with its products for Microsoft Corp. Windows and Sun Microsystems Inc. Solaris environments, Dave Rickey, chairman, president and chief executive officer of AMCC, said in a statement.

However, JNI’s sales have been declining of late. It reported a loss of $6.6 million for the second quarter ended June 30, on revenue of $5.8 million. That revenue figure was down from $10.9 million in the second quarter of 2002, reflecting a decline in sales across all its product lines, according to the company’s July financial results statement.

As part of its growth strategy, the company planned to enter the Windows market and release several new products in the coming quarters. At the time its financial results were released in July, JNI predicted revenue growth of 50 percent to 60 percent in 2004 compared to 2003 and said it would break even by the end of 2004.

The acquisition is expected to close in the fourth quarter subject to the approval of JNI’s stockholders and other standard conditions.

AMCC will pay $7.00 for each outstanding share of JNI common stock, for a value of approximately $190 million, and assume all outstanding JNI employee stock options. Ahead of the announcement, JNI’s shares (JNIC) on the Nasdaq closed at $5.79 on Thursday. The stock climbed 18 percent in after-hours trading to $6.86.

JNI’s products include Fibre Channel host bus adapters, InfiniBand host channel adapters, storage ASICs (application specific integrated circuits) and software. Its products also work on HP-UX, AIX and Linux systems. As of June 30, JNI’s assets included approximately $90 million in cash and investments.

AMCC’s shares (AMCC) on the Nasdaq closed Thursday at $5.93, down less than 1 percent on the day. In trading after hours the stock crept $0.02 lower.