Dialog Semiconductor has dropped acquisition talks with Synaptics, snuffing out a potential deal that would have helped diversify its business into chips for touch screens and voice interfaces used in smartphones and other connected devices. The company signaled it would consider other deals to expand beyond its main power management chip business.
“Dialog remains committed to extending its product portfolio through a combination of organic development and acquisitions, broadening its customer base, and creating value for customers and shareholders,” chief executive Jalal Bagherli said in a statement. The company would not say why the acquisition of its San Jose, California-based counterpart was shelved.
The company announced in June that it was holding discussions with Synaptics. Word came shortly after Dialog disclosed that its largest customer, Apple, had slashed orders for the main power management chips used in the iPhone. Dialog estimated that the decision would cut around five percent from its annual revenue. The company said that Apple would continue to order another power management chip, the sub-PMIC, in the same volumes.
Buying Synaptics could have reduced Dialog’s dependence on Apple, which industry analysts say accounts for more than half of the company’s revenue. It is also trying to sell Apple on mixed-signal chips acquired in its recent $330-million acquisition of Silego Technology. Their one-time programmable chips can replace standard mixed-signal products in connected cars, industrial sensors, and other Internet of Things devices.
With Synaptics, which is valued at more than $1.7 billion, the company would have expanded into touch-screen and voice-control technologies. Last year, Synaptics bought Conexant for around $300 million, giving it a gateway into audio chips designed for voice-powered products. The company also partners on development boards with major players in the voice-assistant race, including Amazon and Baidu.
The breakdown also raises the stakes for Synaptics, which has struggled to succeed in an increasingly consolidated chip industry. The company’s revenues fell sharply in the second quarter, to $394 million, while losses mounted to $13.7 million. The company’s shares dropped more than five percent in value after the discussions were cancelled, wiping out almost half of the value gained this year.
“We are extremely confident in our strategic direction and excited by the significant opportunities before us," said Rick Bergman, chief executive of Synaptics, in a statement. "We are well-positioned to continue as a standalone growth company and will remain disciplined in generating superior long-term value for our shareholders."