Gennum Acquires Nanotech Semiconductor

Significantly Strengthens Mixed Signal Portfolio and Ability to Capitalize on Fast Growing Consumer Connectivity Market

BURLINGTON, ON and BRISTOL, U.K., April 6 /CNW/ - Gennum Corporation (TSX: GND) announced today it has acquired Nanotech Semiconductor Limited, a leading fabless IC company specializing in advanced CMOS mixed-signal ICs for fiber optic communications. This acquisition, pursuant to which Gennum paid USD$34 million in cash and agreed to an earn-out as described below, further strengthens Gennum's growth strategy in the optical transceiver IC market by adding state-of-the-art CMOS products and technology for high volume applications such as Ethernet, PON, telecom and consumer optics.

Today, Gennum's extensive 10Gb/s-100Gb/s optical IC portfolio provides complete solutions for use in optical transceivers. The acquisition of Nanotech further extends Gennum's leadership and portfolio by enabling the company to offer 100Mb/s to 100Gb/s optical IC solutions to fast growing markets such as Fiber to the home (PON) and Ethernet. Nanotech's low cost CMOS technology together with Gennum's high performance SiGe technology allows Gennum to address optical networking markets 'from inception to maturity'.

The transaction is expected to result in a number of benefits, including the following:

  • Increased market presence in an expanded, US$1.3 billion addressable market

  • A strongly positioned business with a highly differentiated optical transceiver IC portfolio, spanning the entire optical speed range from 100Mb/s to 100Gb/s

  • Strengthened optical transceiver IC market position for telecom, Ethernet, PON and consumer optics applications

  • State of the art CMOS technology to deliver groundbreaking low cost optical IC products

  • Addresses customers' need to consolidate the supply chain and provide a convenient one-stop-shop for optical transceiver ICs at all data rates

  • Increased revenues, with Nanotech's revenues for the year ended December 31, 2010 being approximately US$7.4 million and current revenues being approximately US$1.0 million per month

"Through this acquisition, Gennum has significantly strengthened our mixed-signal and optical product portfolio and added critical CMOS technology capability enabling our company to address a broader range of high growth networking markets such as Fiber to the Home, Ethernet and consumer optics," said Dr. Franz Fink, President and Chief Executive Officer of Gennum. "We have listened to our customers' needs to simplify the supply chain and can now provide them with one of the most complete optical transceiver ICs portfolios spanning all data rates. Indeed, we believe the Nanotech portfolio coupled with Gennum's high speed mixed signal and optical portfolio will increase our ability to provide more, high value products resulting in increased growth opportunities for Gennum."

"We are excited to join Gennum and create one of the industry's most compelling optical IC transceiver portfolios," said Gary Steele, Founder, CEO and Chairman of the Board of Nanotech.  "By integrating our recognized expertise in low cost, high performance CMOS based optical products and technologies and talented employees with Gennum's high speed optical products and global organization, customers will gain access to a uniquely comprehensive portfolio and product roadmap."

Expansion of Optical Transceiver Portfolio to Accelerate Growth Strategy
Gennum expects the combined portfolio will deliver highly differentiated optical products that capture a greater portion of the silicon content in applications such as telecommunications, networking, fiber to the home, and consumer connectivity.

The Nanotech portfolio includes industry-leading CMOS based optical ICs. These products span the following optical markets:

  • OC-3, OC-12, Gigabit Ethernet based telecommunications applications
  • GEPON, GPON for fiber to the home applications
  • Fast Ethernet, Gigabit Ethernet based networking applications
  • Firewire, Fast Ethernet, Gigabit Ethernet, HDMI for consumer applications

The combination of Gennum's industry leading 10Gb/s, 40Gb/s and 100Gb/s signal integrity products with Nanotech 100Mb/s-10Gb/s CMOS portfolio, creates a highly differentiated set of optical solutions giving customers a unique roadmap, with increased functionality that reduces their overall system cost, improves performance and accelerates their time to market.

Opportunity to Address High Speed Consumer Optics and Connectivity Market
The need for increased connection speed to transfer data is a growing trend in consumer products. High speed copper and optical-based consumer connectivity holds the promise to increase connection speeds to 10Gb/s and faster.

Key elements to success in serving the consumer connectivity market are providing low cost, high performance solutions. Through the combination of Gennum's 10Gb/s signal integrity ICs and Nanotech's cost competitive, low power CMOS capabilities, this acquisition has strongly positioned the combined entity to provide compelling high speed copper and optical based IC products for many main-stream consumer connectivity products.

Transaction Summary
Under the transaction, Gennum acquired all of the outstanding shares of Nanotech at a purchase price of US$34 million plus an amount of up to US$6 million payable under an earn-out for the achievement by Nanotech of revenue targets over the next 12 months between US$10 million and US$14 million.  Based on information provided by Nanotech, Gennum expects that the transaction will be accretive on a non-GAAP* basis and approximately neutral to its GAAP earnings in the fiscal year ending November 30, 2011.  Gennum expects the transaction to be accretive to its GAAP earnings in fiscal 2012.

Editor and Investor Note:
Gennum will be discussing this transaction during its annual shareholders' meeting today which will be webcast live at www.gennum.com or http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=3469180, and during its 2011 first quarter results conference call with Gennum's President and CEO, Dr. Franz Fink, which will be held on April 7, 2011 at 8:00 am ET.  Interested participants can listen to the first quarter results call by dialing in to 1-877-974-0446 or can access the webcast at www.gennum.com or www.newswire.ca.

About Gennum
Gennum Corporation (TSX: GND) designs innovative semiconductor solutions and intellectual property (IP) cores to serve the rising global demand for high-speed data transmission products in the broadcast, networking, storage and telecommunications markets.  Gennum offers proven optical, analog and mixed-signal solutions with uncompromising signal integrity to support standards such as high-definition (HD) video, Fibre Channel, InfiniBand®, Ethernet, SONET and PCI Express®.  The company is headquartered in Burlington, Canada, and has global design, research and development and sales offices in Canada, Mexico, Japan, Germany, United States, India and the United Kingdom. www.gennum.com.

About Nanotech
Based in the United Kingdom, Nanotech is a fabless chip company, focused on analog and mixed-signal ICs principally for fiber-optics based communications.

Non-GAAP Measure Note

* Non-GAAP basis excludes intangible asset amortization, integration expenses and retention programs related to the Nanotech employees.

Caution Regarding Forward-Looking Statements

This document contains statements which constitute forward-looking statements. These forward-looking statements are not descriptive of historical matters and may refer to management's expectations or plans. These statements include but are not limited to statements concerning: the expected results and benefits of Gennum's acquisition of Nanotech (including the expected impact of the acquisition on Gennum's revenues, earnings, business and market position), Gennum's business objectives and plans including Gennum's corporate strategy and strategic priorities; Gennum's future financial performance and prospects including revenues, gross margins and earnings, and ability to achieve operating earnings, cash flow and other business model targets; future trends in the semiconductor products and intellectual property licensing industries and, in particular, market trends for analog and mixed-signal products, optical products and intellectual property products and licensing; Gennum's expectations for sales and licensing of its products in these markets including anticipated costs and fees, sales, product prices, size, duration, growth or decline of market opportunities and competitive and pricing pressures in these markets; Gennum's product roadmap and the speed at which Gennum is able to introduce new products; the adoption of new standards in the markets in which Gennum competes and the ability of Gennum to anticipate these changes and successfully address new opportunities; sales and capital spending plans and estimates, shipment levels and operating expenses; exchange rate fluctuations in, and the relative values of, the Canadian dollar, the U.S. dollar and the Japanese yen; Gennum's ability to finance its growth plans and make necessary investments; and litigation in which Gennum is involved.

Inherent in forward-looking statements are risks and uncertainties beyond Gennum's ability to predict or control including, but not limited to, risks associated with: information relating to the business and affairs of Nanotech provided to Gennum by Nanotech and the vendors in connection with the acquisition of Nanotech being materially incorrect; the successful integration of acquisitions, including the acquisition of Nanotech; competitive and pricing pressures in the increasingly competitive environment in which Gennum operates; changes in the mix of products sold which, due to associated margins, can impact Gennum's financial results; economic cycles in the semiconductor industry including downturns which can result from adverse general economic conditions; our ability to anticipate needs for future products and successfully execute our product roadmap, including the possibility of the emergence of disruptive technologies which negatively impact our positioning in the marketplace; the risk that unforeseen factors may arise that result in us not being able to achieve our operating income, cash flow and other business model targets; possible impairments of assets which could be required in the future; fluctuations in foreign exchange rates and their potential adverse impact upon our financial results; our reliance on external foundries and suppliers and the potential adverse effects of disruptions in any of these arrangements; our ability to attract and retain key personnel necessary for our business; our ability to successfully protect our intellectual property rights; and the initiation and outcome of legal proceedings.  Readers should also refer to the section entitled "Risk Factors" in our most recent annual information form and the section entitled "Risks and Uncertainties" in our 2010 management's discussion and analysis, each as filed on SEDAR at www.sedar.com.

Actual results and developments are likely to differ, and may differ materially, from those expressed or implied by the forward-looking statements contained in this document.  Such statements are based on a number of assumptions which may prove to be incorrect including, but not limited to, the following assumptions: the information relating to the business and affairs of Nanotech provided to Gennum by Nanotech and the vendors in connection with the acquisition of Nanotech is not  materially incorrect; Gennum is able to successfully integrate acquisitions (including the acquisition of Nanotech); there is no material deterioration in the business and economic conditions in the marketplace for Gennum's products; Gennum's expectations regarding market trends for analog and mixed-signal products, optical products and intellectual property products and licensing are not materially incorrect; Gennum is able to execute its product roadmap without delays or disruptions having a material impact on Gennum; Gennum's expectations relating to the needs and direction of the marketplace for its products are within reasonable bounds of accuracy and Gennum is able to introduce products and capitalize on new opportunities generally as expected; Gennum's expectations relating to its future operating expenses, as well as the capital required to conduct its business in the future, are not materially incorrect; significant impairments of assets will not arise; material disruptions in the manufacture and supply of products and services to Gennum by foundries and suppliers will not materialize; Gennum's expectations relating to competitive pressures, including pricing pressures, as well as Gennum's expectations relating to the mix of products to be sold by it, are not materially incorrect; significant fluctuations in foreign exchange rates which materially adversely affect Gennum's financial results do not arise; customer demand for Gennum's products remains generally as anticipated; and Gennum is able to continue to retain and attract technical and other key employees.

Readers are cautioned that the foregoing list of important factors and assumptions is not exhaustive. Forward-looking statements are not guarantees of future performance. Events or circumstances could cause Gennum's actual results to differ materially from those estimated or projected and expressed in, or implied by, these forward-looking statements. Consequently, readers should not place any undue reliance on these forward-looking statements. Forward-looking statements are provided for the purpose of providing information about management's current expectations and plans relating to the future. Readers are cautioned that such information may not be appropriate for other purposes. In addition, these forward-looking statements relate to the date on which they are made. We disclaim any intention or obligation to update or revise any forward-looking statements or the foregoing list of factors, whether as a result of new information, future events or otherwise, except to the extent required by law.

SOURCE Gennum Corporation

For further information:

Gennum Media Contact   
Robin Vaitonis     
Tel: 480-381-6302    
E-mail: robin.vaitonis@gennum.com  


Gennum Investor Relations Contact 
Gregory Miller
Senior Vice-President, Finance & Administration and
Chief Financial Officer
Gennum Corporation
Tel:  905-632-2999 ext. 3060
E-mail: greg.miller@gennum.com

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