UPDATE 3-Apple to buy part of supplier Dialog's business in $600 mln deal
* Apple has used Dialog chips to manage iPhone battery life
* Dialog says will still ship products to Apple
* Deal settles questions about Apple, Dialog relations
(Writes through with Dialog shares, deal details, Europe
context)
By Stephen Nellis and Douglas Busvine
SAN FRANCISCO/FRANKFURT, Oct 11 (Reuters) - Apple Inc
has agreed to buy a portion of chip supplier Dialog
Semiconductor Plc's business in a $600 million deal,
the two companies said on Thursday, expanding the iPhone maker's
chip operations in Europe.
Since the first iPhones a decade ago, Apple has used Dialog
power-management chips to manage their battery life. Under the
deal, Apple is buying patents, a team of about 300 engineers,
most of whom already worked on chips for Apple devices, and
Dialog offices in Britain, Italy and Germany.
Dialog said its 2018 revenue would not be affected and it
would continue shipments of existing products to Apple.
For now, the deal settles questions about future relations
between Apple and Dialog, whose shares tumbled this year when it
said Apple planned to use chips from another supplier, which was
widely believed to be Apple itself. [nL5N1T25W1]
Dialog's shares rose 17 percent in pre-market trading in
Frankfurt, as the Apple deal secured their business relationship
for the next three years.
The Anglo-German chipmaker also said it would begin a share
buyback programme for up to 10 percent of its stock following
its next quarterly trading update.
Other chip designers in Europe have struggled to manage
their relationship with Apple due to its sheer scale. Britain's
Imagination Technologies ended up being sold to a Chinese-backed
investment fund last year after losing Apple as a client.
[nL8N1N66HI]
EUROPE PUSH
Half of the deal's value, or about $300 million, is cash for
the Dialog engineers and offices and the other $300 million is
pre-payment to Dialog for supplying chips over the next three
years, the companies said.
Dialog said it would continue to deliver chips to other
customers, focusing on the automotive and internet-of-things
markets, among others.
"This transaction reaffirms our long-standing relationship
with Apple, and demonstrates the value of the strong business
and technologies we have built at Dialog," Dialog CEO Jalal
Bagherli said in Dialog's statement.
The deal represents an expansion of Apple's chip design
operations, which kicked into high gear in 2010 when the company
released its first custom processor for the iPad and iPhone.
Apple is buying about 16 percent of Dialog's workforce.
Apple said these employees would stay in Europe and would report
to Johny Srouji, the company's senior vice president of hardware
technologies who oversees Apple's chip design efforts.
"Dialog has deep expertise in chip development, and we are
thrilled to have this talented group of engineers who’ve long
supported our products now working directly for Apple,” Srouji
said.
"Our relationship with Dialog goes all the way back to the
early iPhones, and we look forward to continuing this
long-standing relationship with them.”
Apple has added around 20,000 employees in Europe since
2000. It already has a chip design centres in Munich, Germany,
where it employs 1,000 staff, and St Albans, Britain. The deal
will give Apple four more from Dialog, in Livorno in Italy,
Swindon in Britain, and Nabern and Neuaubing in Germany.
The transaction is expected to close in the first half of
2019, subject to customary closings and regulator approvals,
Dialog said.
Dialog said Qatalyst Partners was acting as financial adviser
and Linklaters was acting as its legal counsel.
(Editing by Riham Alkousaa, Edmund Blair and Jane Merriman)
((Stephen.Nellis@thomsonreuters.com; (415) 344-4934;))
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