Apple Establishes $600 million Acquisition Deal with Dialog

Apple Inc. on Thursday has entered a $600 million acquisition deal with chip supplier Dialog Semiconductor PLC, the Anglo-German company that the US tech giant has been working with since its first iPhones.

As part of the transaction, Apple will pay $300 million to purchase some of Dialog’s assets, including its Swindon office where there are more than 300 employees working on research and development, and sites in Italy and Germany.

The other $300 million will serve as pre-payment to the UK-based firm for providing chips over the next three years.

Dialog also expects annual operational savings of $35 million from the transaction, but it did not provide further information on its financial effect ahead of an investor presentation on November.

Apple Expansion, Dialog Cementing Position

The agreement to buy patents and people from the semiconductor manufacturer is not only rare, but also the largest deal stuck by the California-based company, whose most recent substantial acquisition was the $350 million purchase of Face ID creator PrimeSense in 2013.

The deal represents an expansion of its chip making operations, which became very active in 2010 when the tech giant launched its first custom processor for the iPad and iPhone.

Apple is acquiring about 16 percent of Dialog’s people who would stay in Europe and report to Johny Srouji, the company’s senior vice president of hardware technologies who manages the smartphone maker’s chip design efforts.

For Dialog, The agreement cements its role as a supplier to the smartphone maker. Since the launch of the first iPhones a decade ago, Apple has used Dialog’s power-management chips to help its devices manage battery life.

Dialog Chief Executive Jalal Bagherli said he could now lead a managed, smooth transformation of the business as the company explores new opportunities in areas such as the Internet of Things (IoT) that includes linked devices like home speakers, fitness trackers, or smart watches.

As regards Dialog’s 2018 revenue, the chip designer stated that it would not be affected and it would keep shipping core power management integrated circuits (PMICs) to Apple. Dialog also expects to sell current and future generation of so-called sub-PMICs to Apple.

Dialog expects Apple to represent 35 percent to 40 percent of its overall revenues in 2022 after the agreement. That is lower by 75 percent in the current year. Headcount is estimated to drop to 1,800.

Moreover, the semiconductor maker said it plans to start a share buyback program for up to 10 percent of its shares following its next quarterly trading update. Analysts see the $600 million further lifting Dialog’s already-healthy net cash position of $525 million.

The deal is expected to be completed in the first half of 2019, subject to customary closings and regulatory approval.

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