Apple opens Dialog box of cash: $600m deal for a chunk of chip biz's power-management-fu

Staff snapped up and IP licensed by iPhone giant

Apple has agreed to hand $600m over to Dialog Semiconductor in return for a slice of the chipmaker's business and brains.

The deal (PDF) will see Apple paying $300m in cash and another $300m to keep Dialog delivering silicon to it over the next three years.

Apple will also be absorbing 300 Dialog employees that already work on chip development for the Jesus phone flinger and pick up some facilities in Italy (Livorno), Germany (Nabern and Neuaubing) and the UK (Swindon).

Dialog Semiconductor has a long and rich history with Apple, providing the power management circuitry for the company's smartphones. The outlay, under which 16 per cent of Dialog's workforce will become minions of the cult of Cook, sees Apple bringing this functionality in-house. As well as assets, the deal will also license Dialog's IP.

Earlier this year, Dialog reported (PDF) that it was expecting a reduced order for its power management wares from Apple due to the girls and boys from Cupertino "dual sourcing" the chippery.

It would appear that the second source will be Apple itself.

At the time, Dialog reckoned the change would shave 5 per cent off its revenues and said that if it wanted to stay as Apple's main power management silicon supplier, it would need to meet "Apple's technology, quality, price and volume expectations".

As far as this deal is concerned, Dialog said that it would not affect its gross margin and it expected to see a reduction in operating expenses of $35m once the deal closes, which is expected to be in the first half of 2019.

In August, Dialog reported (PDF) second quarter revenues of $296m, up 16 per cent on the previous year with operating profits of $26.2m, up 31 per cent on the same period last year. It updated its revenue outlook following this announcement, reckoning that the 2018 estimated $150m from Apple would see a CAGR of 30-35 per cent over the next four years. However, licensing, which should bring in $875m in 2018, will begin to decline in H2 2019 and peter out completely in 2022, when Dialog forecasts it will be phased out. ®