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Virage Logic Corporation (VIRL) hit a new 52-week high on Tuesday after the Company announced a strategic agreement with NXP Semiconductors that will broaden its semiconductor IP portfolio. The agreement calls for the transfer of a part of NXP's advanced CMOS intellectual property rights and certain engineering talent and equipment to Virage Logic. This arrangement includes a long-term licensing and IP development relationship between the two companies. Virage Logic will establish an R&D center providing on-going support to NXP and developing new products based on the acquired advanced CMOS I/O, analog mixed signal and System-on-Chip (SoC) infrastructure IP.
This strategic alliance underscores the semiconductor industry's continuing trend for companies to focus on their core competencies while outsourcing non-differentiating elements of their business.
Under the terms of the multi-year agreement, NXP will transfer over 160 employees and the assets associated with selected advanced CMOS libraries, IP blocks and SoC architecture along with other classes of semiconductor IP, including approximately 25 associated patent families. In consideration for the assets, NXP will receive 2.5 million shares of Virage Logic common stock, which will be subject to transfer restrictions, and a share of the future revenue generated by Virage Logic from licensing the transferred IP portfolio. In addition, Virage Logic will provide to NXP services surrounding the transferred IP for a 3.5-year period, and NXP will receive a 3.5 year license to Virage Logic's extensive standard-products semiconductor IP portfolio for all future SoC designs. In consideration for the services and the license of the Virage Logic IP portfolio, NXP will pay Virage Logic $60 million over four years from the closing of the transaction.
Dan McCranie, Chairman for Virage Logic, commented in a conference call late Tuesday, "This agreement, in addition to other recent acquisitions, will result in a major 'moving of the needle' for us. In addition to our organic growth, these recent transactions will allow us to double quarterly revenue within four quarters. We should be running at a $100 million run rate within that time frame. That is the type of top line that we need to be able to fund R&D and demand creation efforts aggressively and expansively in order to exploit the significant changes going on in the semiconductor space relative to disaggregation of IP."
He noted, "Our product portfolio has increased by four-fold with the acquisitions completed over the last few years. We are well on our way to being able to provide every important element used by the semiconductor SoC designers."
Mr. McCranie explained, "The long term services and IP development relationship with NXP enables the two companies to come to market faster with completely interconnected semiconductor process, architecture design and IP. It can now be done faster than traditional arm's length arrangements."
He concluded, "We believe we have fundamentally changed Virage Logic. The industry is changing, and the efforts that we have made over the past several years position us well. You are going to see the results of these changes from a financial standpoint very quickly, beginning this quarter."
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