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Touchscreen chipmaker Atmel Corporation (ATML - Analyst Report) concluded the Newport Media acquisition in a strategic endeavor to increase its footprint in the ‘Internet of Things’ (IoT) market.

The microcontroller and touch technology solutions leader acquired Newport Media, a maker of low-power Wi-Fi and bluetooth gear, for $140 million. The deal, announced in early July, is likely to be accretive to Atmel's non-GAAP financials in the second half of 2015. (For details, read: Atmel to Boost Internet of Things Market with Newport Media Buy)

With the transaction expected to be dilutive for a year or more, it seems that Atmel believes the opportunities for IoT-based revenues to be fairly long-term in nature.

The IoT Market

Atmel is aiming to capitalize on the anticipated growth in the semiconductors market, driven by growing demand for internet connectivity in everyday items. Integration of Newport Media’s solutions will enable Atmel to create the industry’s most comprehensive wireless portfolio of smart connected devices to cater to the wide spectrum of the IoT market.

The IoT concept foresees billions of connected devices and systems with applications ranging from sensors and mobile devices to home appliances and cars. According to Cisco Systems, about 50 billion devices would be connected by 2020, most via WiFi.

Consolidation in the Semiconductor Space

Atmel’s buyout of Newport Media was part of an industry-wide acquisition spree. Per data compiled by Bloomberg, transactions worth $11 billion were announced in the first half of 2014 in the North American semiconductor industry – the highest since 2011.

Additionally, investors have reacted positively to recent acquisitions in the semiconductor space, as indicated by the share price returns of the concerned parties. Shares of RF Micro Devices Inc. (RFMD - Snapshot Report) appreciated 21% on Feb 24, following the announcement of its merger with TriQuint Semiconductor Inc. (TQNT - Analyst Report), while the latter gained 26%. Similarly, Analog Devices, Inc. (ADI - Analyst Report), a maker of semiconductors for wireless-phone systems, rallied 5% on Jun 9, after announcing its decision to buy Hittite Microwave Corp.

Looking Ahead

In the maturing semiconductor industry, it seems that acquisitions are becoming the favored path to achieve growth and expansion. With the Newport Media acquisition, Atmel is conforming to the industry trends as it seeks to expand its capabilities in the wireless connectivity segment.

This Zacks Rank #3 (Hold) stock is set to report second-quarter 2014 financial results on Aug 6.

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