Atheros Ups Guidance, Buys ITLN

Atheros Communications Inc. (ATHR) recently updated its guidance for the third quarter. The company now expects revenues between $145 million and $150 million, up 29%–30% sequentially and up from the earlier projection of revenues between $129.0 million and $134.6 million.

EPS (excluding one-time charges) is projected between 35 cents and 39 cents compared to the previous guidance between 29 cents and 31 cents.

California-based Atheros Communications is a leader in the designing of chipsets used in WLAN devices.

Atheros also announced that it will acquire Intellon Corporation (ITLN) in a stock and cash transaction valued at approximately $244 million or $181 million net of cash and equivalents. Atheros expects to close this transaction by the fourth quarter of 2009.

Headquartered in Orlando, FL, Intellon Corporation designs, develops and markets integrated circuits (ICs) on a global basis for powerline communications or high-speed communications over the existing electrical wiring.

Atheros stated that it will pay for approximately 45% to 55% of the acquisition in stock and the rest in cash. The transaction values Intellon shares at $7.30 each. The shareholders of Intellon have three options: 1) to receive approximately 0.135 shares of Atheros common stock and approximately $3.60 in cash, 2) $7.30 in cash, or 3) approximately 0.267 shares of Atheros common stock for each share of Intellon common stock.

Atheros plans to issue approximately 4.2–5.1 million shares in connection with the acquisition and pay approximately $115–$141 million in cash, depending on what the shareholders of Intellon agree upon.

Management expects that by combining Atheros’ wireless LAN and Ethernet products with Intellon’s market-leading powerline communications products, the company will become a leader in providing networking solutions throughout the digital home.

Atheros is among the smaller U.S. publicly traded companies in the WLAN space and expects to diversify its product portfolio through this acquisition. The transaction is estimated to be accretive to EPS in the first half of 2010.

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