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Leading semiconductor manufacturer Altera Corp. (ALTR - Analyst Report) recently decided to acquire TPACK, a wholly-owned subsidiary of Applied Micro Circuits Corp. (AMCC - Analyst Report), for an undisclosed amount. The strategic move is aimed at strengthening Altera’s position in the OTN (optical transport network) equipment market that is anticipated to reach $13 billion by 2017, according to research firm Infonetics.

TPACK develops OTN solutions for packet and optical networking equipment suppliers. The company has a long-term business association with Altera since 2007 relating to joint marketing and product development initiatives. The acquisition further builds on their business ties and leverages Altera's 2010 purchase of Avalon Microelectronics, a leading OTN IP provider, to provide customers with flexible, scalable solutions in a dynamic market characterized by changing protocols and evolving standards.  

On the other hand, the divestiture by Applied Micro is likely to increase its liquidity as high operating expenses, driven by a nearly three-fold increase in research and development expenditure, led to a significantly high operating loss of $73.2 million in the third quarter of fiscal 2013 (ending Dec 31, 2012).

Headquartered in Sunnyvale, CA, Applied Micro is a premier provider of high-bandwidth low power integrated circuits (ICs), which are essential for the processing, transporting and storing of information. The company provides semiconductor solutions for the enterprise, telecom and consumer/small medium business.

For the telecom and enterprise market, Applied Micro primarily utilizes a combination of design expertise coupled with system-level knowledge and multiple technologies to offer IC products for wireline and wireless communications equipment, such as wireless access points, wireless base stations, multi-function printers, enterprise and edge switches, blade servers, storage systems, gateways, core switches, routers, metro, long-haul, and ultra-long-haul transport platforms.

For the consumer/small medium business, Applied Micro combines optimized software and system-level expertise with highly integrated semiconductors to deliver comprehensive reference designs and stand-alone semiconductor solutions for wireline and wireless communications equipment, such as wireless access points, network attached storage, and residential and smart energy gateways.

Applied Micro presently has a Zacks Rank #3 (Hold). Other companies in the industry that are comparatively better-placed include Lattice Semiconductor Corporation (LSCC - Snapshot Report) and Rambus Inc. (RMBS - Snapshot Report), each carrying a Zacks Rank #1 (Strong Buy).

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