Handicapping the field of possible MIPS suitors

Handicapping the field of possible MIPS suitors

NEW YORK--Correct us if we’re wrong, but many readers may be writing off MIPS Technologies way too soon.

The fate of MIPS is shaping up as one of the industry’s biggest stories in 2012. The company’s potential sale would have a significant impact on its storied processor IP line, MIPS customers, potential suitors who would either gain access to the processor IP or lose access and, of course, the current MIPS work force.

MIPS has not commented on speculation about a possible sale, and we’ve been unable to confirm that it has retained an investment banker to represent it (the rumor mill says it’s Goldman Sachs). Nevertheless, the question of who might buy MIPS is unavoidable and should be debated considering the broader implications of such a deal.

For one thing, there are enough chip companies -- including Broadcom, Sigma Design, Cavium Networks and others -- whose SoC roadmaps are dependent on MIPS cores. The outlook for MIPS licensees is as muddled as the future of MIPS. Switching to new cores is tricky since it requires an extensive rework of the internal software infrastructure. As one EE Times reader noted: “Current-day SoCs need a fast turnaround time, and the time needed to rework the software / debug with a new processor IP is just not there.”

But some argue that the transition might not be all that traumatic. Gary Mobley, senior research analyst at The Benchmark Co., wrote in his recent research note that “there is evidence that many of MIPS’ long-time licensees such as Sigma Designs and MStar have started to migrate toward ARM cores.”

No doubt there will be plenty of speculation about the biggest losers in a MIPS acquisition. But it will be even more important to examine who gains the most by acquiring or merging with MIPS.

To close a deal, seller and buyer must first agree on the sale price. MIPS, which has reportedly been shopped around for the last decade, the question of price is a moving target. In assessing the value of MIPS, Mobley wrote that “the wild card is MIPS patents.” He believes MIPS’ patents, “at a minimum,” could be “worth $100 million.” Mobley estimates the liquidation value for MIPS at about $5 per share “based on our best estimate for the present value of the company’s royalty stream, plus cash and certain assets, minus balance sheet and off-balance sheet liabilities.

MIPS understands how to play this game.



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