ADI-Maxim Deal: Where’s ADI Headed?

Where’s ADI headed? I would like to sneak inside the head of Vincent Roche and wander around its corridors. My quest is simply to figure out what is next on the agenda at Analog Devices where Roche is president and CEO. Analog Devices today announced it would pay $21 billion for Maxim Integrated in an all-stock transaction and many observers believe the transaction is a good move for the two.

Analysts reviewing the deal have been obsessing over details of the transaction.

Stop.

Instead, focus on what Analog Devices plans to do next and why.

Askː What is the longer-term plan Roche and ADI’s board of directors have for the company? As president since 2012 and CEO since 2013, Roche should know. He was the architect of the company’s biggest acquisition till date, that of the $15.8 billion purchase of Linear Technology in 2017.

By next summer, ADI expects to conclude the Maxim acquisition. Which brings me back to the question; What is the grand plan here? My passion is putting together plausible answers for such riddles. I have done some homework and will assemble a clearer picture soon. For now, let us say thisː ADI is hungry for the analog crown. It is also haunted by the fear of losing what it currently has and becoming irrelevant in a fast-changing market.

There is no fear currently of that happening but standing still is also not an option. So, ADI will likely make more acquisitions, some of them small, tack-on deals but it will eventually — I predict in the next 2 years — make another humongous transaction. Because it must.

If you are a supplier to ADI, a distributor serving the company, a direct competitor, a player in an adjacent market, an investor or shareholder or a financial analyst, I suggest thisː stop looking in the rearview mirror. (Full disclosureː Aspencore, publisher of EE Times is owned by Arrow Electronics, a major partner of Analog Devices.)

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The Maxim deal is already history. Regulators may delay its closing and some outside the United States may even try to scuttle it. But it will eventually get approved because the reasons for attacking it will quickly be shown to be untenable.

ADI will conduct a well-executed integration of Maxim. It has the expertise in-house and they have some experience doing this. The company is already at work on the integration, reaching out to ADI’s and Maxim’s customers, suppliers, and investors. They are assuring employees, determining new roles for key staffers, assessing facilities, including production, and packaging sites, and reviewing cost-saving opportunities to gain the promised synergies.

This is not work for people at Roche’s level. His task is to keep a tab on what is going on and make sure the integration is on target. In the meantime, he is moving on to the next item on the company’s bigger, broader, and more comprehensive plan. Like in the case of Linear Technology, the Maxim deal is merely a target, something to be added to the kitty on the road to ADI’s real objective. Both Linear and Maxim are the building blocks but what is ADI constructing?

You would have missed the big picture if you focused on the list of short-term objectives ADI and Maxim put out today – the ones about cost-reductions of $275 million, capitalization on new growth opportunities, delivering of innovative solutions, the increased diversification of offerings, enhanced breadth of engineering capabilities, and so on. You would have lost the chance to be a better, more useful partner, investment analyst or competitor.

Now, where is that portal to Mr. Roche’s head?

— Bolaji Ojo is an independent writer focused on business/financial analysis in the electronics industry. Formerly the group publisher of AspenCore Media, he now contributes to EE Times.

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