Semiconductor manufacturer LSI Logic said Monday it would acquire Agere Systems, creating a combined chip-making company with enough scale to compete for greater market share in segments including hard disks and digital media players.

LSI, of Milipitas, Calif., will trade stock worth US$4 billion for Agere, of Allentown, Pa. The move will double LSI’s size to 9,100 employees and an estimated $3.5 billion in annual revenue.

LSI hopes to use the deal to extend its market in storage and consumer electronics by adding Agere’s expertise in storage, mobility and networking, according to a statement by Abhi Talwalkar, president and chief executive of LSI. Agere’s top 10 customers are Apple, Cisco, Hitachi, Lucent, Maxtor, NEC, Nokia, Samsung, Seagate and Toshiba, the company’s website said.

The two companies will also be more streamlined, saving $125 million per year starting in 2008 through "increased efficiencies in manufacturing and operating expenses." The companies did not say whether that plan includes layoffs.

LSI expects the transaction to close in the first quarter of 2007, pending approval by regulators and by the shareholders of both companies.

-Ben Ames, IDG News Service (Boston Bureau)

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