Avago To Acquire Emulex

Avago Technologies has announced it is acquiring publicly traded Emulex for $8/share, in an all cash transaction topping $606 million. Avago has been busy the last year or so, buying LSI in December 2013 for $6.6 billion, before selling off LSI's storage business to Seagate in May of last year for $450 million. The combination of Emulex's interconnect solutions and Avago's existing storage adapters and fiber optics make for a broad solutions portfolio. Emulex is expected to operate as a business within Avago's enterprise storage segment.

"Emulex's connectivity business fits very well with Avago's existing portfolio serving the enterprise storage end market," stated Hock Tan, President and Chief Executive Officer of Avago. "We are excited to welcome the Emulex team to Avago." "This combination represents a great opportunity for Emulex and its employees to build upon our history of delivering leading-edge solutions to our customers, while providing immediate value to our stockholders," said Jeffrey Benck, President and Chief Executive Officer of Emulex. "Our leading portfolio is a strong complement to Avago's offerings and capabilities, accelerating our strategy to support next generation server and storage architectures."

The transaction is subject to customary closing conditions but is expected to close in the second half of Avago's fiscal year ending November 1, 2015.

How much does Apple company influences Engineer's take home pay check?

Apple company has always pay their employees well but how about the engineers from their supplier? If you don't get the chance to work in Apple, would you still be rewarded well for working with them as their supplier?

Indeed, it's does pay well if you work as their supplier, provided your company include stock option plan(SOP) as part of your total annual compensation. A lot of companies include SOP or restricted stock unit(RSU) as part of their employees total annual compensation.

Let's us take a look at Avago.

Ever since Avago get to a piece of RF chip business in Iphone6, their stock price increase exponentially. And the bull has no sign of stopping. 

Let's take an example of a senior engineer who just joined Avago 2 years ago and was given 2000 SOP at the starting of year 2013. And he was given another 2000 SOP at his 2013 year end performance review. So at Q1 2015, he would have total of 1500 SOP vested(25% of SOP vested every year). Based on the Avago stock price, how much he would earn?

If we assume the exercising price of SOP is $30, then each SOP will bring him around $80 of profit. Total 1500 of SOP will bring him $120,000. If we convert this to Ringgit, it would be staggering RM432,000 comparing to average annual income of RM80,000 that a senior engineer earned in Malaysia. And this is what's happening in Avago Malaysia right now!

Let's change the focus to manager. If a manager in Avago Malaysia is given 7000 SOP yearly starting year 2013 for easy calculation, how much would he take back home in Q1 2014?

Based on 25% of SOP vested yearly, he would have total 5625 SOP which amount to $450,000! This is around RM1.6 Million! Instant Millionaire!!!!  And he still going to have at least 5625 SOP vested for the next few years, this is crazy, isn't it?  

So the conclusion is that it is still rewarding to work as supplier for Apple if you don't get to work in Apple company, provided you join at the right timing. And it really show you how influence Apple is in impacting the take home paycheck for engineer from other company.