Macom Technology Solutions Holdings Inc. said Monday it would buy Applied Micro Circuits Corp. for $688 million, becoming the latest company to expand into the growing cloud computing business.

Applied Micro makes connectivity and computing solutions for cloud infrastructure providers and data centers, while Macom makes analog radio-frequency, microwave, millimeterwave and photonic semiconductor products.

The deal values Applied Micro at about $8.36 per share, including $3.25 in cash and 0.1089 in Macom shares, which closed at $46.95 Friday. The deal is a 15% premium over Applied Micro's closing price of $7.25 on Friday. Shares of Applied rose 12% to $8.15, as Macom shares fell 4% to $45 in early afternoon trading.

The deal provides new products for Macom's inventory and expands its customer base from telecommunications and defense customers to also include cloud-service and enterprise-networking providers.

Companies have been shifting more of their computing operations off site and into cloud-computing centers run by specialized units.

Macom said it intends to divest Applied Micro's so-called compute business and that there are several potential buyers. The transaction is expected to add to Macom's earnings, excluding the divested business.

Oracle also said Monday it would expand its cloud offering by buying web-service provider Dyn.

Write to Austen Hufford at austen.hufford@wsj.com

(END) Dow Jones Newswires

November 21, 2016 14:05 ET (19:05 GMT)

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