Micrel Corp. [MCRL] has been generating a lot of interest, and not just from activist hedge fund and shareholder Obrem Capital Management LLC, which has called for the analog chipmaker to sell itself.

One chip industry analyst says ON Semiconductor Corp. [ONNN] executives approached Micrel to discuss buying it, citing an inside source at ON Semi. The analyst also heard, though through less direct channels, that Intersil Corp. [ISIL] and Analog Devices Inc. [ADI] had similarly approached Micrel.

In all cases, the would-be suitors failed for one major reason: They were rebuffed by Micrel founder, chairman and CEO Raymond Zinn.

"ON Semi approached Micrel because they like the product mesh, the technology and the customers, but management gave them the finger," the analyst said. "Ray has always been very confident about his business, despite what the stock market has been telling him."

While ON Semi did not make actual offer for Micrel, the analyst said, "It was serious, not just 'Let's go do drinks'."

Micrel's stubborness is hardly surprising. Many midsized companies in the semiconductor sector are still run by their founders, who as usual feel a strong attachment to them. That means Obrem, which owns around 15% of the company and is backing a slate of directors for the chipmaker's board, faces an uphill battle. Zinn's love for his company is one issue, as is the fact that he and co-founder Warren Muller together own nearly 30% of the company.

The hedge fund earlier had called for Micrel to sell itself, but was rejected. After Obrem put forth its board nominees, Micrel brushed off the investor, calling Obrem uninformed and self-interested. But the company also set a special shareholder meeting for May 20, at which investors will vote on the makeup of Micrel's board.

A Micrel spokeswoman declined comment. A call to Micrel chief financial officer Richard Crowley was not immediately returned.

For 2007, Micrel reported revenues of $258 million, compared with $276.3 million in 2006. Net income last year totaled $9.4 million, compared with $10.5 million in the previous year. Shares of the Silicon Valley company are off of their year-high of $13.98, reached last July.

Shares of Micrel declined less than 1%, to close Wednesday at $9.09.  -- Olaf de Senerpont Domis

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