I'm not sure what investors were expecting here. With biochip maker Illumina (NASDAQ:ILMN) hitting 52-week highs recently, it seemed inevitable that the company would do a secondary offering to grab some cash -- about $300 million, as it turns out.

Still, investors seem worried about what the company will do with that cash. They've sent the stock down more than 5% since the company announced that it would sell an additional 3.5 million shares. That will increase its outstanding shares by 7.1% if the 525,000 share overallotment is also sold, so this is definitely no small offering.

The $300 million question: What will Illumina do with the money? The offering's prospectus says that the company plans to use the cash to increase research and development, manufacturing capacity, or maybe make an acquisition or two. While Illumina claims that it doesn't have any company in mind, I'd bet that Illumina will spend the bulk of its newfound cash on an acquisition.

Illumina has been killing Affymetrix (NASDAQ:AFFX) in the battle of the biochip makers, and its sequencing division has also been raking in the revenue recently. Just like in biotech, it's all about who's got the next big thing -- in this case, providing tools to drug developers. But Illumina is about to have a larger, more formidable competitor for its sequencing division; Invitrogen (NASDAQ:IVGN) announced in June that it will buy Applied Biosystems (NYSE:ABI).

The other option for Illumina is to follow through on its plan to push into diagnostic tests. That could mean buying up a small CLIA-certified laboratory similar to Affymetrix's, or picking up a company like deCODE genetics (NASDAQ:DCGN), which is already using Illumina's systems to do genome-wide tests, or Google- and Genentech-backed (NYSE:DNA) 23andMe.

Ironically, if the company does absolutely nothing with the money, the offering could boost its earnings per share just a bit, according to one analyst.

Whatever Illumina decides to do with the cash, I don't think investors should be too worried. As the recent growth in earnings suggest, management knows what it's doing.

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Fool contributor Brian Orelli, Ph.D., doesn't own shares of any company mentioned in this article. The Fool has a disclosure policy.