Storage chip manufacturer LSI Logic has agreed to buy fellow chip maker C-Cube Microsystems, which specialises in chips for digital video devices, LSI Logic announced last week.
Gaining C-Cube's products for compressing, transmitting and decompressing digital video will help LSI Logic strengthen its presence in the chip market for digital-video devices and broadband communications systems, executives from the companies said.
By acquiring C-Cube, LSI Logic also increases the geographic diversification of its revenue stream, said Umesh Padval, C-Cube president and CEO. For example, in fiscal year 2000, about 60 per cent of LSI Logic's revenue came from North America, while C-Cube generated only 13 per cent from that market. But C-Cube got almost half of its revenue from the Asia-Pacific region, while LSI Logic only attained 14 per cent of its revenue from this region.
The stock-for-stock transaction is valued at approximately $US878 million and calls for each outstanding share of C-Cube common stock to be exchanged for 0.79 per cent of a share of LSI Logic's common stock. LSI Logic expects to complete the transaction before June 30.
"This acquisition provides LSI Logic with all of the capabilities to drive the convergence of communications and broadband entertainment. C-Cube will further strengthen our position in high-growth global markets . . . and [the acquisition] brings us important new customers and distribution channels," said Wilfred Corrigan, LSI Logic's chairman and chief executive officer.
C-Cube and LSI Logic have complementary product lines "with only minimal overlaps" that will allow LSI Logic to offer a broad variety of chips and related products for devices used to provide digital video to homes, Corrigan said.
LSI Logic makes both standard and custom-designed chips for storage and communications systems, such as data networking products. Some of its biggest clients are Cisco Systems and Sun Microsystems. It had revenue of $US2.74 billion in 2000, a 31 per cent increase over 1999.