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Chips and Tech Tapped Intel spends $420M to gain stake in graphics By Margaret Ryan, EE Times Santa Clara, Calif. -- Backing its promise to become the leading force in PC graphics with action, Intel Corp. last week offered $420 million for Chips and Technologies Inc., the leading vendor of notebook-graphics accelerator chips. The acquisition strengthens Intel's hand in defining notebook computers. It also provides immediate entry into the portable graphics market--where Chips did $168 million last year--as well as the 2-D and video technology Intel needs to compete in the desktop space. The merger also gives Intel design, support and sales clout to back up its plan to push desktop 3-D graphics later this year. Under the deal, Intel will begin a tender offer for all outstanding Chips and Technologies shares at $17.50 each. If the deal is approved, Chips would become a wholly owned Intel subsidiary, part of its graphics-components division. In an interview with EE Times, Pat Gelsinger, senior vice president and general manager of Intel's desktop-products group, called the Chips acquisition a way "to make sure that Intel can deliver on the promises" it made for visual computing. At Visual Computing Day in March, it laid out its plans for that platform, including bringing the full range of graphics, video and imaging to both desktop and mobile customers. He also described the mobile-computing market as increasingly important for Intel, one that is becoming "a larger percentage" of the chip giant's business. Intel did not have a graphics effort for mobile computers before this acquisition, but was working on desktop graphics. In April 1996, Intel began jointly developing a 3-D graphics accelerator for desktop PCs and workstations with Chips and Technologies and Lockheed Martin Inc.'s (Orlando, Fla.) Real3D. The Intel 740, as the accelerator is known, will connect to the accelerated graphics port (AGP) on Intel's next-generation Pentium II core logic. It will combine scaled-down Real3D graphics hardware with 2-D acceleration from Chips and Technologies. Replying to speculation that buying Chips is a sign that Intel has had to delay its 740 for lack of engineering resources, Gelsinger said the accelerator is "on schedule to meet the original goal of being in production in the second half of 1997." Meanwhile, he said Chips is going ahead with plans to develop a mobile AGP product. "It boils down to a question of Intel saying, 'If you guys [in the graphics business] can't do it, we'll do it for you,'" said Dan Kleskin, semiconductor analyst with the investment bank Robertson, Stephens & Co. (San Francisco). "Intel's major focus through this acquisition and a lot of other things it's done through investments is to enable markets." That approach got Intel into the motherboard and core-logic business a few years ago, Kleskin said. To keep PC demand healthy, Intel has to keep PC technology advancing, and it will take the reins itself to ensure "that it is done with enough muscle behind it," he said. John N. Latta, president of 4th Wave Inc. (Alexandria, Va.), a technology consulting firm that covers 3-D, virtual reality and multimedia, said the acquisition puts Intel in a strong position to compete with all other major graphics-card companies: S3 Inc., ATI Technologies Inc., Matrox, Cirrus Logic Inc. and others. "The combination of 3-D technology from Lockheed Martin and [Chips and Technologies] strengths makes Intel immediately a major force in the market," said Latta. Geoff Ballew of Dataquest said that with the acquisition of Chips, "Intel's likelihood of succeeding in the graphics market just went up a couple of points." --Additional reporting by Craig Matsumoto and Rick Boyd-Merritt. (Next article.)
[This article comes from EE Times in a joint cooperative effort with the Motley Fool. For more articles like it, please look at Fool's Gold every weekend or simply go to the Fool's Gold Mine and page through our back issues, which all have clever and cool EE Times articles in them.]
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