Entropic Communications Inc. (Nasdaq: ENTR) has reached a deal to acquire RF Magic Inc. , a merger of two young companies focused on "connected home entertainment" technologies.

The closely held firms declined to divulge the financial terms of the agreement, but the resulting company will retain the Entropic name. Patrick Henry, Entropic's president and CEO, is set to become CEO of the merged entity. Mark Foley, RF Magic's president and CEO, will be appointed president and COO of Entropic once the deal is closed sometime in June.

Although Entropic and RF Magic both build silicon and products designed to connect "islands of entertainment" in consumer homes, they say their respective portfolios are completely complementary.

Entropic, a chip developer, is a founding member of the Multimedia over Coax Alliance (MoCA) , the group behind a next-gen home networking platform that pipes video, including high-definition video, and other digital content over home coax at speeds up to 270 Mbit/s. Although Comcast Corp. (Nasdaq: CMCSA, CMCSK) and EchoStar Satellite LLC are among MoCA's founders, Verizon Communications Inc. (NYSE: VZ) is the leading early adopter of the technology, using it for multi-room digital video recorders and other media-sharing applications.

Entropic's c.LINK silicon is also used as a high-speed access technology. Jupiter Telecommunications Co. Ltd. (J:COM) of Japan, for example, uses it to deliver symmetrical 100-Mbit/s Internet services to apartment buildings. Entropic says it has shipped more than 5 million chipsets so far.

RF Magic, which has shipped more than 20 million integrated circuits since its founding in 2000, specializes in tuners for satellite, cable and terrestrial TV, channel stacking switches (CSSs), and WiMax silicon. Its CSS technology allows satellite TV providers to enable watch-and-record DVR capabilities using a single cable. On the WiMax front, it has built an 802.16b chipset and is considering an "e" version for mobile WiMax transceivers.

"We can become a more diversified semiconductor company with very little [overlap] in product. It will give us the [ability] to address multiple opportunities in the market for connected home entertainment," Henry says.

He adds that the marriage also fits with Entropic's pending acquisition of high-performance packet processing specialist Arabella Software. That deal is expected to close later this month.

While the merged company will find itself facing off with larger chipmakers, including Broadcom Corp. (Nasdaq: BRCM) and Intel Corp. (Nasdaq: INTC), it will also serve as a technology partner to others. RF Magic, for example, has connected with STMicroelectronics NV (NYSE: STM) on the development of a front-end set-top system.

Henry declined to discuss the profitability picture for Entropic and RF Magic. "You will hear more about that in the coming year," he says. But he doesn't expect the combined company to require additional financing in the foreseeable future. In three rounds of financing, Entropic and RF Magic have raised $81 million and $43 million, respectively.

Together, Entropic and RF Magic have about 200 employees. Among other personnel moves expected at closing: Dr. Itzhak Gurantz, an Entropic founder and RF Magic board member, will become chief technology officer; Dale Hancock, RF Magic's CTO, will become vice president of RF technology; and Dr. Anton Monk, Entropic's current CTO, will be appointed vice president of communications technology.

— Jeff Baumgartner, Site Editor, Cable Digital News