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Broadcom Tunes Up DTV Strategy

Jeff Baumgartner

Chip giant Broadcom Corp. (Nasdaq: BRCM) is putting up $192.8 million in cash to snap up the digital television business of Advanced Micro Devices Inc. (NYSE: AMD), a move that would let Broadcom flesh out a portfolio of processors for low-, mid-, and high-end panels. (See Broadcom Buys AMD's DTV Unit.)

Under the proposed deal, 530 employees from AMD's DTV team are "invited" to join Broadcom. Roughly 90 percent of those are presently in engineering, according to Daniel Marotta, SVP and GM of Broadcom's Broadband Communications Group, who outlined the deal in a conference call Monday morning.

He declined to say how many employees are in Broadcom's own DTV business but noted that they are part of a "matrix team" that works on chips for DVDs, set-tops, and other MPEG-related products.

Broadcom would get not only AMD's processors, such as the Xilleon line, but also reference designs, receivers, and all of AMD's DTV patents and patent applications. The panel processor line will include some new 120 Hertz technology, referring to a faster screen refresh rate.

The deal will also complement Broadcom's other DTV efforts, including work aimed at high-end models using the tru2way platform. (See Sony Supports tru2way and Revealed: The Tru2way MOU.)

Broadcom expects to close the deal sometime in the fourth quarter.

From a competitive standpoint, Broadcom hopes the combination will give it a leg up on the DTV front against the likes of Micronas GmbH , NXP Semiconductors N.V. (Nasdaq: NXPI), STMicroelectronics NV (NYSE: STM), and Zoran Corp. (Nasdaq: ZRAN).

Not specifically discussed was AMD's involvement with the CableCARD, a removable security module that was central to a Federal Communications Commission (FCC) set-top ban that went into effect last July. AMD got into CableCARD through the 2006 acquisition of ATI. (See Countdown to 'Seven-Oh-Seven', CableCARD Update IV , CableCARD Six-Pack , and Cable Developing Two-Way PCTV Play .)

Marotta acknowledged that AMD's DTV business has been operating at a loss, though revenues there are expected to jump 50 percent during the second half of the year (compared with the first half), based on AMD winning back some undisclosed Tier 1 customer.

Broadcom expects the acquisition to reach breakeven by the fourth quarter of 2009.

AMD president and CEO Dirk Meyer said the sale was a step toward helping his company become "leaner and more focused while seeking to create a business model to deliver sustainable profitability." In July, AMD posted a second quarter net loss of $1.189 billion, or $1.96 per share, while revenues dipped 7 percent, to $1.349 billion.

— Jeff Baumgartner, Site Editor, Cable Digital News

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