Broadcom Acquires Sand Video

Broadcom buys Sand Video, developer of advanced video compression semiconductor technology, for $70.1M in stock and $7.4M in cash

April 7, 2004

3 Min Read

IRVINE, Calif. -- Broadcom Corporation (Nasdaq: BRCM), a leading provider of highly-integrated semiconductor solutions enabling broadband communications, today announced that it has acquired Sand Video, Inc., a privately-held, Andover, Mass.-based company focused on the development of advanced video compression semiconductor technology for a broad range of consumer digital video applications. Advanced video compression technology substantially increases the capacity of digital video and audio consumer electronic devices, which will enable equipment manufacturers and service providers to offer more services and features at lower prices to the consumer.

Sand Video(TM) products support existing MPEG-2 compression standards as well as the emerging ITU-T H.264 standard, also known as advanced video coding (AVC), or MPEG-4 Part 10, and will be supporting Microsoft's Windows Media(R) 9 compression and decompression standards in the future. The combination of technologies and products from Broadcom and Sand Video will enable Broadcom's customers to bring to market next-generation video solutions for a range of products, including digital TVs, enhanced cable and satellite TV set-top boxes, personal video recorders (PVRs), high definition DVD recorders and players, Internet Protocol (IP) set-top boxes, and video conferencing, among others. With Sand Video's Compression Advantage(TM) multi-standard compression chip products, Broadcom will be uniquely positioned to provide these markets with complete solutions.

Video compression algorithm technology has moved forward dramatically over the past several years, culminating in new emerging compression standards such as AVC and Windows Media 9. These standards can provide an over 50% reduction in the bit rate required to transmit a video signal. This improvement in turn will allow a cable or satellite operator to provide more channels and consumers to record more movies on their PVR set-top boxes.

"With the demand for high definition (HD) and video-on-demand content accelerating rapidly, the industry is looking beyond the current MPEG-2 standard to advanced compression technology that will significantly reduce the bit rate required to transmit broadcast-quality video," said Daniel A. Marotta, Group Vice President of Broadcom's Broadband Communications Group. "The acquisition of Sand Video and its advanced technology will allow us to offer customers more complete solutions that support all of the major existing and emerging video compression formats and enable customers to bring their products to market more rapidly."

"Moreover, Sand Video has assembled a unique team with world class expertise in semiconductor-based advanced compression and image processing technology, and a proven ability to conceive and develop products employing these technologies for customers worldwide," Mr. Marotta continued. "They are a great complement to our existing global digital video team, adding both depth and breadth to what is already an outstanding resource for Broadcom."

"With its broad product portfolio and market access, Broadcom is the ideal complement for Sand Video's growing reach into the consumer video segment," said Peter Besen, President and CEO of Sand Video. "Combining Broadcom's outstanding design experience with Sand Video's advanced silicon compression technology will create highly integrated silicon solutions that fill the demand for next-generation, feature-rich consumer electronic devices."

In connection with the acquisition, Broadcom will pay a total of up to approximately $77.5 million - $70.1 million in the form of 1.666 million shares of its Class A common stock issued or reserved for future issuance (valued at the NASDAQ National Market closing price on April 6) and $7.4 million in cash consideration -- in exchange for all outstanding shares of Sand Video capital stock and upon exercise of outstanding employee stock options and other rights of Sand Video. The cash consideration will be subject to escrow pursuant to the terms of the acquisition agreement. Broadcom expects to record a one-time charge for purchased in-process research and development expenses related to the acquisition in its second fiscal quarter, ending June 30. The amount of that charge has not yet been determined. This transaction will not draw upon the S-3 or S-4 shelf registration statements that Broadcom filed with the Securities and Exchange Commission in February 2004.

Broadcom Corp.

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