Comms chips

Entropic Buys Hi-Def Specialist

Entropic Communications Inc. (Nasdaq: ENTR), a chipmaker that has cut its teeth on Multimedia over Coax Alliance (MoCA) technology, is expanding into the world of high-definition multimedia interface (HDMI) products after paying just $5.9 million in cash for Vativ Technologies Inc. , a closely held firm that has raised more than $37 million.

Entropic will pick up the assets of the San Diego-based company and hire 17 Vativ employees, including 15 engineers. Entropic said it will also assume about $1 million of liabilities and place a portion of the $5.9 million purchase price in an escrow fund "to satisfy potential indemnification claims." (See Entropic Buys Vativ.)

Vativ, a fabless semiconductor company founded in June 2001 as Myrica Networks Inc., specializes in high-bandwidth digital signal processing technology. Its product line features HDMI chips and receivers, as well as 10 Gigabit Ethernet and WAN access products.

It has also developed a digital signal processing (DSP)-based adaptive equalization capability designed to deliver solid signal recovery. Entropic said Vativ's DSP technology will be useful in the digital TV market.

Entropic, which supplies chipsets for multi-room DVRs and other devices designed to shuttle high-def signals around homes using already-installed coaxial cable, said Vativ's assets would fit with Entropic's "focus on connected home entertainment." (See Entropic Ships MoCA 1.1.)

Entropic did not say how it expects to integrate Vativ's technology portfolio, but HDMI is becoming a popular conduit for in-home, hi-definition signals in digital TVs and set-top boxes. According to In-Stat , the HDMI device market is set to grow from 80 million units shipped in 2006 to an estimated 485 million in 2011.

"This acquisition represents part of our corporate strategy to address adjacent market opportunities within the large and rapidly growing markets for HD video and connected home entertainment," said Entropic chairman and CEO Patrick Henry, in a statement. Entropic officials were not immediately available for further comment.

Near-term, Entropic expects the deal to be neutral to earnings and accretive within two quarters, based on expected revenue growth.

Entropic, which went public in 2007, has been using acquisitions to expand its portfolio well beyond MoCA and broadband access chipsets specialized for multi-dwelling unit (MDU) environments. Last year it acquired RF Magic Inc., a company that makes tuners for satellite, cable, and terrestrial TV, and silicon for WiMax. (See Entropic Wires Up an IPO and Presto! Entropic to Merge With RF Magic.)

Entropic shares were up 5 cents (1.15%), to $4.38 each, in early trading Friday.

— Jeff Baumgartner, Site Editor, Cable Digital News

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