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Intel to buy graphics chip leader

The company agrees to buy Chips and Technologies, instantly becoming a major player in the graphics chip market.

Brooke Crothers Former CNET contributor
Brooke Crothers writes about mobile computer systems, including laptops, tablets, smartphones: how they define the computing experience and the hardware that makes them tick. He has served as an editor at large at CNET News and a contributing reporter to The New York Times' Bits and Technology sections. His interest in things small began when living in Tokyo in a very small apartment for a very long time.
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Brooke Crothers
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Intel (INTC) has reached an agreement to purchase Chips and Technologies, a buyout that will instantly make the company one of the largest suppliers of graphics processors, an increasingly important chip market where Intel has been virtually absent.

C&T is one of the leading manufacturers of graphics chips for notebook PCs. Intel, C&T, and Real3D, a Lockheed Martin company, have also been doing joint development work on Intel's upcoming Intel740 graphics chip for desktop PCs and workstations.

"The acquisition is aimed at advancing capabilities for graphics and visual computing in mobile personal computers," Intel said in a prepared statement today.

Intel has been virtually absent from the graphics chip market, one of the main chips in a PC that controls the processing of the images that users see on their computer screens. Entry to this market would make Intel a major player in one of the last remaining chip markets it has yet to dominate.

Other major players include Cirrus Logic, ATI Technologies, S3, and Trident Microsystems.

According to the agreement, Intel will commence a cash tender offer in the near future for all outstanding C&T shares at a price of $17.50 per share.

In addition, the terms provide for a merger of C&T with a subsidiary of Intel. The transaction is subject to regulatory approval and other conditions.

"Intel and Chips and Technologies already share an excellent working relationship based on our joint efforts in graphics accelerators. Intel's acquisition of Chips and Technologies will provide us with the ability to bring strong graphics solutions to the mobile market segment," said Craig R. Barrett, Intel's president and chief operating officer, in a statement today.

The Intel release added: "Current Chips and Technologies employees will become employees of Intel. Intel does not anticipate any immediate changes to Chips and Technologies' product line, and Chips and Technologies will continue to manufacture and provide its products to customers under existing arrangements for the foreseeable future."

C&T reported sales of $37.9 million and net income of $8.7 million, or 38 cents per share, for the fiscal quarter ending June 30, according to a July 17 release from the graphics chip maker.

Revenues for the quarter ended June 30 were down 2 percent from $38.8 million in the year-ago quarter. They were flat with $37.8 million in the third fiscal quarter, which ended March, 31, C&T said in the July 17 release.

Operating income of $4.4 million for the June quarter decreased 26 percent, compared with $6.0 million posted in the year-ago quarter, and was down 8 percent from $4.8 million reported in the previous quarter. Net income for the quarter ended June 30 increased 47.4 percent compared to $5.9 million, or 27 cents per share, posted in the year-ago quarter, and increased 6.4 percent from $8.2 million, or 35 cents per share in the prior quarter, according to the release.

(Intel is an investor in CNET: The Computer Network.)