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Will a bigger fish swallow chip designer XStream Logic?

Network-processor designers have been snapped up at a furious clip recently, and the Silicon Valley start-up could be next.

Network-processor designers have been snapped up at a furious clip recently, and Silicon Valley start-up XStream Logic could be next, analysts say.

Gartner analyst Joseph Byrne says it's still up in the air whether network processing units can live up to their promise of flexibility and speed in the long run.

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Los Gatos, Calif.-based XStream is one of the few notable independent companies left that specialize in network processors--chips specifically designed to manipulate data as it travels along a computer network. Several other network-processor makers have been bought this year, most recently SiByte, which was acquired for more than $2 billion by Broadcom earlier this month.

Analysts see promise in an XStream network processor design that could potentially condense the functionality of a series of chips into one. However, they also doubt that XStream, which targets only a part of the market, will go it alone.

"They are offering a piece of puzzle," Dataquest analyst Joseph Byrne said. "There has been a trend among companies to offer a more complete solution."

In the last 12 months, Conexant Systems bought Maker Communications, Motorola purchased C-Port, Lucent Technologies bought Agere, Vitesse Semiconductor bought Sitera, and PMC-Sierra scooped up Quantum Effect Devices.

In addition, Intel, IBM and MMC Networks also offer network processors.

The trend makes XStream a likely candidate for acquisition. However, Byrne said it is also possible XStream could partner with a larger company without being acquired.

Israeli start-up EZchip, for example, is one of the few other remaining independents. At the beginning of the month, IBM announced that it had taken a 5 percent stake in EZchip and that it will manufacture chips for the start-up, which is majority owned by publicly traded LanOptics.

While acknowledging there are lots of competitors out there, XStream executives said their chips will take aim at a different part of the market than the others. Most of the companies target the lower layers of the network, executives said, but its chips are designed to process packets at higher layers at speeds of up to 10 gigabits per second.

The company unveiled its architecture last month at the Microprocessor Forum chip conference in San Jose, Calif., but XStream has yet to announce any specific products or customers.

Most competitors are lining up arrays of general-purpose processors to do the kind of work that XStream's chips will do. Although such an approach works with general routing of information, XStream vice president Ron Barr said, it is ill-suited to prioritizing data and other advanced manipulations that will be required in the networks of the future.

As for staying independent, product marketing director Joe Salvador said XStream is developing a family of chips, not just a single product. However, Salvador did not rule out the possibility of being acquired.

"We're planning the company as an IPO-bound company," Salvador said. "Naturally we're going to look at things that are in the best interests of our shareholders and stakeholders."

XStream, which has about 50 employees based in Silicon Valley, has $5 million in first-round funding from the Mayfield Fund. The company, which is said to be raising more money, has yet to announce an additional round of funding.