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Broadcom buys into cell phone graphics

The chipmaker is back on a buying spree, having announced deals with six companies so far this year.

Tech Industry
Broadcom said Monday that it would pay more than $120 million to acquire Alphamosaic, a British maker of chips for cell phone graphics.

The move continues a resumed buying spree for Broadcom, which has announced five other acquisitions this year. The chipmaker had been highly acquisitive in 1999 and 2000 but had been on somewhat of a hiatus before resuming the trend this year.

The company said that it has already acquired 93 percent of Alphamosaic shares and expects to purchase the remaining shares within 10 days. The company is paying $120.3 million in stock, based on Broadcom's Friday closing price of $28.86 per share, as well as approximately $2.7 million in cash.

Cell phones have been an area of growing interest for Broadcom, which already offers baseband chips for GSM cell phones. In June, the company said it would buy Zyray Wireless, a maker of chips for W-CDMA, or Wideband Code Division Multiple Access, a third-generation cell phone technology. In April, Broadcom said it would buy Bluetooth chipmaker Widcomm for $49 million.

The deal with Cambridge-based Alphamosaic will help Broadcom in the growing market for camera phones, the company said, citing statistics from In-Stat/MDR, which has predicted the sale of 318 million phones with digital cameras or imaging technology in 2006. The research company expects that number to double by 2008.

Broadcom Group Vice President Robert Rango said in an interview that the day is not far off when high-end cell phones and smart phones will need to be able to handle video, multi-megapixel images and MP3 audio, as well as Bluetooth, Wi-Fi and cellular networks.

"You can do some of that on the main baseband chip, but a lot of it needs additional power," Rango said, noting that that's where chips such as Alphamosaic's come in.

The purchase comes despite a cloudy financial outlook for Irvine, Calif.-based Broadcom. Earlier this month, the chipmaker cut its financial outlook for the quarter, warning of an inventory buildup at key customers.

Alphamosaic's 57 workers will keep working in Cambridge, said Broadcom, which also has offices there.

Rango said that Alphamosaic's chips will be sold as separate processors in the near term, but he added that a low-end version of Alphamosaic's technology will also be integrated into Broadcom's future release schedule for baseband and application processors. Separate chips will probably still be needed in the future to handle things such as watching television on a cell phone, he said.

Alphamosaic's initial cell phone chip is being used by Samsung, among others, allowing for phones with MP3 playback, video messaging and megapixel-class cameras. Broadcom said Alphamosaic is now sampling a follow-on chip with even higher video-processing capabilities.

Shares of Broadcom traded higher on the news, changing hands recently at $29.27, up 41 cents, or more than 1 percent.

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