As reported earlier, Taiwanese chipset manufacturer Via Technologies has agreed to purchase the Cyrix microprocessor division of National Semiconductor, a deal that paves the way for Via to produce chips for PCs, including the first true clones of Intel's low-end Celeron processor.
How might Via find profits--and have a bigger impact on the PC market--where National typically lost money? Speed, for one thing. Via, which went public in Taiwan recently, is known to be a nimble company that can get products to market quickly. That's been a problem in the past for National. Compaq Computer, among other companies, uses Via chipsets for their consumer PCs.
"Via is a really good fit. It is a third-party chipset vendor whose products are frequently used with Cyrix products," said Dean McCarron, principal analyst at Mercury Research. "They have frequently produced chipsets that have outperformed Intel's chipsets at initial launch."
America Online's investment in Emachines, and the whole "free PC" movement in general may favor the company as well. Emachines and a number of the free-PC companies use Cyrix processors and Via chipsets.
Via will waste no time in its efforts, said Stan Swearingen, general manager for Cyrix. Cyrix will continue to produce the 400-MHz and 433-MHz MII processors and will release "Gobi," a next-generation chip that will fit into the same motherboards as Celeron, in time for the Christmas buying season.
"You'll see it in PCs at the $499 price point," said Swearingen. Gobi will run at 466 MHz, 500 MHz, and 533 MHz, and come with a variety of system buses, including a speedy 133-MHz system bus.
Although the transaction is not yet completed, Via's overall strategy seems clear. National will continue to produce the MII chip, and possibly the Gobi processors for Via as the final details of the deal are worked out, said Swearingen. Once the deal is complete, Via will take control of designing and marketing the Cyrix line of processors, but actual manufacturing will be handled by another company. After Gobi, Cyrix will come out with the "Mojave" generation of processors in the next century and will look at integrated processors.
Under the deal, Via gets the intellectual property and the design and marketing teams behind Cyrix. Currently, 362 employees work at Cyrix, Swearingen said. Via will also likely keep the brand name.
The purchase does not include the South Portland, Maine, fabrication facility. National continues to look for a buyer for the majority interest in that factory, said Swearingen. Via may also license some of its intellectual property back to National for its line of MediaGX integrated processors for "intelligent appliances."
Since the deal hasn't fully closed, the actual sale price has not been established, but the selling price will be "north of" $175 million, he said.
Via's connections to other markets will also be a boost. "Via is part of the Taiwan-based Formosa Plastics Group, a huge conglomerate that also owns motherboard maker FIC and DRAM maker Nanya Technology," wrote Michael Slater, founder of the Microprocessor report, in a bulliten today. "This intimate connection with Taiwan's semiconductor and motherboard industries should benefit Cyrix's business."
Intellectual property tangle
One of the more interesting aspects of the deal will be how Via and National structure the deal to get around intellectual-property claims from Intel.
Earlier this month, Intel revoked a licensing agreement with Via and filed a lawsuit in federal court against the company. The suit revolves around an Intel-compatible chipset from Via that contains a 133-MHz system bus, which is faster than Intel's chipsets, said sources. Via, however, engaged in practices that may have exceeded the license terms, others said.
National has a far-reaching cross-licensing deal with Intel. However, this license does not transfer to Via, said Swearingen and several others. So how will Via get around the restriction? Most likely, Via will have the chips manufactured in a plant owned by a company that has an Intel license, said McCarron and others. Such an arrangement is meant to insulate Via from claims. National, IBM, and Taiwan Semiconductor Manufacturing Company are all likely candidates, said several sources.
Swearingen further added that the intellectual-property arrangements contained in the Via-National-Cyrix deal work in such a way that Via will be able to continue to produce its controversial 133-MHz system bus.
"We're pretty bulletproof on intellectual property," said Swearingen.
The combination of Via and Cyrix will have some natural appeal for PC makers. As McCarron pointed out, a number of companies use the two companies' products together right now. Combined, the company will now be able to sell the bulk of the silicon building blocks, including graphics, to PC makers. In the future, integrated chips, which fuse many of these disparate parts into one, will follow.
Now the bad news: Cyrix has been losing money for the past several quarters, National executives have said. It also held only a 5 percent share of the PC market. Further, most of its chips sell in the budget PC market, where everybody but Intel appears to be losing money.