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ATI to buy ArtX for $400 million

The leader in graphics chips plans to acquire ArtX in a stock deal valued at about $400 million, a move that will expand its horizons from PCs to game consoles.

ATI Technologies, the leader in the volatile world of graphics chips, plans to acquire ArtX in a stock deal valued at about $400 million, a move that will expand its horizons from PCs to game consoles.

As part of the agreement, ArtX chief executive Dave Orton will fill the newly created post of chief operating officer at ATI, and ArtX cofounder and chairman Wei Yen will join ATI's board of directors. Orton and Yen both worked on high-performance graphics machines at SGI before taking their posts at ArtX.

ATI said it expects its earnings to increase slightly in 2001 as a result of the acquisition. In 2002, earnings per share should increase about 10 to 15 cents, the company said.

ATI's stock has been on a roller coaster ride in recent months, but leaped up from about $12 to about $14 on Monday on news that Sony selected ATI's Rage graphics chips for use in its next-generation TV set-top boxes. Shares today rose 5 percent in midday trading to $15.81.

The acquisition, still subject to regulatory approval, significantly broadens the graphics offerings of ATI, which currently is best known for making graphics cards for desktop PCs.

ArtX, based in Palo Alto, designed the graphics chip used in Nintendo's next-generation game device, the Nintendo-64 "Dolphin" machine, a deal it won at the expense of graphics powerhouse SGI in 1998. Nintendo president Hiroshi Yamauchi endorsed ATI's acquisition of ArtX in a statement today.

ArtX also sells a chip for PCs and other computing devices that integrate graphics features with the chip that handles communication with a computer's memory, enabling computing devices to be built that don't require separate memory for the CPU and for the graphics system.

ATI reported profits of $54 million in January.