AUSTIN, Tex. -- Cirrus Logic Inc. here said it has completed its stock-for-stock purchase of Stream Machine Co., a multimedia chip supplier based in Milpitas, Calif., and the company estimates that it will take a one-time, non-cash charge of $14-to-$20 million in the current quarter for in-process R&D in the acquisition. The purchase was valued at $110 million in stock when it was announced in August.
Cirrus Logic also said revenues from Stream Machine's products are expected to grow from $1 million in the current quarter to a range of $30-to-$40 million in fiscal 2003, which ends March 31, 2003. The growth of Stream Machine's sales hinges on several factors, including continued strong increases in DVD sales and increases in the use of digital video recording systems in the home, said Cirrus, which is completing a series of acquisitions aimed at connectivity and entertainment applications (see Nov. 3 story).
Long-term gross margins from Stream Machine's products are expected to be greater than 50%, said Cirrus.
Key applications in Cirrus' growth strategy are personal video recorders and DVD recorders, which are expected to dramatically in volume shipments in the next four years, according to the Cahners In-Stat Group. The market research organization predicts that personal video recorders, based on MPEG technology, will grow from 520,000 units in 2001 to more than 11 million in 2005. DVD recorders will grow from 540,000 units this year to more than 17 million in 2005, according to In-Stat's forecast.
In-Stat also predicts that the total MPEG-2 encoder chip market will grow 135% annually, from under two million units this year to more than 35 million units in 2005, representing a semiconductor market opportunity in excess of $370 million in 2005, up from $38 million this year, said Cirrus.
"Stream Machine products are shipping in digital recording systems, which are manufactured by leading companies including Amoisonic, Datavideo and Malata," said Michael L. Canning, formerly the CEO of the Milpitas company and now general manager of the Video Recording Division at Cirrus. "We are also seeing strong design win momentum throughout Japan, Korea and China," he added.
After taking the charge for in-process R&D in the fiscal current quarter, Cirrus Logic said the remaining purchase price of Stream Machine will be allocated primarily to amortizable intangibles and goodwill. Based on current forecasts, the acquisition is anticipated to be accretive to pro forma earnings per share within three quarters. Cirrus has said it have a dilutive effect of $0.00-to-$0.02 per share in each of the next two quarters.