SANTA CLARA, Calif. Parthus Technologies plc and DSP Group Inc. have agreed to merge their intellectual property (IP) operations. Under terms of the deal, DSP Group will spin off its IP business unit, called Ceva, and merge it with Parthus' operations to form a new company named ParthusCeva Inc. In addition, DSP Group will provide $40 million in cash to the new operation.
DSP Group had considered spinning off its Ceva division through an initial public offering, but held off due to market conditions and "looked for other opportunities," said Eli Ayalon, chairman and chief executive at DSP Group (Santa Clara, Calif.). "We found a perfect match in Parthus," he said. "The synergy between the two companies is close to 100 percent."
DSP Group and Parthus make an interesting pair. The former's Ceva division has focused on developing digital signal processing IP for communications applications, producing the PalmDSP, OakDSP and TeakDSP cores. Parthus, on the other hand, has developed application-specific IP platforms, which include RF and DSP functionality, for Bluetooth, GPS, cellular and other communications applications.
Brian Long, founder and chief executive officer of Parthus (Dublin, Ireland), said OEM and semiconductor customers want applications that wrap around a DSP core. The merger will produce a company that can deliver both, he said.
With a DSP core architecture, ParthusCeva will be able to target a broad range of applications, said Kevin Fielding, president at Parthus. While DSP Group's offerings are used in a host of communications sectors, from wireline to wireless, the combined company will focus on full platform solutions, include cores and application-specific IP, and target high-growth sectors, he said.
The wireless sector will be an obvious near-term target. Both companies have experience in the sector, with DSP Group's cores landing in a host of cell phone architectures, and Parthus building platforms for GPS, 2.5/3G cell phones, and Bluetooth.
Bluetooth and next-generation cellular architectures will be hot buttons for ParthusCeva, Fielding said, and the company will address the emerging application processing space in 2.5/3G mobile designs. "We feel we have a significant role here due to our application knowledge," he said.
The combined company could find a big competitor in Adelante Technologies NV (Leuven, Belgium), a company similarly formed by a merger, of the DSP IP operations of Philips Semiconductors and application-specific IP developer Frontier Design.
Without naming any company, Ayalon said former ties with large semiconductor manufacturers could hurt some DSP IP developers. "In order to license DSP technology, we need to be independent," he said.
The DSP Group-Parthus merger could have significant ramifications for standalone DSP IP core providers. At several points during a briefing Friday (April 5), executives from ParthusCeva stressed the importance of offering more than a point DSP solution. "You have to have an application-ready solution," Fielding said, meaning a core along with application-specific platforms.
Parthus and DSP Group expect their merger to be completed in the third quarter of 2002. ParthusCeva will be headquartered in San Jose, Calif., and its shares will be traded on Nasdaq and the London Stock Exchange. Ayalon will serve as chairman of the new company and Long will be vice chairman. Fielding will assume the role of chief executive officer.
Under terms of their agreement, DSP Group shareholders will retain 50.1 percent control of the new organization. Parthus shareholders will own the rest, and in addition will receive a cash payment of approximately $60 million.
DSP Group will continue to own its fabless semiconductor operations, and will receive a free license to ParthusCeva's DSP cores under the deal, Ayalon said.