SANTA CLARA, Calif. -- NeoMagic Corp. here announced it will acquire four-year-old LinkUp Systems Corp., a Santa Clara-based supplier of RISC-based design cores, for about $5 million in stock to expand its new strategy in system-on-chip products for Internet multimedia communications devices.

NeoMagic, a former leader in graphics ICs, said it intends to support LinkUp's SoC design products and customers after completing the acquisition, which is being made with 1.6 million shares of common stock. The company also said it plans to accelerate its own SoC product development using the acquired design-core technology, which is based on RISC processor architectures from ARM Ltd.

"The management teams of NeoMagic and LinkUp share a common vision -- a vision of convenient, personal, wireless devices with engaging video, audio and graphical capabilities," said Prakash Agarwal, president and chief executive officer at NeoMagic. "The technologies and intellectual properties our two companies have developed are largely complementary, while our futures converge around a common market opportunity."

Last year, NeoMagic switched its focus from graphics in notebook computers to SoC solutions for Internet-based multimedia communications systems, which caused its revenues to nearly evaporate. Last month, NeoMagic reported revenues of $83,000 and a net loss of $6.8 million in the third quarter, but the company also said it had $94.1 million in cash, cash equivalents, short-term investments and restricted cash (see Nov. 15 story). In the first three quarters of 2001, NeoMagic's revenues totaled $351,000 vs. $74.7 million last year. Its net loss for the first nine months of this year was $21.1 million compared to a loss of $4.0 million in 2000.

NeoMagic said it expects the majority of LinkUp's 28 employees to join its workforce. NeoMagic also said it does not expect this transaction to have a material effect on its cash or cash equivalents for the current fiscal year.