C-Cube plans to spin off or sell its semiconductor business in a taxable transaction prior to the closing of the Harmonic sale, which is expected by next February, said Alan Markow, vice president of corporate communications and investor relations. The semiconductor business includes chips for DVD players and MPEG chips for broadcasting video.

DiviCom is a vendor of software and systems for end-to-end digital video networks. Its products include audio/video encoding, data broadcast equipment, network management systems, and consulting and integration services. Revenue for the subsidiary in the most recent quarter was $49.1 million, or just under half of C-Cube's total revenue of $101.4 million.

Markow said the deal would benefit C-Cube shareholders, who will receive shares in the spun-off semiconductor division, as well as half a share of Harmonic stock for each C-Cube share held. C-Cube will continue to sell chips to Harmonic after the sale.

DiviCom employs about 450 of C-Cube's total staff of 1,200. Its principal operations are in Milpitas, Calif. and a major office is located in Boulder, Colo. When C-Cube acquired DiviCom in August 1996, Alex Balkanski, president and chief executive officer of C-Cube, said in a prepared statement, "The acquisition of DiviCom redoubles C-Cube's commitment to digital video communications. DiviCom's video networking products coupled with C-Cube's video chip level solutions will allow for the deployment of complete end-to-end video networks." Balkanski was unavailable for comment on the change in strategy, although the company released a statement from him noting that, "The spin-off launches a semiconductor pure play that is number one and strengthening in digital video."

C-Cube's stock closed Thursday at 43 13/16, up 3 7/16. Harmonic's stock closed at 52 1/2, down 7 3/8.

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