SANTA CLARA, Calif. PC chip-set provider Via Technologies Inc. surprised the industry this week by announcing that it has signed a letter of intent to purchase certain assets of the Centaur design subsidiary of Integrated Device Technology Inc., including intellectual property (IP) related to WinChip microprocessor technology and the X86 microprocessor design team located in Austin, Texas.
The news follows the July 14, 1999 announcement that IDT will exit the X86 microprocessor market. It also comes close on the heels of Via's June acquisition of Cyrix, the microprocessor subsidiary of National Semiconductor Corp.
Wen-Chi Chen, president of Via Technologies, said the acquisition was intended to "further solidify our design capability in the X86 arena."
Len Perham, chief executive officer of IDT, said the transaction will complete IDT's exit from the X86 market announced last month and enable IDT to intensify its focus on the company's core communications business.
The financial terms of the agreement were not disclosed.
In addition to the purchase agreement, Via and IDT also signed a patent cross-license agreement that will allow each company to utilize intellectual property covered by the other's patents, including the Centaur patents that are being acquired by Via. The cross-licensing agreement extends over the life of those patents.
Analysts said they were surprised by Via's news, which will allow Via to move into the X86 microprocessor market with critical microprocessor design skill sets from both Cyrix and Centaur, and creates a third major competitor in the X86 market, behind Intel and Advanced Micro Devices..
A.A. LaFountain III, a semiconductor analyst with Needham & Co. (New York), said Via's acquisition of Centaur is logical, since the company isn't getting identical offerings from Cyrix and Centaur. He said Via will likely combine the best skills in each group to build a successful microprocessor design group.
"Combining the two teams could be problematic, but since each group brings its own unique skills, it makes sense," LaFountain said. Centaur's design group brings good register and SRAM cache capabilities to the merged group, while the Cyrix group's forte is integration techniques, he said.
LaFountain said IDT's Centaur subsidiary was unable to compete with Intel successfully. Centaur had a register-intensive approach to microprocessor design and its WinChip I and II products were inefficiently pipelined, he said. It was only with the WinChip III and IV that Centaur was able to play catch-up to Intel's microprocessor performance, but by then it was too little, too late.
Centaur was losing millions of dollars a month and IDT realized the ongoing R&D investment required made no sense, LaFountain said. IDT also saw National Semiconductor's stock price go up after it sold Cyrix, and that became another reason to sell the Centaur subsidiary, he said.
The integration of the two companies isn't expected to result in any layoffs, analysts said, since most of the employees in the acquired groups are design engineers and no one is expendable.
Via Technologies, which recently went public and has as a major shareholder one of the richest families in Asia, is also said to have plenty of cash to finance a robust X86 microprocessor effort. The Centaur and Cyrix acquisitions will also give Via a stronger position in its developing battle with Intel. In June Intel sued Via for contract violations over Via's P6 bus license with Intel.