August 6, 2003 3:08 PM PDT

AMD scoops up National Semi unit

Advanced Micro Devices has agreed to purchase National Semiconductor's information appliance chip business, the companies said Wednesday.

National Semi said the transaction primarily covers its Geode chip family, designed for use in set-top boxes and other electronics. Though no financial details of the transaction were released, National Semi said the information appliance unit accounted for no more than 5 percent of its total annual revenue, which topped $1.6 billion in its most recent fiscal year.

Under the deal, AMD gains certain intellectual property and assets of the product line, along with 132 current National Semi employees working in the unit. As a result of the deal, National Semi will lay off another 65 employees working in engineering and marketing positions related to the unit, the company said.

"This deal makes good sense for both companies," National Semi CEO Brian Halla said in a statement. "This allows National to focus on growing our core analog business and improving our returns. At the same time, AMD will be able to leverage the Geode technology through their existing manufacturing and marketing infrastructure."

National Semi announced earlier this year that it planned to sell the unit as part of a $30 million restructuring plan. At that time, Halla said he remained optimistic about the information appliance business but said he felt the market would take longer to develop than National Semi could afford to wait. Halla indicated that he plans to focus the company's investments on higher-margin analog technologies.

In May, National Semi reported it would close its cellular baseband processor unit. At the time, the company estimated it would garner $16 million in potential cost savings related to the sale of the information appliance business and the shuttering of the cellular baseband unit.

National Semi said it would record a charge for employee severances related to the AMD deal in its earning statement for the current quarter, which ends Aug. 24.

The deal is expected to close by the end of the month.

AMD was one of the few candidates for the acquisition. National Semi's Geode chips incorporate intellectual property licensed from Intel. Intel licenses, however, are not transferable.

Analysts earlier pointed out that any acquiring party would need to have such a patent license from Intel in order to use the Geode portfolio or would need to have a close manufacturing partnership with a company that had such a license. AMD is one of a limited number of companies with this type of license, and most others, such as IBM and Toshiba, have shown little interest in getting into the information appliance market.

AMD's plans for the information appliance unit, once the deal is completed, are unclear. Peter Glaskowsky, editor in chief of industry newsletter Microprocessor Report, said the most likely scenario was that AMD was interested in a product under development at National Semi. Alternatively, AMD might have found itself in need of engineers, based on optimism in some other area of its business, he said.

"You would think since AMD is taking on all those employees, they must already be working on something interesting, perhaps a Geode 4 chip," Glaskowsky said. "I wouldn't think AMD was purely after the existing Geode technology. They must see a good opportunity."

CNET News.com's Michael Kanellos contributed to this report.

 

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