June 27, 2000 4:20 PM PDT

Conexant buys chipmaker HotRail

Continuing its pace of networking chip acquisitions, Conexant Systems said today it will acquire privately held HotRail in a stock deal worth nearly $400 million.

San Jose, Calif.-based HotRail makes a so-called switch fabric, an integrated circuit that serves as a connection point among the various other chips inside high-end networking equipment. The acquisition follows earlier deals this year by Conexant to purchase networking chipmakers Microcosm and Applied Telecom.

HotRail was once best known as the company that was going to enable Advanced Micro Devices (AMD) to get into the world of high-end computers. But the company said in May that it was no longer working on a chipset to allow servers to work with multiple AMD processors.

Newport Beach, Calif.-based Conexant, which was spun off last year from Rockwell International, said it expects the deal to cut into per-share earnings for about 18 months, not counting any one-time charges or amortization of goodwill. The deal is expected to close later this week.

Conexant chief executive Dwight Decker said the switch fabric is typically one of the first parts of a networking product to be designed into a system.

"We are now better positioned to influence the design of next-generation Internet (equipment)," Decker said.

HotRail has announced two products: the HotRail Channel, a high-speed chip to connect networking chips, and the SkyRail Link to connect switches and routers. Both products depend on a switched fabric design. With switched fabric, a group of chips creates a high-speed miniature network inside a computer.

In December, Conexant said it would spend roughly $943 million in stock to acquire network processor firm Maker Communications.

 

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