VIA deal with IDT keeps heat on Intel

Chip set maker VIA Technologies Inc. has signed a letter of intent to purchase Integrated Device Technologies Inc. Intel-compatible chip technology.

"(Our) acquisition of IDT's Centaur design subsidiary further solidifies our design capability in the x86 arena," said Wen-Chi Chen, president of the Taipei, Taiwan-based VIA. Financial details of the sale were not revealed.

For IDT, the deal is a no-brainer, said Dave Cote, vice president of marketing for the California company. Almost 70 percent of the company's revenue comes from semiconductors built for the communications market, he said. The PC processor market has not been so successful. "Our foray into the x86 business has been a tough road for us," he admitted.

The agreement puzzled some analysts. On Tuesday, VIA completed an agreement to buy National Semiconductor Corp.'s Cyrix subsidiary, which also makes x86 chips, for $167m (£102m). That gives VIA two sets of x86-compatible intellectual property and two design teams in its battle to take on Intel in the low-cost PC market.

Keith Deifendorff, chip analyst with semiconductor technology watcher MicroDesign Resources Inc., believed the deal might be to acquire the IDT's design team. "There is no question that the Centaur design team is really impressive -- they have built really small chips with really good performance, and they have done it very quickly," he said.

Yet, merging two design teams is not simple, he stressed. "It also takes two design teams with different philosophies and rivalries and puts them together and that's a problem. I can't imagine what it is that IDT brings to the party that Cyrix didn't."

Another analyst agreed. "There is probably some of the design team they are interested in and some of the IP they are interested in," said Mike Feibus, principal analyst with industry watcher Mercury Research Inc., "but I bet (the Centaur design team) has probably been heavily discounted."

As part of the deal, the two companies have also agreed to cross-license each other's patents, including those Centaur patents acquired by VIA in the deal. IDT's Cote stressed that the patent portfolio it would sell to VIA would not shield the company against a suit from Intel. "There is no hidden Intel protection," he said.

IDT hopes to finish the deal by the end of the quarter.

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