Broadcom to buy Silicon Spice for $1.24B

Acquisition of chip maker signals a broader move into the market for core network-communications chips for Broadcom.

Broadcom Corp. said it will acquire Silicon Spice Inc., a maker of processor chips for communications networks, for roughly $1.24 billion in stock as part of a broader move into the market for core network-communications chips.

Broadcom (brcm), of Irvine, Calif., said the acquisition gives it access to both existing Silicon Spice products and important technologies that will help it broaden its assault on the blazing-hot market for communications chips. Where Broadcom has mainly sold chips for use in network-related devices such as cable modems and personal-computer network cards, the Silicon Spice products could potentially allow it to sell directly into the big routers and other network equipment that direct data traffic across the Internet.

"This opens up a multibillion-dollar market," said Henry Nicholas III, Broadcom's president and chief executive.

Silicon Spice, of Mountain View, Calif., makes so-called communications processors, chips that bridge flows of communication data from one type of data network to another. Its founder, Vinod Dham, is a former executive at both Intel (intc), itself a recent entrant to the communications-chip field, and Intel rival AMD (amd).

One of the first major uses for communications processors is likely to be connecting networks for Internet-based telephony to the existing telephone network, Nicholas said. Where such functions currently require 16 or 24 digital-signal processing chips, he said, a single communications processor should soon be able to do the job. The processors also should be able to handle tasks such as running up to 200 modem connections for an Internet-service provider, and in the future they will be capable of handling high-speed digital-subscriber line (DSL) connections as well.

Dham said the communications processor will play the role for high-speed data networks that microprocessors play in the personal-computer world because they are a generic "platform" that can handle a variety of communications tasks. "Like the x86 [microprocessor] in the PC industry, we have tried to create a similar solution for the communications market," he said.

Broadcom will issue roughly five million shares of its Class A stock in exchange for all outstanding shares of Silicon Spice. In 4 p.m. Nasdaq Stock Market trading Monday, Broadcom rose $9 to $247.94.

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