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Shareholders say ‘yes’ to S3, Diamond merger

Company splits into separate business units -- primed for sell-off?

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The proposed merger between S3 and Diamond Multimedia will now go ahead after investors in both companies voted this week to support the deal. And with the deal effectively done and dusted, S3 revealed its post-merger structure. The company will split into four independent divisions. Multimedia will take charge of S3's 3D graphics acceleration technology and Diamond's audio products, and focus on consumer -- and presumably OEM -- markets. Diamond's high-end graphics products, most notably its FireGL 1, will form the core offerings of the new Professional Graphics subsidiary. Diamond's RioPort subsidiary will continue as a separate business unit operating in the digital music space. Interestingly, it will not take on the Rio digital music player -- that will fall into the Communications division's remit, which also includes Diamond's modem and home networking lines. Breaking S3's business down into separate business units, all in different geographical locations, suggests that S3 is ultimately planning to sell some of them off. Certainly, it's a darn sight easier to flog off, say, the Professional Graphics business, to be based in Germany, if it's a self-contained unit. It will also make simpler to spin off RioPort through an IPO. It's not known if S3 wants to divest itself of any of these units -- most likely it will see how the combined company develops before making any such moves, but whether it already has spin-off plans or not, it's ready for them structurally. Meanwhile, it's not yet clear whether the Diamond Multimedia brand will be retained in the medium term -- for now, it will have to be; there's too much kit out there in Diamond-branded boxes, and the combined operation is for now retaining Diamond's URL for its e-commerce efforts. ®

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