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Via buys S3 chip biz for $323m-plus

Meanwhile, S3 becomes Diamond Multimedia... er... an 'Internet appliance company'

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Via has bought S3's 3D chip business, just like it said it would yesterday. The announcement came a little later than planned, but the deal is pretty much what the company yesterday told Taiwan's Commercial Times it would be. The acquisition will cost Via at least $323 million in cash and securities, with further sums to be paid to S3 if the chip unit makes certain unstated financial performance targets. Via will also buy three million S3 shares - the Taiwanese company already owns 15 per cent of S3 - "at a price coincident with the signing of the definitive agreement". Once it takes over the business, Via will incorporate it into Via-S3, the joint venture it already owns with S3 to develop integrated graphics and North Bridge chipsets. Indeed, that still seems to be Via's prime interest in S3's chip technology, stressing that side of the operation over its Savage family of 3D accelerator chips. S3 has managed to build up a lot of momentum behind the Savage line over the last 18 months or so, pulling the company back from the edge of oblivion. But since the launch of the Savage 2000, made after the company bought the more diverse Diamond Multimedia, its eye does seem to have drifted from the ball. Allegations that the company hasn't enabled certain Savage 2000 features it previously advertised as being ready for use hasn't helped. Whether Via will pick up this technology and run with it remains to be seen. S3 itself - now it's pretty much what Diamond was before the acquisition - will relaunch itself as an "Internet appliance company". That seems to mean a greater focus on its Rio product line and home networking offerings than Net appliances per se, though clearly these are in the pipeline - S3 was one of the first companies to sign a processor deal with Transmeta, you may recall. S3 will also continue to develop its DSL modem business. What S3 hasn't said how its remaining divisions, specifically its games-oriented sound and video card business and its high-end FireGL workstation graphics card line, fit into all this. The fact is, they don't and we can expect an announcement soon that will see them sold to third-parties or spun off into further joint ventures. In fact, given Via said S3 was talking to other companies, this should come as no surprise. Of course, it was assumed that they were all after the chip business, but that looks less likely now. It's a plan not dissimilar to SGI's attempts to get rid of its Windows NT workstation and Cray supercomputer businesses. We hope S3 has more luck, but in a very crowded market - witness 3DLabs' acquisition of Intense 3D, 3dfx's purchase of Gigapixel and ATI's ArtX buy - we're not entirely sure its going to get what it wants. ® Related Stories Via to buy S3 graphics chip operation 3DLabs buys Intense 3D as ATI, Nvidia breathe down neck

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