Creative snaps up 3DLabs

$170m buy

Creative Labs is beefing up its graphics business with the $170m agreed takeover of 3DLabs. The deal is constructed two-thirds cash/one third stock.

Creative is already a shareholder of 3DLabs, so in effect it's paying itself for some of the business.

The companies reckon that the acquisition will result in increased market share, marrying 3DLabs technology with Creative's worldwide distribution reach. Post-acquisition, 3DLabs will return to the volume desktop graphics market - making another competitor for Nvidia and ATI. The sub-text is that 3DLabs could not afford to do this launch without support from Creative.

The company today reported a poor Q4 in 2001 with sales of $10.1m - half that of the same period in 2002. Operating losses were $6.2m - and this excludes inventory reserve charges of $9.7m and one-off charges of $188k to cover redundancies (Q4, 2000 $9,000 profit).

The inventory reserve covering the Oxygen line, a slow mover in Q4, was made to cover unsold kit, a possibility increased by 3DLabs' intention to "introduce a broad range of new products in the second quarter of this year".

3DLabs says it will continue to supply, support and develop all existing products, including, of course the Wildcat and Oxygen lines.

Presumably, Creative lessens its reliance on third party chipmakers in the graphics space, now that it will own technology. ®