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August 26, 2008

AMD to sell ATI's TV business to Broadcom

Chip maker sheds digital TV unit for $192m

Grant Gross

AMD has announced it will sell its digital television business to Broadcom for $192.8m, as the chip maker fights to return to profitability.

AMD's digital TV business, which includes processors, receivers and software for digital sets, will help round out Broadcom's DTV business, said Daniel Marotta, senior vice president and general manager of Broadcom's Broadband Communications Group. Broadcom makes DTV receivers, processors and other products, including products for high-definition television.

"We believe that this deal will position Broadcom to be a leader in this market by significantly expanding our customer base, giving us the product breath needed to lead the market, and enabling us to achieve the scale needed to broadly compete," Marotta said.

While Broadcom has focused on the middle to high-end of the DTV market, the acquisition will bring more budget-friendly products to the company, Marotta added. The combined DTV business will offer turn-key products that allow its customers to "rapidly configure and deploy productive televisions," he added.

AMD acquired its DTV business in 2006, as part of its $5.4bn purchase of graphics chip vendor ATI. But AMD in July said it took a charge of $880m in its second quarter related to the falling value of ATI's former digital TV and handheld business units. AMD reported a net loss of $1.19bn in the second quarter of 2008, the seventh consecutive quarter the company lost money.

AMD is working to "transform the company, becoming leaner and more focused", said Dirk Meyer, AMD's new president and CEO. The sale is a key step, "helping to strengthen our balance sheet, lower our break-even point, and hone our focus", he added.

Broadcom, however, said it was bullish about the future of AMD's DTV business. Broadcom expects the business unit's revenue in the second half of 2008 to be 50 percent higher than in the first half of the year, Marotta said. Digital televisions are expected to be the top selling consumer electronics device during the next five years, he added.

"The market is large and expected deliver strong growth into the future," Marotta added.

Broadcom will add about 530 employees - 90 percent of them engineers - in the transaction, Marotta said. As part of the deal, Broadcom will buy AMD's patents and patent applications related to DTV, he said.

The companies, both based in California, expect the deal to close in the fourth quarter of this year, pending government approvals.

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