Philips in deals with WD, SPEA

Electronic News, Oct 2, 1995 by Jim DeTar

Philips Semiconductors completed two deals last week designed to further the company's strategy of establishing itself as a leader in the multimedia processor market, even as the company at the same time continues to wind down its aging analog technologies business.

Philips agreed to acquire Western Digital's multimedia products unit including the Paradise graphics accelerator cards and the RocketCHIP family of silicon devices. In addition, Philips and German software vendor SPEA Software AG revealed a joint venture aimed at developing 3D-capable, high-performance multimedia ICs which will target applications such as PCs and game consoles for the multimedia market.

Under terms of the Philips/Western Digital agreement, Philips will acquire all of the assets of Western Digital's multimedia products unit for an undisclosed sum, giving Philips access to another piece of the multimedia puzzle. Currently, Philips offers 2D graphics chips but the addition of the WD lines will enable it to enter the growing 3D market as well. The deal is expected to close by early November.

Cees Jan Koomen, Philips' executive vice president of communications and multimedia, commented that "We see the acquisition of this technology, and the access it gives us to the people who developed it, as a key factor in Philips' continued development as a multimedia corporation."

The multimedia unit, based in Mountain View, Calif., will remain an independent entity and will report to Mr. Koomen. Philips said that the current management team will remain in place, headed by John Thompson, who joined Western Digital last January following management stays at Dell, Compaq and IBM.

Ken Hendrickson, Western Digital's executive vice president and general manager of microcomputer products business, said the multimedia unit did approximately $100 million in business last year but does not fit the company's strategic game plan.

"What this does is let us totally focus on the management of data or in-and-out (I/O) of data. It (the multimedia unit) was getting to be kind of an orphan. Also, I feel we needed to make some significant investments in the unit to get it up to size so it would be competitive with our mainline storage."

Mr. Hendrickson said Western Digital figured it would have had to double the size of the unit to make it work, from about 75 people at the Mountain View facilities to around 150 employees, and that it was not willing to make that kind of commitment. He added that just because it is exiting the multimedia chip business that does not mean Western Digital will stop making semiconductors.

"We still have a vibrant, active semiconductor group which makes chips and boards relating to storage.

On another front, Philips has entered into a joint development agreement with SPEA Software, based in Starnberg, Germany under which Philips will hold 50.5 percent of the shares. This joint venture has been dubbed SP3D Chip Design GmbH, and is approved by the Federal Monopolies Office. At the core of this new company is a team of graphics engineers who had previously formed part of an independent division of SPEA.

The joint venture's first product, a planned 3D accelerator, will initially be manufactured using Philips' 0.5-micron CMOS process before switching to 0.35-micron late next year or early 1997. First samples are expected to be available at the beginning of 1996, and all products developed by the company SP3D Chips Design will be marketed under the brand name of Philips Semiconductors.

The venture represents a further development in the multimedia strategy of Philips. Already a contender in desktop video ICs for multimedia PCs, the company will be expanding its existing digital-video product line with the 3D know-how of SPEA.

Ulrich Seng, chairman of SPEA Software, asserted that "The new company has the potential to play a major role in the 3D graphic IC market." SPEA employs about 150 people and is a manufacturer of high-end 3D and multimedia PC boards for the European market.

Jergen Ruprecht, director of product group desktop video ICs, commented "With SPEA's leading-edge 3D expertise the focus will be on the integration of our well-known video expertise, starting with combining our video encoder with the 3D accelerator.

"This product will give the home computer the capability to equal the graphic performance and realism previously only possible on high-end 32-bit game machines."