Weitek files Chap. 11, selling assets

Electronic News, Dec 16, 1996 by Andrew MacLellan

San Jose, Calif.--Chipset maker Weitek last week filed for Chapter 11 bankruptcy protection and signed a deal to sell the bulk of its assets to the Brooktree division of Rockwell Semiconductor Systems for $3 million.

The deal, which is contingent upon U.S. Bankruptcy Court approval, includes a non-exclusive license to Weitek's technology, the contents of the company's design center here and an offer of employment by Rockwell to 20 of Weitek's two dozen engineers and staff.

"We believe that the Rockwell agreement, together with an orderly disposition of other assets, provides Weitek with the best opportunity to satisfy its obligations to creditors and return some assets to shareholders," said Weitek president/CEO Richard Bohnet.

The deal pertains to assets only and includes no transfer of stock or debt assumption. According to Weitek, which had been looking for a strategic partner for nearly two years, the bankruptcy filing was a condition imposed by Rockwell to shield it from any liability associated with the acquisition.

Under the agreement, Rockwell will buy technology relating to Weitek's Sparc Power microprocessor, VGA cores, Unified Memory Architecture (UMA) chips and floating point technology, much of which could be applied to future multimedia PC products.

"The primary purpose of the acquisition is to hire the engineering team," said David Galvin, VP of multimedia business for Rockwell's Brooktree division. "We were looking to accelerate our development for desktop products. Along with that they had a facility that was entirely facilitized for over 100 people, fully equipped with Sun workstations and the like."

The agreement and subsequent bankruptcy filing follow a string of unprofitable annual returns and a March layoff which slashed Weitek's work force by 30 percent (EN, March 25). The company, which last spring also pulled the plug on a planned release of its W564 UMA chipset for Pentium-based systems (EN, March 18), said the failure of UMA to attract a large portion of the graphics industry contributed to Weitek's demise.

"The need for that (UMA) technology diminished as things like the Pentium chip came about," said a company spokesperson. "And (Weitek) didn't move fast enough to come up with new technology for the PC market."

According to Mr. Bohnet, Weitek will provide contract engineering services to Rockwell until the asset transfer is approved and is seeking other buyers for the remaining assets and intellectual property not included in the Rockwell purchase agreement.