VIA-Cyrix: It's a done deal
By Om Malik
forbes.com
EW YORK. 01:35 PM EDT—National
Semiconductor (nyse: NSM) has finally found
a buyer for its ailing microprocessor
subsidiary, Cyrix Corp. The buyer is
Taiwanese chipset maker VIA Technologies. The
deal will probably be announced June 30.
For some time it has been known that VIA was
ready to snap up Cyrix for about $175 million. In
addition, VIA will probably assume other costs,
which may run as high as $80 million. The total $255
million for Cyrix is much lower than the $375 million
that National really wanted for the Cyrix unit.
Wen Chi Chen, president of VIA Technologies, is
visiting the U.S. for talks with National, trying to
negotiate a price. VIA's decision to buy Cyrix comes
in the wake of VIA's troubles with Intel Corp.
(nasdaq: INTC). Last Wednesday, Santa Clara,
Calif.-based Intel filed a lawsuit against VIA,
charging that the Southeast Asian company
infringed upon Intel's patents.
The Cyrix acquisition finally gives VIA Technologies
ammunition to counter the Intel offensive. VIA--which
was initially funded by Taiwanese conglomerate
Formosa Plastics--is part of various PC-related
companies that Formosa has a stake in.
Aside from VIA, Formosa holds stakes in memory
chip maker Nanaya and motherboard maker First
International Computer (FIC). FIC also makes and
assembles personal computers for other companies.
By buying a microprocessor maker, Formosa will
have all the pieces needed to churn out low-cost
PCs and compete aggressively in the market.
"The only way to support a design team like Cyrix is
to have at least 5% of the [microprocessor] market,"
says Linley Gwennap, editor and analyst at The
Microprocessor Newsletter, a Sebastopol,
Calif.-based industry newsletter. In his opinion, it
would cost more than $150 million to run Cyrix
successfully, and VIA might not have that kind of
cash.
At present, Cyrix has 5.4% of the microprocessor
market, according to data from Mercury Research, a
Phoenix, Ariz.-based research firm. In first quarter
1999, Cyrix sold 1.7 million units, down from 1.9
million in fourth quarter 1998.
Cyrix needs to sell at least 1.5 million units a quarter
in order to stay afloat. However, Mercury Research
analyst Mike Febius thinks VIA might be able to turn
Cyrix into a profitable operation. "Chipset makers are
used to operating on low margins and know how to
survive the low-end of the business," says Febius.
The biggest challenge for VIA will be to brand Cyrix
as a major player in the chip business. "Cyrix has
failed on this front, and it will be tough for [VIA] to
play against AMD and Intel," says Febius.
The VIA buyout brings down the curtain on the soap
opera-like life of Cyrix, which National acquired in
1997 for $550 million. It's unfortunate Cyrix is having
such a tough time finding buyers, given that the
company has some pretty decent chips coming
down the pipeline. For example, three different
versions of 0.18-micron M II chips--400 MHz, 433
MHz and 466 MHz--are on cards and will likely hit
the shelves later in June. A mobile version of M II
433 is also on cards.
The Cyrix pipeline also has new chips that combine
the Cayenne core (an enhanced version of M II), a
256 K on-chip L2 cache, a Socket 370 interface and
3Dnow support. Code-named Gobi, these chips are
expected to come to market in the third quarter
1999. Cyrix also plans to support a 133 MHz front
side bus on Gobi. This will likely put the chip on an
even keel with Intel's Celeron chips. Cyrix is said to
be working on a chip called Mojave, which is
supposed to ship in the second quarter 2000.
Now if Cyrix and VIA can retain those pesky design
engineers who are sending out their résumés to
companies like AMD and Texas Instruments (nyse:
TXN), they'll be all set.
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So much for the saying that "barrier of entry is prohibitively high"
A cool 250 millions get Via right in front of AMD and Intel.
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