|
By Samuel Perry
PALO ALTO, Calif., July 29 (Reuter) - The acquisitions by
chip makers Intel Corp. and National Semiconductor point to
more consolidation but were not expected to shake up the
industry's pecking order, analysts said Tuesday.
Intel, based in Santa Clara, Calif., agreed to buy graphics
and video chip designer Chips & Technologies Inc. on Monday for
$420 million. The deal will barely dent Intel's $8 billion of
cash on hand but will help it to offer chips that run
sophisticated graphics and video, industry analysts said.
Just hours later, National Semicondutor Corp. agreed to buy
Cyrix Corp. for about $550 million in stock.
Some analysts said the price for Cyrix was high and a few
said Cyrix's dependence on outside parties to manufacture its
chips, combined with its low-end microprocessor strategy,
forced it into the arms of a partner with chip-making capacity.
Intel's acquisition will build on Chief Executive Officer
Andrew Grove's initiative to stoke the market for personal
computers, more than 85 percent of which contain an Intel
microprocessor, by offering more powerful features.
These include fancy graphics that had come mainly from
workstation maker Silicon Graphics Inc.
Nevertheless, analysts do not see a sweeping consolidation
in the semiconductor industry, where chip design companies can
spring up overnight and often rely on chip-making capacity in
countries like Taiwan and Singapore.
These chip-making factories, known in the industry as
"fabs," have enabled the new companies to start business
without investing $1 billion to $2 billion to build plants.
"Most of Silicon Valley is really a design house," said
David Wu, an analyst at ABN AMRO Chicago Corp. "There will be
more companies born than bought out. For every company that's
acquired, there will be 10 companies that are new."
National Semiconductor Chief Executive Brian Halla said the
Cyrix deal means his company would make chips for personal
computers that sell for $500 or less, boosting the number of
PC-like devices sold each year to 700 million from 70 million.
Some analysts said the acquisition could put more pressure
on other chip makers such as Advanced Micro Devices Inc. to
compete directly with Intel. Others said creating a new
category of devices was a risky business, and the effort might
allow Intel to actually raise prices overall.
Bear Stearns analyst Nimal Vallipuram cut his earnings
estimates for National Semiconductor, which he continues to
rate as a "buy," to $1.65 a share from $1.75 a share for the
fiscal year ending in May 1997 and to $2.10 from $2.25 for
fiscal 1998 to reflect dilution from the acquisition.
Shares of National Semiconductor, also based in Santa
Clara, slid $2 to $31 in composite trading on the New York
Stock Exchange while Richardson, Texas-based Cyrix gained
$1.875 to $24.94 on Nasdaq.
Intel fell 44 cents to $88.125 and Chips & Technologies
slid 6.25 cents to $17, both on Nasdaq. |
