Steve, IMO, S3 wouldn't buy any Cirrus capacity. Rather, they would buy the graphics design teams, selected support personnel, and a patent portfolio from Cirrus. What S3 probably needs most is the Cirrus hardware and software teams. Cirrus graphics business is a fraction of what it was a few years ago, so the price for some engineers and a patent portfolio would only be millions, I'd SWAG. It would probably be reported as an "undisclosed sum", i.e., nothing material.
Cirrus and S3 would just have to come to some agreement on the existing revenue stream and order book. Likely, Cirrus would retain those orders and continue to service them as the heavy engineering and customer support work is complete. Now it's production, shipping and booking revenue. S3 would probably go for that deal just to keep the total acquisition cost down. Or it could be shifted to S3 and the deal price would reflect the earnings stream from the pending orders. Cirrus would just agree to supply the parts off their fab. Either way, a wash.
I doubt if there would be any antitrust problems as both Cirrus and S3 currently have falling market shares (for now). Also, with Intel buying into the graphics business via CHPS, S3 & Cirrus could argue they need the economic and engineering mass to compete effectively against the beast of Intel.
Earlier this year when Cirrus was really hurting, this rumor of S3 buying Cirrus' graphics business was going around. At that time I recall posting that I thought it was a great idea for S3 as it would remove the severe pricing pressure Cirrus was creating at the low end of the business in an attempt to buy their way back into the graphics business. These days, I think there's less of a margin win for S3 on this point as S3 pretty much won the low end (<$10) graphics chip business.
Regards,
Ski |
