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Broadcom Grabs Chipmaker

Broadcom Corp. apparently wasn't full after Thanksgiving because it gobbled up yet another company Tuesday, making a total of 12 for the year. Tuesday's acquisition was VisionTech Ltd., a supplier of digital video/audio MPEG-2 compression and decompression chips for Personal Video Recording (PVR), interactive video conferencing and IP video streaming.

Broadcom will buy the Herzliya, Israel-based company for about $776.6 million in stock, issuing about 7.96 million shares of its Class A common stock.

Broadcom wants to combine VisionTech's MPEG-2 technology with its family of interactive-TV video decoder devices to speed delivery of its solution for next generation PVR-enabled set-top boxes. Broadcom said the combination will give manufacturers more integrated features, higher flexibility and improved price and performance.

"PVR is one of the most compelling consumer applications which will radically change the way people watch TV, allowing simultaneous recording and playback of live broadcast -- without a VCR or videotape," said Dr. Henry T. Nicholas III, Broadcom's president and chief executive officer. "VisionTech's capability to compress live video in real time will be used across all of Broadcom's product lines for applications ranging from distributed video over home networking to IP video streaming over the Internet, also changing the way people use their computers, digital video cameras and other consumer electronics to communicate over broadband."

However, competition in the still nascent market is stiff. Two of the biggest players around, Microsoft Corp. and America Online Inc. are rolling out their own PVR software for set-top box manufacturers. And ReplayTV, a pioneer in PVR, just Tuesday announced that it would withdraw from the set-top box manufacturing side of its business to focus exclusively on the software.

Broadcom said VisionTech will form the core of a new Broadcom Israel subsidiary to be managed by VisionTech president and chief executive officer Amir Morad. Broadcom Israel will focus on developing silicon solutions for enabling MPEG compression of voice, video and data as well as evaluating new synergistic technologies from the start-ups in the region.

Broadcom anticipates that the merger will close in 60 days and said it will be accounted for under the purchase method. The boards of both companies have approved the merger, though VisionTech's shareholders have not yet voted. Broadcom expects to record a one-time charge for purchased in-process research and development expenses related to the acquisition.

Broadcom stock was trading down at $88.43 in early afternoon trading Tuesday from an open $98.25.