Irvine-based chip maker Broadcom Corp. moved to acquire Advanced Micro Devices Inc.'s digital television business for $192.8 million Monday, aiming to become a leader in the growing market.
Broadcom, which also makes chips for Bluetooth headsets and Nintendo's Wii video game console, also agreed to take on about 530 AMD employees, most of them engineers.
The deal -- still subject to regulatory approval but expected to close by the end of the year -- gives Broadcom a wider customer base for its own digital TV business and frees AMD to refocus on its core microprocessor business, in which it is trailing far behind rival Intel Corp.
Broadcom will take over AMD's production of a type of chip that "connects it all -- the panel where the picture comes out, the sound, the power and all those plugs in the back," said Daniel Marotta, senior vice president and general manager of Broadcom's Broadband Communications Group.
Broadcom, which has acquired more than 30 companies since 1999, expects its latest purchase to cut into its earnings by 4 cents to 5 cents a share in 2009. The acquisition puts it in position to take advantage of the increased demand for large-screen and high-definition television sets it predicts in coming years.
Caris & Co. analyst Betsy Van Hees saw the deal negatively, at least in the near term. She said AMD hadn't paid enough attention to its underperforming digital TV segment since the Sunnyvale, Calif., company acquired the unit as part of its 2006 purchase of ATI Technologies Inc.
"The dilution created from the acquisition is spooking the market a bit," said Gary Mobley, an analyst with Piper Jaffray. "But Broadcom's business should ramp significantly in the second half of 2009."
Broadcom's stock fell $1.25, or 4.6%, to $26.17.
AMD's shares gained 12 cents, or 2.1%, to $5.93.
Broadcom is already looking to expand digital TV capabilities to display personal photographs, play music from a digital collection and view Internet content.
"The chips that Broadcom and AMD are making support connectivity," Marotta said. "It's more of an entertainment device for your personal media, for content that doesn't have to come from your service provider."