by Anton Shilov
07/06/2011 | 09:21 AM
High-Tech Computer (HTC), a leading maker of smartphones, on Wednesday announced acquisition of shares of S3 Graphics from Via Technologies. With the takeover of S3 Graphics, HTC will not only get a number of crucial graphics related patents, which will help the firm in its legal fight against Apple, but may also enable it to eventually create its own system-on-chip for mobile devices.
Via Technologies acquired S3 Graphics in 2001 with the intention to accelerate integration of graphics capabilities with its processor and chipset products. However, S3 Graphics became undercapitalized in 2005, and Via introduced WTI Investment International as a new investor to help fund the operations and R&D initiatives. WTI is a private investment company, in which Cher Wang [chairman of Via as well as chairman and co-founder of HTC] is a significant shareholder.
Graphics technologies of S3 Graphics can hardly be compared to those of AMD, Nvidia, PowerVR and some others. However, S3G still owns a number of crucial patents that are currently licensed by others. As a result, the acquisition will help HTC to more successfully battle Apple, which accuses HTC over patent infringements and which is counter-sued by the Taiwanese company, in court.
Potentially, the takeover of S3 Graphics may also enable HTC to build its own system-on-chip devices eventually. Unfortunately, HTC itself does not own license to make ARM chips and also does not have appropriate experience. In fact, it would be logical for HTC to acquire Via Technologies itself (which owns both ARM and x86 licenses) rather than S3G alone, especially given the fact that Cher Wang is the chairman of both companies and her husband, WenChi Chen, is the chief exec of Via and an experienced engineer.
Under terms of the agreement with HTC, total consideration for all outstanding shares of S3 Graphics will be $300 million. Of which, Via will receive $147 million; and WTI will receive $153 million. Via will recognize a capital gain of $37 million and paid-in-capital of $115 million in this transaction.
"The transaction would allow Via to monetize a portion of its rich IP portfolio, yet retain its graphics capabilities to support the development and sale of its processors and chipsets," said Tzu-mu Lin, senior vice president and board director of Via.
The proposed transaction has received approvals from the boards of directors of Via, WTI, and HTC. Subject to regulatory approvals and other customary conditions, the transaction is expected to close before end of 2011.