Replay and rewind

Broadcom has signed an agreement to acquire VisionTech, Ltd., a supplier of digital video/audio MPEG-2 compression and decompression chips.

Broadcom has signed an agreement to acquire VisionTech, Ltd., a supplier of digital video/audio MPEG-2 compression and decompression chips enabling Personal Video Recording (PVR), interactive videoconferencing, and Internet Protocol (IP) video streaming for the consumer electronics market.

Founded in 1996, VisionTech is a privately held, fabless semiconductor company headquartered in Herzliya, Israel. VisionTech’s latest MPEG-2 video/audio encoder chip, Kfir-2, has been adopted by many set-top box manufacturers, including Motorola’s Broadband Communications Sector (formerly General Instrument), Scientific-Atlanta, Pace, Microsoft WebTV, as well as PVR pioneer Replay TV. Personal Video Recording enables viewers to freeze a live TV program, instantly replay or rewind a program being watched, and skip ahead in a recorded program to a favourite movie scene or the next play of a sporting event.

According to Cahners In-Stat, between 2001 and 2003, unit shipments of PVR-enabled set-top boxes are expected to increase approximately 275 percent each year. During the same period, the installed base of PVR-enabled set-top boxes is expected to grow to eight million units.

Following the acquisition, VisionTech will form the core of Broadcom Israel. Broadcom Israel will focus on developing silicon solutions that enable MPEG compression of voice, video and data.

In connection with the acquisition, Broadcom will issue in aggregate about 7.96 million shares of its Class A common stock in exchange for substantially all of the assets of VisionTech and upon exercise of outstanding employee stock options and other rights of VisionTech.

The consideration includes Broadcom Class A common stock reserved for future issuance to customers upon the exercise of outstanding performance-based warrants of VisionTech that become exercisable upon satisfaction of certain customer purchase requirements.

The merger transaction is expected to close within 60 days and will be accounted for under the purchase method of accounting. The Boards of Directors of both companies have approved the merger, which awaits approval by VisionTech’s shareholders and the satisfaction of regulatory requirements and other customary closing conditions.

Broadcom expects to record a one-time charge for purchased in-process research and development expenses related to the acquisition upon its consummation.

Broadcom and VisionTech will demonstrate a complete PVR-enabled set-top box solution at the Western Cable Show, November 29-December 1, at the Los Angeles Convention Center.

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