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GlobeSpan and Virata are confident that, when combined, they can grow more efficiently and bring a more complete product offering to DSL equipment makers.

InformationWeek Staff

October 2, 2001

1 Min Read

DSL chipmakers GlobeSpan Inc. and Virata Corp. will be one if GlobeSpan's proposed buyout of Virata is approved. The all-stock deal would create a rival to Texas Instruments Inc. in the market for digital subscriber line integrated circuits, software, and systems design. Shareholders responded negatively to the news, driving GlobeSpan shares down 7.3%, to $8.38, and Virata shares down 15.5%, to $8.43. Based on those closing prices, the transaction would be worth $544.9 million.

GlobeSpan makes integrated circuits and software for systems design of DSL applications; Virata makes communications chips and software for DSL, satellite, wireless, and other broadband networking equipment. Struggling DSL companies need cheaper equipment that offers more functionality, making the deal logical, TeleChoice analyst Pat Hurley says. The deal would combine GlobeSpan's modem-to-modem chips with Virata's more specialized service-oriented processors. "Most chipmakers are doing one or the other but are looking at doing both," Hurley says. The combined company would more effectively compete with Texas Instruments, which Hurley says is the leader in integrated DSL chips. The buyout needs regulatory and shareholder approval. GlobeSpan CEO Armando Geday said Monday that the deal would join complementary technologies. "We share a common vision of the direction and the potential of the DSL marketplace," said Geday, who would be CEO of GlobeSpan Virata. Virata CEO Charles Cotton would serve as executive chairman for a year before relinquishing his post. Says Cotton, "We can accomplish more together with GlobeSpan strategically, operationally, and financially than we could on a standalone basis."

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