C-Cube to Unload Chip Biz; DiviCom to Join with Harmonic

One of Silicon Valley's most aggressive semiconductor companies has surrendered to the siren song of merger and acquisition. On October 27, Milpitas, California-based C-Cube Microsystems announced that it has entered into an agreement to combine its DiviCom digital television subsidiary with Harmonic, a Sunnyvale designer and maker of digital and fiber-optic systems that deliver video, voice, and data via cable, satellite, telephone lines, and wireless networks. DiviCom products enable digital video broadcasting over the same variety of networks. Blending the two companies may be a good fit for the coming age of digital TV and Internet-based "infotainment."

C-Cube will spin off its semiconductor business before finalizing the Harmonic acquisition of DiviCom in a stock trade that could result in a value of $1.7 billion for the combined new company. C-Cube shareholders will also receive shares of the spun-off semiconductor business, according to Business Wire.

"The combination of DiviCom and Harmonic creates a powerful broadband networking company that is the premier provider of open solutions for voice, video, and data infrastructure," according to C-Cube CEO Alexandre Balkanski.

C-Cube shareholders could benefit from the sale of the semiconductor business, said division president Umesh Padval. "C-Cube Semiconductor has made excellent gains over the past year, and leads the world in the digital video marketplace. We foresee accelerating opportunities in our growth platforms of DVDs, set-top boxes, and codecs." Stockholders of both companies must approve the merger, which could take place in the first quarter of 2000.