Broadcom to Purchase AMD’s Digital TV Business

Chip maker Broadcom has said that it would buy Advanced Micro Devices Inc’s digital television chip business for $192.8 million in cash which will allow them to enter the market for cheaper television sets.

From Reuters:

AMD shares rose 4.5 percent after the news but Broadcom shares fell 3.5 percent after it said the deal would hurt earnings in the first year.

However, Stifel Nicolaus analyst Cody Acree applauded the agreement, saying it opens high-volume, high-growth consumer markets for Broadcom’s TV chip unit.

“If Broadcom gets into a lower end DTV box, it allows them to target markets like China, India and Brazil,” said Acree, adding that sales of cheaper televisions could be lifted by economic uncertainty among consumers.

After the deal, Broadcom would be selling chips for television sets with screens of up to 20 inches priced around $200 to $300. Broadcom, which makes chips for a range of consumer electronics including cell phones and set-top boxes, had previously focused on chips for more expensive TVs.

The deal is expected to close in the fourth quarter and is forecast to cut Broadcom’s full year 2009 net earnings per share by a range of 4 cents to 5 cents, including 2 cents of stock-based compensation, the company said. It expects the impact on earnings to lessen and “approach neutrality” by the fourth quarter of 2009.

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