sbp
03-13-2002, 01:28 AM
http://biz.yahoo.com/rf/020311/sin92613_2.html
SINGAPORE, March 11 (Reuters) - Computer peripherals maker Creative Technology Ltd on Monday unveiled plans to re-enter the graphics market by taking over loss-making U.S.-based 3Dlabs Inc for US$103.7 million.
Singapore's Creative, known for its Sound Blaster sound cards, plans to buy the 72 percent in 3Dlabs it doesn't already own by paying one-third in cash at US$1.20 per share and the rest in stock at US$2.40 per share.
The deal works out to US$3.60 per share, a 22 percent premium to 3Dlabs' closing price on Friday of US$2.95. Shares of 3Dlabs have tripled since the end of December.
Some analysts said they were concerned whether Creative was making the right move after having taken big losses in the graphics business in the late 1990s. The company had reduced its exposure to the graphics sector barely two years ago.
``The acquisition of loss-making 3Dlabs...deviates from Creative's earlier statement on concentrating on its core audio business and de-emphasising the highly competitive storage and graphic business,'' said GK Goh analyst Jonathan Ng.
Ng said Creative's bid for 3Dlabs translated into a high price-to-book ratio of 4.3 times.
Creative shares, suspended in the morning pending the announcement, were volatile. After hitting a high of S$24.50, up S$1.10, they eased back to finish down 10 cents at S$23.30.
``The company (3Dlabs) is small relative to the other graphics leaders now, so it's not easy at all. If they want to go into the gaming market, it will be a lot more work,'' said an analyst with a European bank.
HIGH PRICE
Sim Wong Hoo, Creative's founder and chief executive officer, said that after analysing 3Dlabs' product lines and technology roadmap, he believed it had a significant competitive advantage in the graphics space with its high-performance graphics technology.
``For the first time, we will own substantial graphics intellectual property and a formidable graphics patent portfolio that will allow us to achieve a higher level of returns...as we re-emphasised the graphics category,'' he said.
3Dlabs' latest graphics chips will be included this year in workstations built by Hewlett-Packard and Compaq.
The purchase could be add to Creative's earnings in the first half of the next calendar year, excluding any charges related to the acquisition, Sim said.
``This is a very different opportunity than when we were exclusively a graphics card provider that relied solely upon chips from other vendors,'' he said.
Speaking to reporters at a news conference, Sim said the move would allow Creative to create synergy between its audio and graphics business and have better control over the product cycle.
The graphics business would also have potential for high margins like its audio business, which was generating margins of more than 30 percent, Sim added.
He said 3Dlabs would launch ``a highly scaleable chip'', which would allow it to create a family of graphics chips to target new graphics market segments.
The chips could go to the mass market by the end of this year while being scaled up for the high-end market.
On the price of the acquisition, Sim said 3Dlabs had great technology and there was value to be extracted in the future.
3Dlabs reported an operating loss, excluding inventory reserves and one-time charges, of $6.2 million for the fourth quarter to December against a $9,000 profit in the third quarter. Its fourth quarter revenue was $10.1 million compared with $20.1 million in the third quarter.
($1 equals S$1.82)
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Kind of a strange move. Creative said it was concentrating on its core market. That is why Creative stopped selling videocards over here in the US. Then they go and do this. :hmm:
It seems like a Mutt and Jeff marriage. 3Dlabs makes high end workstation market graphics videocards. Creative basically makes mass market products.
Years ago 3Dlabs did have a couple chipsets used in consumer level boards. But they produced images that had graphical glitches and missing texture problems. Creative was one of the companies that used one of those chipsets (Permedia2 chipset).
Nvidia's Quadro chips, ATI's FireGL lineup pro graphics, and 3dlabs Wildcat and Oxygen chips compete with one another in that high end workstation market.
So Creative is doing this to gain a foothold in the high end workstation market and to use 3Dlabs tech to enter the mass market. If Creative wanted to just enter the high end workstation market why not buy Elsa who produce Nvidia's Quadro range? In terms of the mass market: why not buy 3dfx for chump change when 3dfx was going down? After all Creative owned a chunk of 3dfx stock. Or why not buy STM Graphics graphics division which is currently up for sale?
Creative does have deep pockets and a significant retail presence which is good for mass market products.
Supposely we will see a new Creative 3Dlabs mass market card by the end of this year.
Overall we are going to have to see how this turns out.
SINGAPORE, March 11 (Reuters) - Computer peripherals maker Creative Technology Ltd on Monday unveiled plans to re-enter the graphics market by taking over loss-making U.S.-based 3Dlabs Inc for US$103.7 million.
Singapore's Creative, known for its Sound Blaster sound cards, plans to buy the 72 percent in 3Dlabs it doesn't already own by paying one-third in cash at US$1.20 per share and the rest in stock at US$2.40 per share.
The deal works out to US$3.60 per share, a 22 percent premium to 3Dlabs' closing price on Friday of US$2.95. Shares of 3Dlabs have tripled since the end of December.
Some analysts said they were concerned whether Creative was making the right move after having taken big losses in the graphics business in the late 1990s. The company had reduced its exposure to the graphics sector barely two years ago.
``The acquisition of loss-making 3Dlabs...deviates from Creative's earlier statement on concentrating on its core audio business and de-emphasising the highly competitive storage and graphic business,'' said GK Goh analyst Jonathan Ng.
Ng said Creative's bid for 3Dlabs translated into a high price-to-book ratio of 4.3 times.
Creative shares, suspended in the morning pending the announcement, were volatile. After hitting a high of S$24.50, up S$1.10, they eased back to finish down 10 cents at S$23.30.
``The company (3Dlabs) is small relative to the other graphics leaders now, so it's not easy at all. If they want to go into the gaming market, it will be a lot more work,'' said an analyst with a European bank.
HIGH PRICE
Sim Wong Hoo, Creative's founder and chief executive officer, said that after analysing 3Dlabs' product lines and technology roadmap, he believed it had a significant competitive advantage in the graphics space with its high-performance graphics technology.
``For the first time, we will own substantial graphics intellectual property and a formidable graphics patent portfolio that will allow us to achieve a higher level of returns...as we re-emphasised the graphics category,'' he said.
3Dlabs' latest graphics chips will be included this year in workstations built by Hewlett-Packard and Compaq.
The purchase could be add to Creative's earnings in the first half of the next calendar year, excluding any charges related to the acquisition, Sim said.
``This is a very different opportunity than when we were exclusively a graphics card provider that relied solely upon chips from other vendors,'' he said.
Speaking to reporters at a news conference, Sim said the move would allow Creative to create synergy between its audio and graphics business and have better control over the product cycle.
The graphics business would also have potential for high margins like its audio business, which was generating margins of more than 30 percent, Sim added.
He said 3Dlabs would launch ``a highly scaleable chip'', which would allow it to create a family of graphics chips to target new graphics market segments.
The chips could go to the mass market by the end of this year while being scaled up for the high-end market.
On the price of the acquisition, Sim said 3Dlabs had great technology and there was value to be extracted in the future.
3Dlabs reported an operating loss, excluding inventory reserves and one-time charges, of $6.2 million for the fourth quarter to December against a $9,000 profit in the third quarter. Its fourth quarter revenue was $10.1 million compared with $20.1 million in the third quarter.
($1 equals S$1.82)
--------------
Kind of a strange move. Creative said it was concentrating on its core market. That is why Creative stopped selling videocards over here in the US. Then they go and do this. :hmm:
It seems like a Mutt and Jeff marriage. 3Dlabs makes high end workstation market graphics videocards. Creative basically makes mass market products.
Years ago 3Dlabs did have a couple chipsets used in consumer level boards. But they produced images that had graphical glitches and missing texture problems. Creative was one of the companies that used one of those chipsets (Permedia2 chipset).
Nvidia's Quadro chips, ATI's FireGL lineup pro graphics, and 3dlabs Wildcat and Oxygen chips compete with one another in that high end workstation market.
So Creative is doing this to gain a foothold in the high end workstation market and to use 3Dlabs tech to enter the mass market. If Creative wanted to just enter the high end workstation market why not buy Elsa who produce Nvidia's Quadro range? In terms of the mass market: why not buy 3dfx for chump change when 3dfx was going down? After all Creative owned a chunk of 3dfx stock. Or why not buy STM Graphics graphics division which is currently up for sale?
Creative does have deep pockets and a significant retail presence which is good for mass market products.
Supposely we will see a new Creative 3Dlabs mass market card by the end of this year.
Overall we are going to have to see how this turns out.