ATI buys Chromatic for $67 million

ATI buys Chromatic for $67 million
SUNNYVALE, Calif. — Chromatic Research Inc. is being acquired by ATI Technologies Inc. (Thornhill, Ontario), a PC-graphics company, in a cash deal worth $67 million, the companies announced Wednesday (Oct. 21).

The deal gives a solid home to the ailing Chromatic and boosts ATI's aspirations to move beyond the contentious PC market.

Chromatic's 140 employees and all of the company's liabilities will come under ATI's wing, pending approval by ATI's shareholders. Targeted to close on Nov. 13, the deal was first first revealed on Oct. 8 when ATI announced it was in negotiations to buy Chromatic.

ATI will inherit Chromatic's in-progress research and its patent portfolio, but it will not obtain Chromatic's Mpact multimedia processor line. Chromatic, which halted development in July of new Mpact parts and refocused its work on a new breed of processor, now plans to sell Mpact to Multimedia Convergence Corp. (Chicago), which will continue to supply and support the parts.

"ATI is not buying the Mpact product line," said John Monti, vice president of marketing for Chromatic (Sunnyvale, Calif.). "We're going to sell that prior to the merger [with ATI], in the next couple of weeks we hope."

Every Chromatic employee has received a job offer from ATI, Monti said. While it's probable that the staff will move to an ATI facility in the Bay area, Monti thought it unlikely that ATI would force any staff to leave the region.

Chromatic's stated mission after halting work on Mpact was to produce a new architecture that would address Mpact's shortcomings. Specifically, the new chip will use an open software environment and will better fit the industry's tight design cycles. Target applications for the chip are widespread, including set-top boxes and digital TVs.

ATI expects Chromatic's work to carry well in those markets and in "sub-$500" PCs, according to company statements. As such, the merger could help ATI's recent push from PCs into consumer electronics. ATI in August made its first foray into that business when General Instrument Corp. announced it would use ATI's Rage graphics chips in GI's DCT-5000+ set-top box.