S3 to sell graphics chip business to Via joint venture for $323 million

SANTA CLARA, Calif.--In a move to transform itself into an Internet appliance company, S3 Inc. today announced plans to sell its graphics chip business to a four-month-old joint venture with Via Technologies Inc. of Taiwan for $323 million in cash and securities. S3 said it will also receive additional earn-outs if certain financial milestones are reached by the S3-Via Inc. joint venture.

"With this announcement, we've effectively completed the first phase of our long-term growth plan, transforming S3 from a graphics focused semiconductor supplier to a well-positioned Internet appliance company with leadership product and substantial financial resources," said Ken Potashner, CEO and chairman of the Santa Clara company. "As we begin our next phase, our challenges are to broaden our product offerings leveraging the success of the Rio players and our home networking products and execute on internal development and product plans."

S3 said it was exploring options for its multimedia board business, which could be transferred to a partnership with another company or joint ventures.

Under its agreement with Via Technologies, S3 retain ownership of established cross-licensing agreements with Intel Corp., covering chip set and bus technologies. S3 said the transaction with Via was expected to be completed by the third quarter of 2000.

S3 and Via Technologies formed the S3-Via joint venture in early November to address the competitive PC graphics and core logic business (see Nov. 2 story). For Via Technologies, the new joint venture and transfer of S3's chip business to the operation will give it "an unrivaled opportunity in the volume OEM PC market for high-performance, yet cost-effective integrated products," said Wen-Chi Chen, president and CEO of the Taiwan chip company. "By combining S3's cutting-edge graphics and video capabilities with Via's market leading core logic chipset technology, we believe that the joint venture will enable us to expand our strong competitive position in the rapidly-growing integrated solutions market," he declared.