Smartphone maker HTC is bulking up its graphics capabilities and patent portfolio by buying S3 Graphics from Via for $300 million.
HTC is making
an aggressive move in the highly competitive smartphone world, buying S3
Graphics from chip maker Via Technologies and investment firm WTI Investment
International for $300 million.
The move not
only gives HTC greater graphics capabilities-S3 makes graphics chips for mobile
phones, tablets, PCs and game consoles-but also more leverage in its ongoing
legal dispute with Apple over alleged patent infringements.
The two
companies have been trading legal shots since last year, when Apple officials in
March 2010 filed a lawsuit against HTC, claiming the Taiwan-based device maker
had infringed on almost two dozen Apple patents for its iPhone, relating to the
smartphone's hardware, architecture and interface. HTC executives denied the
claim, and in May 2010, in a filing with the International Trade
Commission,
accused Apple of infringing on HTC patents and
asking that such popular Apple devices as the iPad, iPhone and iPod not be
allowed in the United States.
The
acquisition of S3 Graphics would further bolster HTC's patent portfolio, giving
it more leverage and protection when dealing with Apple and the like in an
increasingly litigious smartphone space. HTC will gain 235 patents and pending
applications from S3, according to reports.
S3's
image-compression technology is used in a number of game consoles, including
Nintendo's Wii and Sony's PlayStation, and is increasingly being incorporated
in other devices, including smartphones and tablets. And the company is no
stranger to patent litigation. On July 1, the ITC ruled that Apple had
infringed on two S3 patents involving image compressing and image data formats.
"Buying a
patent portfolio will be very useful to us," HTC CFO Winston Yung said,
according to
Bloomberg News, though he did not comment on
specific legal disputes.
Apple
officials have been aggressive in pursuing legal action against smartphone
competitors they say have infringed on Apple patents. The company also recently
bulked up its own patent portfolio, as part of a consortium that bought
bankrupt
Nortel Networks' patents for $4.5 billion. Also
in the consortium were Microsoft, BlackBerry maker Research In Motion, Sony,
EMC and Ericsson. Google lost out on the patents, which some analysts said the
company needed to protect itself from litigation in the mobile-technology
market. Googe's Android mobile operating system is used by a growing number of
mobile-device manufactures-including HTC-and is the key competitor to Apple's
iPhone and iPad devices.
In the Nortel
deal, Apple and the others reportedly bought 6,000 patents and patent
applications that cover such areas as wireless, 4G technology, Web search,
social networking, data networking, Internet, service providers and
semiconductors.
News of the S3
deal came the same day that HTC announced record second-quarter financial
numbers, including $608 million in income, more than doubling the income from
the same period last year. HTC was helped in large part by demand for a number
of popular smartphones, including the Desire HD, Thunderbolt and Sensation
devices.
The HTC-S3
deal had the fingerprints of WenChi Chen and his wife, Cher Wang, all over it.
Cher Wang is chairman of both HTC and Via, and is also a large shareholder in
WTI. WenChi is CEO of Via. Via bought S3 in 2001 to improve the integration of
graphics capabilities in its processors and chipsets. It sold part of the
company to WTI in 2005.
Of the $300
million HTC will pay for S3, Via will get $147 million and WTI $37 million.
While HTC will own S3, it reportedly will give a perpetual license of the S3
patents to Via, enabling the x86-based chip maker to continue to strengthen the
graphics capabilities in its products.
HTC and Via
officials expect the deal to close before the end of 2011.
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