S3 Inc. and Diamond Multimedia Systems Inc. Friday said the merger of the two companies is complete.
Graphics chip maker S3, based here, said on June 22 that it would buy Diamond, a San Jose, Calif.-based maker of multimedia component technology. Under the agreement, Diamond shareholders will receive 0.52 of a share of S3 stock for each share of Diamond stock.
The deal was approved by both shareholders of both companies on Thursday.
Andrew Wolfe, S3 chief technology officer, said the merger allows the company to diversify beyond the graphics business into Internet audio, broadband communications and home networking.
"It also means that we now become the broadest graphics supplier in the industry," he said. "As OEMs become more dependent on their vendors to provide more complete packaged services, they want to deal with fewer and fewer vendors."
Diamond's products include the Rio series of Internet audio appliances, a line of home-networking products, the Stealth and Viper series of video cards and the Supra series of modems.
Based on the completed merger, S3 said it restructured its business into four separate units: communications, multimedia, professional graphics and RioPort.
The communications unit includes home-networking products, broadband communications products and the Rio players. The multimedia business will handle all the desktop and mobile graphics products, while the professional graphics unit is based on what S3 described as "exclusive access" to IBM Corp.'s high-end graphics technology.
RioPort, a wholly owned subsidiary of S3, is an online site for digital audio content.
The merger of S3 and Diamond is the latest in a string of similar pairings between graphics chip makers and add-in card vendors.
In May, 3dfx Interactive Inc., San Jose, and STB Systems Inc., Richardson, Texas, completed their merger. Last November, Thornhill, Ontario-based ATI Technologies Inc. bought Chromatic Research Inc., Sunnyvale, Calif.
Dwindling margins in the graphics business has brought about alliances, mergers and acquisitions to help improve the bottom line, said Bob McQuillan, executive editor at Jon Peddie Associates, a Tiburon, Calif.-based research firm.
The end goal is a vertically integrated business model, where a company supplies the chips, the add-in boards and the software that drives them, he said.
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