Creative puts stock in graphics; agrees to buy 3Dlabs

Creative Technology Ltd., maker of digital entertainment products such as its Sound Blaster sound card, has agreed to purchase the remaining shares of graphics vendor 3Dlabs Inc. Ltd., in a deal valued at US$170 million.

Announcement of the deal Monday marks Creative's re-entry into the graphics market, after moving away from the market a couple years ago to focus its core technologies, such as audio.

Financially troubled 3Dlabs said in a statement Monday that it would continue to supply, support and develop its product lines under terms of the agreement.

Singapore-based Creative said that it will purchase the company's stock at $3.60 a share, two-thirds of which will be converted to Creative stock and one-third to cash. If the deal is approved by both companies' board of directors as well as regulatory agencies, 3Dlabs shareholders will receive $1.20 in cash and Creative ordinary shares with a value of $2.40 for each share of 3Dlabs.

Creative is already a shareholder of 3Dlabs, and has collaborated with the company on 3D gaming boards, graphics processors and other products.

Sunnyvale, California-based 3Dlabs said that although the company has been experiencing financial difficulties recently, it expects the deal with Creative to allow it to make a splash with the upcoming release of its new graphics processors for the desktop.

Also Monday, 3Dlabs reported a 2001 fourth-quarter net loss of $20.4 million, or $0.67 per share, compared to a net loss of $3.7 million, or $0.17 per share, in the fourth quarter of 2000. Revenue for the fourth-quarter came in at $10.1 million, less than half of the $24 million the company reported in the fourth quarter of 2000.

Despite recent pessimism about the health of the graphics industry, stock in Creative (CREAF) inched up $0.13, or 1 percent, to $13.10 a share after the deal was announced Monday morning.

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Scarlet Pruitt

PC World
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