3DLabs to be acquired by Creative Technology

3DLabs announced today that it has signed an agreement to be acquired by Creative Technology LTD. (NASDAQ:CREAF) Creative will purchase 3Dlabs stock at $3.60 per share, with two-thirds being converted to Creative stock and one-third to cash, valuing the company at approximately $170 million.

“We see great opportunities to leverage 3Dlabs’ high-end professional market leadership into higher volume PC desktop products that satisfy power gamers’ insatiable demand for faster graphics,” said Sim Wong Hoo, Chairman and CEO of Creative. “We have analyzed 3Dlabs’ forthcoming products and technology roadmap and we believe that their development of a scalable visual processing architecture with new levels of programmability and flexibility will provide a significant competitive advantage in the graphics space. The technological breakthroughs that 3Dlabs has achieved to date, coupled with the strong market we see for high-performance graphics processors, provide a tremendous growth opportunity for our company.”

“We are very excited about the opportunity provided by Creative’s worldwide distribution network, huge customer base, world-famous brands, and financial resources to maximize the technology we produce,” said Osman Kent, Chairman and CEO of 3Dlabs. “Integrating the resources and expertise of these two industry-leading companies can create a truly potent force in the graphics market. The timing of this acquisition is fortuitous, as we are close to releasing the most exciting high-performance graphics lineup in our history. We have experienced a difficult financial period during which we continued to devote significant resources to the development of our breakthrough technologies. Creative can provide us the resources and opportunity to expand our leadership position beyond the high end professional graphics market. We can leverage Creative’s vast experience at building global brands and market share to take full advantage of the market potential for our upcoming release of an exciting new family of graphics processors for the desktop.”

This is a good thing for 3Dlabs, since it lacks the marketing muscle to compete with NVIDIA and ATI, even though 3DLabs has consistently produce excellent (though not always bleeding-edge) products. With 3DLabs posting a loss of nearly $5 million for Q2, the needed some infusion of cash to compete in the cut-throat consumer graphics market. While 3DLabs has typically sold to the workstation market, it’s getting tough to ask premium prices for high-end graphics boards when the sub $400 boards could do nearly as much. With 3DLabs new chipset coming out and with the OpenGL 2.0 proposal, 3DLabs can certainly use the infusion of cash that the Creative acquisition will bring.

UPDATE: The acquisition was completed May 16,2002.

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