ATI Cements Its Lead in the Consumer Digital Television Market

ATI and Terayon Communication Systems today announced they have signed a definitive agreement for ATI to acquire Terayon's cable modem silicon intellectual property and hire approximately twenty-five employees from Terayon's design team. Under the terms of the agreement, ATI will pay Terayon up to a total of $14 million dollars in cash, $6.95 million of which will be paid on closing with the balance subject to the satisfaction of certain conditions, including completion of certain deliverables. The acquisition will extend ATI's product and technology range and provides for one-stop-shopping for the value-added silicon in next generation digital televisions.

The explosion of Digital Cable Ready (DCR) HDTV products on North American store shelves reflects consumers' desire to enjoy movies by directly connecting their television sets to the cable system without a separate set top box. Adding cable modem technology enables cable TV operators and TV manufacturers to offer key features such as video on demand, electronic program guide, and completely new interactive services. LG and Samsung demonstrated Interactive DCR products at this year's Consumer Electronics Show.

"ATI is the leading supplier of silicon in HDTVs," said Geoff Phillips, Vice President and General Manager, Digital Television Business Unit, ATI Technologies Inc. "This acquisition of Terayon's field-proven IP cements our lead as the industry moves to Interactive Digital Cable Ready technology, and keeps us at the cutting edge of DTV development."

ATI has shipped over 5 million digital television chips in 2004 to leading consumer electronic companies including Sony, Samsung, Mitsubishi, JVC, Philips, Funai, ALPS, Panasonic, Thomson, Toshiba, Sanyo, Sharp, Hitachi, Changhong, Xoceco, Hisense, Scientific Atlanta, Pace, and Kreatel. ATI's THEATER™ and NXT™ demodulators have 85% market share and its XILLEON™ MPEG decoders have 40% market share in the ATSC/DCR Markets.

"This agreement with ATI is a key step in our strategic initiative to focus our efforts on our core video and home access solutions businesses," said Jerry Chase, Terayon CEO. "Several years ago being vertically integrated was a competitive advantage for us in the cable modem business, but today it is more advantageous for us to focus on adding new value-added functionality to our home access solutions rather than designing and building our own cable modem chips. This deal with ATI will enable us to do just this, and to free additional resources for expanding our highly successful digital video solutions product lines."

More than three million Terayon TJ 700x series cable modems have been deployed by cable operators worldwide to deliver high-speed Internet access, online gaming, and other broadband services to consumers. The TJ 700x cable modem series includes the TJ715 DOCSIS 2.0 certified modem, the euro-DOCSIS 2.0 Certified TJ 720x and the TJ 735x, which has been designed specifically for Japanese cable television operators.