HTC Corp. has agreed to purchase S3 Graphics Co. in a deal that will give the second largest smartphone maker in Asia access to more patents as it tries to defend itself against infringement lawsuits from its rival Apple Inc. HTC is going to pay $300 million in cash for the company based in Fremont, California which provides image compression technology to Sony Corp.’s PlayStation and Nintendo’s Wii machines, said the company’s Chief Financial Officer Winston Yung in Taipei today. The graphics company is being sold by VIA Technologies Inc. which holds a 12.5% stake and WTI Investment International Ltd., which is a holding company that is controlled by VIA and HTC’s chairwoman Cher Wang.
HTC’s legal battle against Apple will be boosted by owning S3 Graphics. Apple had sued the Taoyuan, Taiwan based cellphone manufacturer last year for patent infringements. However, just last week S3 Graphics won a similar ruling against the manufacturer of iPhones and iPads concerning two patents about compression technology. Yung said that buying a patent portfolio will be very useful for the company. However, he declined to comment on the specific lawsuits. Today, HTC climbed 3.3% in Taipei before it announced the acquisition and its second quarter earnings.
This year the company’s shares have gained a record 22%. VIA, which is a Taipei based designer of computer chips, will receive $147 million from the sale along with a $37 million gain, it stated in a statement today. HTC’s Yung said that WTI will receive $153 million, with the difference in value arising because of the two owners holding different classes of shares.
As a part of the transaction, HTC will acquire 235 patents, which are mostly related to graphics technology. A lawsuit had been filed by Apple against HTC in June last year in a Delaware district court, which had added to an earlier complaint that had been filed against the company. Apple also asked the US International Trade Commission in March last year to block imports of HTC phones into the country, alleging that the company had infringed upon patents related to the implementation of platforms.
HTC had then denied the charges and responded with its own lawsuits against Apple. A Beijing based spokeswoman for Apple, Carolyn Wu, did not respond to queries. S3 Graphics, which was acquired by VIA in 2002, recently won a ruling by an ITC judge who determined that two of the company’s patents had been violated by Apple.
