If I had $400 Million Dollars I would have bought Art-X as well! Then again if I had 400 million I wouldn't be writing this right now :). I'd be partying like a freaking rockstar! ATI is purchasing Art-X to break into the e-appliance and gaming realm. I'd say Art-X is a good place to start. Here's the goods!

OTTAWA, Feb 16 (Reuters) - ATI Technologies Inc. (Toronto:ATY.TO - news) (NasdaqNM:ATYT - news), the world's leading graphics chip maker, said on Wednesday it will buy chip developer ArtX Inc. in a $400 million stock and option deal aimed at expanding into the electronic appliance market.

Under the agreement expected to close in four weeks, ATI will pay 24.6 million ATI common shares and eight million ATI options.

The acquisition is expected to boost earnings after the third quarter, adding 0.05-1.0 cents per shares in fiscal 2001 and another 10-15 cents in fiscal 2002.

The purchase of Palo Alto, California-based ArtX advances ATI's strategy to expand its market from computers to appliances, such as Internet-enabled gear.

ArtX designs and develops graphics chips for such appliances as DVD players and Internet terminals alongside products that work on high-performance PCs.

Founded in 1997, ArtX recorded $10 million revenue in fiscal 1999, but the 70-employee firm projects massive growth with sales expected to reach $300 million in 2003.

ATI recorded fiscal 1999 revenue of 1.2 billion, with a net income of $107 million.

Privately-held ArtX supplies chips for Nintendo Co. Ltd.'s home video console and boasts customers like Matsushita Electric Inc. and Acer Group.

ArtX is also shipping an integrated PC chip set that ATI said is acknowledged as the highest performing integrated product on the market.

Thornhill, Ont.-based ATI said the deal delivers several advantages, particularly by increasing its stake in the e-appliance and game console market.

``The e-appliance opportunity rates strong growth. We're banking on the fact that this will be half of ATI's business by the end of this decade,'' said Henry Quan, ATI vice president of corporate marketing, in an analysts' conference call.

``Without accounting for synergies, the deal will add over $600 million of revenues over the next five years.''

ATI said it identified the e-appliance market for strong growth three years ago and is pursuing that sector.

``The set-top box, consumer electronics and console markets will provide the highest growth to ATI and ArtX will improve our deployment rate and our success in this market,'' said Quan.

``There are additional design wins coming. I know we keep saying this, trust me, you'll see more announcements coming in the next couple of weeks.''

ATI announced on Monday that Sony Corp. will include its chips in digital set-top boxes. Set-top boxes are used to receive digital data from cable operators, allowing high-speed digital services such as Internet access.

Investors applauded the deal, sending ATI stock to C$24.90 on the Toronto Stock Exchange before it slipped to C$22.50, a gain of 70 Canadian cents, or nearly 3.5 percent. On Nasdaq, the issue added 1/2 to trade at 15-9/16.

``What I like also is that they bring additional strong management and presence in the U.S.,'' said Emil Savov, analyst at Goepel McDermid. ``The founders and senior executives are formerly from Silicon Graphics (Inc. (NYSE:SGI - news)) which is the top graphics work station designer. Period.''

Dave Orton, president and chief executive of ArtX, will join ATI in a new position of president and chief operating officer, while ArtX co-founder and chairman Wei Yen will join ATI's board of directors.