The merger gives National Semiconductor access to new Intel-compatible chip designs from Cyrix. For their part, Cyrix gains access to National Semiconductor's marketing clout, deeper pockets, and manufacturing facilities. Until now, Cyrix was relying solely on IBM for manufacturing its chips. Cyrix will continue to operate as an independent subsidiary, keeping its operations in Richardson, Texas.

Cyrix relied on IBM's patent cross-license with Intel to produce their Intel-compatible chips; Cyrix itself was never able to negotiate its own patent licensing pact with Intel. Now that National Semiconductor will produce Cyrix chips, are they headed for a lawsuit with Intel? (See SIGPC V1N10, "Digital Sues Intel Over Pentium Patent Infringements") Probably not. National Semiconductor has a longstanding agreement with Intel to share patented technology, which should help to protect them from potential Intel lawsuits.

One of the factors that influenced this deal is the desire by both companies to expand into the growing market of lower-end sub-$500 "information appliances," such as entry-level PCs, NetPCs, NCs, and palmtops. Cyrix has been reasonably successful with its latest microprocessors targeted to this market segment. Their MediaGX chip, which is used in some Compaq Presario models, combines the functions on several chips onto a single system-on-a-chip. Cyrix's fastest Intel-compatible chip, the 6x86 MX, is also showing strong signs of growth.

However, growth based on lower cost is not assured for the merged National Semiconductor/Cyrix. Intel, which currently enjoys about 85% marker share for PC microprocessors, recently cut its prices by an impressive 10-50% margin across its Pentium, Pentium Pro, and Pentium II product lines. Rumors are that Intel's next-generation chip, code named Merced and being jointly developed with Hewlett-Packard, will be ready a year ahead of schedule, perhaps as early as next summer. Merced is said to be a 64-bit processor with a low-end clock speed of 600MHz and at least 4MB of level-two cache. Another Intel-compatible competitor, Advanced Micro Devices, followed Intel and lowered the price of its K6 microprocessors to at least 25% below Intel's new prices.

In a related story, Intel agreed to buy graphics microprocessor company Chips & Technologies for $420 Million. Truly interesting times in the PC world. As the market for traditional PCs nears saturation (at least in America), companies like Intel and Microsoft are looking to expand into what they see as the next big thing: information appliances that are more akin to smart toasters than today's hobbyist PCs.

From the Wall Street Journal, Information Week, and other sources.