S3 Gets $42 million From UMC For 29 Patents

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June 08, 1999 (1:59 PM EDT)

Taiwan foundry United Microelectronics Corp. (UMC) has paid graphics vendor S3 $42 million to license 29 multimedia patents, as well as the expected proceeds from a stock sale in a joint venture.

A spokeswoman at Santa Clara, Calif.-based S3 said her understanding was that the patents, covering multimedia products and IC design, will be used by UMC in its foundry business, and not to develop its own products. Representatives from UMC, Hsin-Chu City, Taiwan, were not available for comment.

"S3 continues to reap the rewards of its strong patent portfolio, which the company has invested heavily in over the last few years," said Ken Potashner, president and CEO of S3, in a statement. "The $42 million we will be receiving represents substantial upside for the company as it provides us with increased cash assets, strengthens our balance sheet, and provides S3 with opportunities to grow our existing business and enter new businesses with solid financial strength."

S3 also released UMC from legal contingencies associated with S3's previous sale of stock in United Semiconductor Corp. (USC), a Taiwan foundry and joint venture. Under the terms of USC's charter, S3 was allowed to ask for advance proceeds from the expected returns of USC's public offering, scheduled for some time in 2000. The money for both the patents and stock will be paid in four equal payments, possibly beginning this quarter, according to the S3 spokeswoman.

The USC joint venture was founded in 1995 by UMC, the majority shareholder, and Alliance Semiconductor Inc. and S3.