Sigma Designs buys home-networking chip maker CopperGate for $160M

sigmaBoosting its ability to transfer broadband data within the home, Sigma Designs has agreed to buy home-networking chip maker CopperGate Communications for $160 million in cash and stock.

CopperGate, based in Tel Aviv, Israel, makes chips that can handle the complex job of processing home networking data, regardless of the type of wires being used. It can, for instance, handle data transferred over a coax cable for cable TV. It can also handle broadband data transferred through the home from one phone jack to another or over the electrical power wires from one electrical outlet to another. Normally, a chip will handle just one of those tasks.

That has forced vendors of home broadband adapters to create three different kinds of products for consumers, who are often confused about which solutions will work best in their homes.

The benefits of networking broadband throughout your home are becoming more obvious. Consumers want to transfer high-definition video from one source, such as a computer attached to a digital subscriber line (DSL) in a den to a flat-panel TV in the living room. Wireless solutions are usually slower and subject to security risks. So wired solutions have been built to transfer that data via phone lines, cable wires, or power lines.

Sigma Designs, based in Milpitas, Calif., plans to integrate CopperGate’s offerings into sigma’s line-up of consumer-oriented chip products. CopperGate has creaetd three generations of its networking chips since 2005 and has shipped more than 12 million chips. Sigma is paying $92 million in cash and will issue 4 million shares to CopperGate shareholers. Sigma will also pay $5 million in cash to certain CopperGate employees and assume other obligations.

CopperGate was founded in 2000 and it has raised $25 million to date from investors including Tamir Fishman, Carmel Ventures, Motorola Ventures and Challenger Fund II. CopperGate has 130 employees. Michael Weissman, vice president of marketing for the Americas at CopperGate, said in an interview that CopperGate has been leading the way on a next-generation standard, dubbed G.hn, for transferring data at high speed across three different wired platforms. CopperGate bought the powerline business of Conexant in December. Production of G.hn chips is expected to begin in 2010.