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Cadence Design Systems, the largest maker of chip design tools, has agreed to acquire chip design firm Tensilica for $380 million in cash.
The deal gives San Jose, Calif.-based Cadence a larger portfolio of chip intellectual property so that its customers can create chips for mobile wireless, network infrastructure, car electronics, and home consumer electronics.
Cadence makes design tools that chip engineers use to create intricate designs used to manufacture chips. Founded in 1997, Tensilica created its own Xtensa architecture for designing microprocessor cores that could be easily configured into custom chips. They provided the ease-of-design that cut out a lot of the costs of creating chips, but they also allowed for the customization that results in faster and more efficient specialized chips.
Tensilica, founded by Chris Rowen, has more than 200 licensees, including seven of the top 10 chip companies. Those customers have shipped more than 2 billion cores in their chips.
Tensilica had $30 million in cash at the end of 2012.
“With Tensilica, we will be able to provide designers with a more complete system-on-a-chip solution that will speed the development of innovative and differentiated products while reducing time to market,” said Lip-Bu Tan, president and chief executive officer of Cadence.
In a conference call with analysts, Tan said, “They have a very strong position in mobile wireless and the smartphone area. It is a very fast-growing market.”
He said that Tensilica’s rivals included custom designs created by major electronics companies.
Most of Tensilica’s revenue came from a combination of license fees on its products and royalties on customer sales.
Jack Guedj, president and chief executive officer of Tensilica said in a statement, “Joining Cadence will provide a broader platform to expedite our product development strategy and customer engagement. We will have the ability to accelerate IP subsystem development and integration while providing a more extensive support network to our customers.”
Cadence’s deal is subject to closing conditions such as regulatory approvals.
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