NXP Semiconductors and Virage Logic Corp. have announced a strategic agreement that accelerates NXP's move to high-performance mixed signal leadership and will broaden Virage Logic's semiconductor IP portfolio. NXP will transfer a part of its advanced CMOS intellectual property rights and certain engineering talent and equipment to Virage Logic. This arrangement includes a long-term licensing and IP development relationship between the two companies, enabling NXP to significantly reduce costs without compromising its design capability.

Virage Logic will establish an R&D center in Eindhoven to provide ongoing support to NXP and develop new products based on the acquired advanced CMOS I/O, analog mixed signal and system-on-a-chip (SoC) infrastructure IP. These new products are expected to be commercially available in early 2011, and will further the company's position as the largest independent IP provider to the semiconductor industry.

Under the terms of the multi-year agreement, NXP will transfer over 160 employees and the assets associated with selected advanced CMOS libraries, IP blocks, and SoC architecture along with other classes of semiconductor IP, including approximately 25 associated patent families. NXP will receive 2.5 million shares of Virage Logic common stock, which will be subject to transfer restrictions, and a share of the future revenue generated by Virage Logic from licensing the transferred IP portfolio. In addition, Virage Logic will provide to NXP services surrounding the transferred IP for a 3.5-year period, and NXP will receive a 3.5-year license to Virage Logic's extensive standard-products semiconductor IP portfolio for all future SoC designs.

In consideration for the services and the license of the Virage Logic IP portfolio, NXP will pay Virage Logic $60 million over four years from the closing of the transaction. The companies are targeting a closing in the fourth quarter of this year, pending consultations with employee representatives. The transaction is expected to be accretive in Virage Logic's fourth fiscal quarter of 2010.

This strategic alliance underscores the semiconductor industry's continuing trend for companies to focus on their core competencies while outsourcing non-differentiating elements of their business.