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SUNNYVALE - 09/24/04 - UK-based semiconductor maker ARM Holdings has said it will pay $913 million in cash and stock to buy Sunnyvale-based Artisan Components.

In a deal seen as a signal of the growing outsourcing of chip-design outsourcing, ARM said it will combine its low-power microprocessor designs with the California-based company's designs to offer a one-stop shop to companies that don't want to design their own semiconductors.

Companies such as ARM and Artisan pioneered the business of chip-design outsourcing, in which they create a chip that is licensed by a customer to use in a product.

Such outsourcing has reportedly gained in popularity as the costs of designing semiconductors have risen.

Once, both electronic companies and chip manufacturers wanted to do all their designs in-house. But it's far more common today to license intellectual property that has already been pre-tested by the design firm.

Artisan, industry analysts have said, has capitalized on its ability to design a chip component that could be used in a customer's custom chip.

That same standardized component, they said, could also be used in any other customer's chip and still be manufactured in 100 different chip factories.

Artisan Components has more than 340 employees, including 290 in the US, while Cambridge, England-based ARM has about 770.

According to a spokesman for Artisan, a small number, perhaps a few dozen, employees at both firms would lose jobs as the companies eliminate duplicate functions. But he said for the most part, Artisan would continue to operate in Sunnyvale as a division of ARM.

Mark Templeton, co-founder and CEO of Artisan, will stay on as president of the division and join ARM's board. Artisan Chairman Lucio Lanza will also take a seat on ARM's board.

Artisan was founded in 1991 under the name VLSI Library by Templeton and a group of chip designers who believed that intellectual property licensing was the wave of the future. The company raised venture capital in 1997 and changed its name to Artisan.

Today, Artisan has more than 2,000 customers, while ARM has more than 130 microprocessor licensees.

In its fiscal third quarter ending June 30, Artisan Components reported earnings of $6.2 million. In the year-earlier quarter, it reported earnings of $1.4 million.

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