ST takes stake in 8x8 in exchange for VoIP, DSP core license

ST takes stake in 8x8 in exchange for VoIP, DSP core license
By Mark Hachman, EBN
January 24, 2000 (9:31 p.m. EST)
URL: http://www.eetimes.com/story/OEG20000124S0067

ST Microelectronics Inc. today said it has invested about $27.8 million in stock in 8x8 Inc., a struggling vendor that bet most of its future on consumer videoconferencing.

Under the terms of the agreement, ST, based in St. Genis-Pouilly, France, agreed to purchase 3.7 million shares of 8x8 stock at $7.50 a share, giving ST about a 16% stake in 8x8. In return, ST will receive a non-exclusive license to 8x8's voice-over-IP software and its next-generation VP7 DSP core.

8x8, Santa Clara, Calif., will use the funding to continue product development. Once a pure-play chip house, 8x8 invested heavily in the late 1990s to adapt its technology to two internally-developed end-user products, a television-based videoconferencing system and a similar, more expensive handheld device.

The problem, explained an 8X8 spokesman, was cost-reducing the products for the consumer market. "We were really not a high-volume manufacturer," he said. "We were squeezin g pennies out of the design. At $300 a unit, we sold 150,000 units last year. We really needed to be doing that per month."

The company ended up writing down the entire inventory, selling the units for between $120 to $150 when the boxes cost $180 to manufacture. Now, 8x8 is attempting to develop a voice-over-IP system for the enterprise market.

ST, meanwhile, will integrate 8x8's technology into its DOCSIS cable modem front ends, giving the company a quick entry into the voice-over-IP market. ST will also integrate 8x8's VP7, a 128-bit, VLIW, 5 to 6-gigaoperations per second core that will be designed into a completed ASIC in 9 to 12 months, the 8x8 spokesman said. ST was not immediately available for comment.