Is TI About to Tee Off Against Broadcom?

That's what a purchase of Libit Signal Processing by Texas Instruments would indicate.
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Texas Instruments

(TXN) - Get Report

is close to buying

Libit Signal Processing

, a start-up Israeli chip company, for more than $300 million, according to two people, one with connections to TI and the other with connections to Libit.

The deal would seem to be small potatoes in the grand scheme of TI's aggressive and expensive acquisition binge. Watch this one, though, because it promises to pit one tech-stock darling, TI, against an even dearer tech-stock darling,

Broadcom

(BRCM)

, the leader by far in supplying the semiconductor technology in the components for high-speed Internet connections over cable TV systems.

Though not well known outside the communications sector, privately held Libit is the No. 2 player in the space that's given Broadcom a value of $10.4 billion on 1998 revenue of $203 million. Its pairing with an ascendant Texas Instruments would all of a sudden create meaningful competition for Broadcom. Both companies' stocks have been on a tear. TI's shares, at 132 3/4, are up 55% year to date; Broadcom's, at 111 15/16, have nearly doubled in the same time. Both companies have soared in part because they focus on the market for communications chips instead of the rapidly commoditizing microprocessors for PCs that

Intel

(INTC) - Get Report

dominates.

It is still possible that TI's acquisition of Libit will fall through. After all, the Israeli media, which reported unofficial word of the transaction on Sunday, also reported weeks ago that

Lucent

(LU)

had agreed to buy Libit.

That deal never materialized. Intel (a Libit shareholder) and

Analog Devices

(ADI) - Get Report

also have reportedly taken a harder look at Libit. The perpetually pending purchase of Libit is what one industry player calls "one of the most shop-worn deals on the Street."

A spokeswoman for TI, working late on Friday in Dallas, issued the customary refusal to comment on rumors. Ditto for Jacob Tanz, Libit's marketing vice president in Los Altos, Calif., who hinted that calling back at the beginning of the week could be fruitful.

TI has other options if it wants to tee off against Irvine, Calif.-based Broadcom. It could license technology from

Stanford Telecommunication

(STII)

, a former defense contractor in Sunnyvale, Calif. Stanford Telecommunications is locked in patent

litigation with Broadcom.

For now, though, Broadcom is the company to beat. Its key customers include

3Com

(COMS)

,

General Instrument

(GIC)

,

Cisco

(CSCO) - Get Report

and

Nortel Networks

(NT)

. Despite all the hullabaloo, Libit counts only

Toshiba

as a major, publicly disclosed customer. Marketing man Tanz hints, however, that the start-up has won other big accounts it has yet to make public.

Broadcom "has the big ones, which is what warrants their hefty valuation," says Tanz. "But we are right behind them."

Adam Lashinsky's column appears Mondays, Wednesdays and Fridays. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. Lashinsky writes a monthly column for Fortune called the Wired Investor, and is a frequent commentator on public radio's Marketplace program. He welcomes your feedback at

alashinsky@thestreet.com.