Western Digital to Acquire Producer of Graphics Chips

Western Digital, a rapidly expanding Irvine electronics manufacturer, tentatively agreed Tuesday to acquire Paradise Systems, a San Francisco-area chip maker, in a stock swap valued at about $35 million.

The acquisition, to be formally announced today, would immediately rank Western Digital among the leaders in the fast-growing market for video controller chips, the silicon squares that allow personal computers to create charts, pictures and other graphics. Market analysis groups have projected that the graphics market, now estimated at $300 million annually, will grow to more than $1 billion by 1990.

Western Digital already makes chips that allow personal computers to store information and to communicate with other computers--markets that are expected to reach a combined total of $3 billion by the end of the decade.

Roger Johnson, Western Digital’s chairman and chief executive, said the Paradise acquisition gives his company an immediate presence in the video controller market--a year earlier than if the firm had proceeded with plans to develop its own controller chips.

“The acquisition is a natural extension of our strategy of entering markets characterized by high growth and opportunities for leadership,” Johnson said. He added that Western Digital and Paradise already have many of the same customers for their products, enabling the combined company to offer a larger array of chips to computer manufacturers without significant changes in existing distribution operations.