If you’re looking for an example of smart M&A activity, particularly in this stifling economic environment, focus in on the Monday announced Broadcom acquisition of AMD’s digital TV unit.

Some key points:

AMD is drowning in losses and layoffs and needs to shed its excess if it wants to reach profitability by the end of Q3, as promised in December, and if it wants to stay in the game. This near $193 million deal gives it a cash infusion by the end of the year, slims its overly extended R&D expenses by dropping a fickle consumer unit, and sees AMD reduce its overall headcount by 530 employees without having to pay severance.

Much of the DTV group also came to AMD through its $5.4 billion acquisition of ATI and after the $948 million charge AMD estimated in July (and later exceeded) in part from its ATI business, it’s safe to safe the company overpaid for the GPU maker. The sale should ease some of Wall Street’s concerns.

The deal also expands Broadcom’s DTV Tier-1 rolodex, and should allow it to grow beyond its DTV customer base, notably including LG and Sharp, to potentially include customers such as AMD/ATI partner Samsung, Sony, and other top TV vendors. (Philips would be on that list, especially because Broadcom CEO Scott McGregor came to the company from what was Philips Semiconductors, but it recently announced plans to exit TV manufacturing.)

Further, Broadcom is stellar at integrating in acquired companies. Its M&A skills are a big part of what have built the company into the top industry player it is today. And with the AMD DTV group’s technology (all Xilleon integrated DTV processors and turnkey reference designs, NXT receiver ICs, the Theater 300 DTV processor, and a line of panel processors that perform motion compensation, frame rate conversion, and scaling) folded in, Broadcom could scale its offers and cover the DTV market’s full range from low-end and mid-range to high-end interactive platforms and panel processors.

Note that this blog post is peppered with would s like “should” and “could.” Even the best laid plans sometimes don’t work out. But right now this looks like a win-win situation for AMD and Broadcom. Share your thoughts on the acquisition below.

--Suzanne Deffree, Managing Editor, News