Under the terms of the agreement, Netgear will pay up to $9m in cash for SkipJam, a portion of which is structured as a retention incentive programme for the acquired engineering team.
The acquisition is subject to various standard closing conditions and is expected to close in the third quarter.
This deal fits Netgear's strategy of expanding its product portfolio in the expanding market for digital home entertainment and control.
SkipJam's technology will form the basis of future multimedia products, including media centres, media players and audio players.
According to Parks Associates, a research firm focusing on the digital home, over 30 per cent of network nodes will be multimedia/entertainment focused by 2010, up from four per cent today.
Parks Associates estimates that this represents an opportunity for over 200 million multimedia/entertainment/multimedia nodes to be connected.
"This acquisition supports our vision that the internet is becoming the primary conduit for the delivery of entertainment and voice as well as data," said Patrick Lo, chairman and chief executive of Netgear.
"As more and more entertainment content is digitally distributed over the internet, the market for networked entertainment devices is growing."
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