It is a sad commentary on the state of the broadband chip market when a chip maker essentially gives itself away to a rival, who gets much needed-cash in exchange for stock and the promise of a future market. TranSwitch, a broadband chip maker, has agreed to buy fellow clip maker Centillium Communications for $42.8 million in cash and stock. Centillium’s fortunes rose and fell with the DSL market, though in its 11 years of standalone existence it never managed to turn a profit.

TranSwitch isn’t doing much better — it hasn’t had a profitable quarter since 2003. So why the deal? Apparently Centillium has Ethernet passive optical networks chips that have been qualified by NTT DoCoMo for its EPON deployments. Apart from that, the move appears to be nothing more than a reshuffling of the cards.

Of the $43 million purchase price, $15 million is in cash and the rest is stock. Centillium has around $45 million in cash, so in essence the deal will give TranSwitch $28 million in cash. But since it’s also giving out $30 million in stock, the whole transaction looks like a secondary offering.

The financial machinations aside, there is a lot of work that needs to be done by both entities to merge their operations. Still, from a broadband chip industry perspective, sad as it might seem, it’s a good thing as there will be one less player. Hopefully soon there will be even fewer of them.