Motorola Inc, the second-largest maker of cell phone handsets, yesterday announced its acquisition of Terayon Communication Systems Inc in an all cash deal for $1.80 per share, a 2 per cent discount to Terayon''s $1.84 closing price Friday.

The deal values Terayon for $140 million in cash. Motorola says the deal will be neutral to earnings in the first year after closing, excluding one-time costs.

The acquisition will enable Motorola to offer advanced video on its handsets.

Terayon makes chips that process video. The chips will allow Motorola to offer digital ads and graphical overlays, enabling cell phone providers to offer more advertising space on their networks.

Motorola plans to maintain Terayon''s operations in Santa Clara, California.

Motorola expects to close the deal in the second or third quarter of 2007. Terayon posted a loss of $3.8 million in 2006, on sales of $76.4 million.