Autodesk and Discreet had been working together for more than a year to blend their technologies in creating and manipulating two-dimensional and three-dimensional images before agreeing to strike a deal.

The proposed purchase would also give Autodesk access to one of Discreet's fastest-growing markets, as the transition to digital television, or HDTV, from traditional television that uses analogue signals gets under way.

Jim Guerard, who heads the Kinetix unit of Autodesk that will be folded into Discreet, said the deal gives Autodesk a complete set of two-dimensional and three-dimensional software design programmes for creating digital images for movies, video games, architectural plans, automobiles and for other applications.

Autodesk's software, which includes AutoCAD and MechanicalDesktop, among others, was used in the recent Summer blockbuster "Lost in Space" and to create the popular dancing baby in the television series "Ally McBeal," which airs on News Corp's Fox network.

"This bolsters the digital content creation side of our business," Guerard said in an interview, of Autodesk's planned purchase of Discreet, which is based in Montreal. He added that Autodesk expects to close the purchase by the end of the year.

Under the terms of the agreement, Autodesk will issue 0.525shares for each Discreet share. Based on Discreet's closing price on Thursday, the deal values each Discreet share at about $17.13 each, about a seven per cent premium to Discreet's closing price Thursday.

There could be a "minor amount" of layoffs because of the deal, Guerard said, but he added that there is little overlap between the two companies' products.

Discreet shares rose $2.38 to $16 on Thursday. Discreet had about 31 million shares outstanding, Autodesk said. Discreet has annual revenue of about $152 million.

Discreet, which will operate as a division of Autodesk and remain headquartered in Montreal and include the Kinetix unit, will be headed by Richard Szalwinski, Discreet's current president. He will report to Eric Herr, Autodesk's president and chief operating officer.

Guerard of Kinetix will head up the New Media Group, which will include both Kinetix and Discreet products.

Separately, Autodesk reported fiscal second-quarter earnings of $9.11 million, or 18 cents a diluted share, down from $17.8 million, or 34 cents a diluted share, in the year-ago quarter.

The second quarter ended July 31 includes a charge of $18.6million before taxes related to its May purchase of Genius CAD Software.