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Intel to Buy Wireless Unit of German Chip Maker
Intel Corp. announced plans to buy the wireless communications unit of Germany's Infineon Technologies AG for $1.4 billion, the second deal in as many weeks the computer company has made in its attempt to leverage the growing mobile market.
Infineon's chips are widely used in laptops and smart phones, including the iPhone 4 and the iPad 4. Intel will operate the wireless branch as a standalone business and continue to support ARM devices. Subject to regulatory approval, the deal is expected to close in the first quarter of 2011. The sale of Infineon's Wireless Solutions (WLS) will allow Infineon to concentrate on its automotive, industrial and multi-market, chip card and security segments, said Paul Otellini, Intel president and CEO.
“We all stand to benefit enormously from this deal,” Otellini said. “Thanks to the outstanding effort of the employees and the management during the last years, WLS is excellently positioned to grow further with the new owner who is ideally suited for this business.”
Intel has been marketing its chips for cell phones with limited success amid criticism that its batteries eat too much power, a serious problem as the mobile market grows increasingly lucrative. Intel's deal with Infineon gives the computer company the know-how to develop batteries that don't drain as quickly. Intel has had trouble competing with companies like ARM and Qualcomm because they can offer a wide variety of communication options such as 3G, 4G, WiFi GSM and Bluetooth on a single chip.
Rather than relying on a third party to provide this technology, Intel decided to do it in-house, effectively buying Infineon wireless house as it already comes furnished and ready to go. The chips it will develop through Infineon won't only power the thin laptops Intel has become known for, but also smart phones, tablets, and netbooks.
“The global demand for wireless solutions continues to grow at an extraordinary rate,” said Paul Otellini, Intel president and CEO. “The acquisition of Infineon’s WLS business strengthens the second pillar of our computing strategy - Internet connectivity - and enables us to offer a portfolio of products that covers the full range of wireless options from WiFi and 3G to WiMAX and LTE.”
This puts the computer company at an advantage in leveraging the mobile market, especially important for Intel as sales of PCs have dipped as notebooks, iPads and mobile platforms become increasingly popular for online access. The diminishing PC market caused Intel to lower its revenue expectations for the current quarter.
Actively trying to gain momentum in its push to control the mobile market, Intel purchased McAfee on Aug. 19 for $7.68 billion. The deal enables Intel to use the website security companies software on its mobile devices, laptops and notebooks, an advantage as hackers become ever more sophisticated.
As Intel ventures outside of the PC market, it must do so cautiously, as it has been burned before. In 2006, the company was forced to sell a number of companies for a mere $600 million, despite paying billions for them during the dot.com bubble burst.
Yet the enticement of the mobile market is just too exciting too wait, especially as the PC market grows increasingly dull. Whether Intel can successfully operate outside its core market is hard to say, but it clearly needs an alternative. Long lasting batteries and reliable website security are likely steps in the right direction.
by Matt Gallagher www.redherring.com