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Intel to shell out $1.4 billion for Infineon wireless unit
SAN JOSE, Calif, Aug 30, 2010 (San Jose Mercury News - McClatchy-Tribune News Service via COMTEX) --
In its second major deal in just over a week, Intel has agreed to buy German-based Infineon Technologies' wireless communications unit for $1.4 billion in cash, a move the Santa Clara, Calif.-based Goliath hopes will help get it into the fast-growing market for smart phones and other mobile gadgets.
The Infineon unit makes chips for smart phones including Apple's iPhone. Intel, which has had trouble getting its chips into products other than personal computers, also agreed Aug. 19 to pay $7.7 billion to buy Santa Clara security software maker McAfee.
"We are committed to positioning Intel to take advantage of that growth potential in every computing segment, from laptops to handhelds and beyond," Intel CEO Paul Otellini said in announcing the Infineon deal late Sunday night.
Infineon says the deal will allow it to focus on its core automotive, industrial and chip card and security divisions.
While Intel's x86 chips are used as the brains in 80 percent of personal computers, the vast majority of smart phones rely on chips based on a design licensed from a British company, ARM Holdings. That's largely because Intel's chips are less energy-efficient and more likely to shorten the battery life of smart phones than those using the ARM design.
Consequently, Intel recently has developed a microprocessor dubbed Atom, which uses less power than its other chips. Still, experts say it may take several years before Intel reduces the power consumption of Atom sufficiently to make it a serious competitor to the ARM chips.
"I think they've realized getting into the smart-phone market is going to be more difficult than they had thought," said Linley Gwennap, a chip analyst with The Linley Group. "You can't walk into the phone market today and just offer somebody a processor. You need to offer them a complete smart-phone design."
That appears to be precisely what Intel has concluded, given its recent blockbuster announcements.
By buying McAfee _ the biggest deal in Intel's history _ Intel hopes to make its chips more attractive for smart phones by bolstering them with McAfee's security software. The Infineon purchase would give Intel another key technology.
Smart phones rely on two main chips _ an application processor, which oversees the phone's basic functions, and a baseband processor, which lets the phone communicate with other gadgets. Since Infineon makes a baseband processor and Intel's Atom is an application processor, Intel would own both components that smart-phone makers need.
Moreover, by owning Infineon's technology _ instead of just licensing it _ Intel could more easily manipulate it to work more effectively with its Atom processor, experts said.
"Intel is always looking ahead," said Nathan Brookwood, a research fellow at Saratoga market consulting firm Insight 64 who tracks chip companies. As several other ARM chipmakers already have done, he said, Intel would likely merge both processors onto a single chip because that "would save space, it would reduce cost and it would improve battery life."
Jim McGregor, chief technology strategist at the technology market intelligence firm In-Stat, said he believes Intel eventually will improve Atom's capabilities to challenge ARM's smart-phone dominance. But he added, "it's definitely a challenge for Intel to break out of its core competency and its traditional market."
Indeed, around the time of the dot-com boom, Intel spent billions of dollars on communications and other businesses, only to shed them later. That included some ARM-based cell phone chip technologies dubbed XScale, which Intel sold to Marvell Technology Group in 2006 and which Marvell has turned into a big moneymaker. As a result, some analysts are less than enthusiastic about Intel jumping back into the ARM communication-chip arena.
Among those is Craig Berger of FBR Capital Markets, who told his clients in a note recently, "We feel we have seen this movie before."
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