Intel is making a push into the Internet-connected mobile device space with its purchase of Infineon's wireless chip business, whose customers include Apple, Nokia and Samsung.
After months of rumors and speculation, Intel
is buying Infineon
Technologies' wireless chip unit, its latest move to
expand beyond its traditional server and PC processor business.
The Aug. 30 announcement by Intel signals the chip giant's
aggressive push into the exploding Internet-connected mobile device space-Infineon's
wireless customers include the likes of Apple, Nokia and Samsung-and is an
indication that Intel's Atom platform may not yet be ready for the mainstream
mobile phone market.
It also comes four years after Intel sold
its XScale application processor
business to Marvell Technology Group. The
chip line at the time was being used in some mobile devices from Palm and
BlackBerry maker Research In Motion.
During a conference call with analysts and journalists Aug. 30,
senior vice president and general manager of Intel's
Ultra Mobility Group, said the mainstream mobile device space is of keen
interest to the company, and that buying Infineon's Wireless Solutions business
will enable it to continue its momentum.
"If we slowed down with our investments in this area, we'd
lose touch with where the market is going," Chandrasekher said.
Intel is buying the Infineon business for $1.4 billion, and
after the deal closes sometime in the first quarter of 2011, about 3,400
Infineon employees will shift over to Intel, Peter Bauer, Infineon CEO,
said during the call. The unit will operate as an independent business, with a
dedicated sales force, according to Intel and Infineon executives. It will be
headed by Infineon board member Hermann Eul, who will report to Dadi
Perlmutter, executive vice president and co-general manager of Intel's
Intel President and CEO Paul
Otellini said the acquisition will enable his company to become a player in
every computing segment where devices connect to the Internet.
"The global demand for wireless solutions continues to
grow at an extraordinary rate," Otellini said in a statement. "The acquisition
of Infineon's [wireless chip 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 (Long-Term Evolution)."
Roger Kay, an analyst with Endpoint Technologies Associates,
said the deal makes sense for Intel, which not only gets an established
wireless chip business that Infineon officials said has been profitable for the
past five quarters, but also gets established big-name customers.
"[Communication] chips have become that much more
important over the last three or four years" since Intel sold its XScale
chip line, Kay said in an interview with eWEEK. "Maybe at the time it was
a non-strategic asset, but that's changed now."
Intel has been trying to make some inroads into the mobile
device market with its x86-based Atom platform-which initially was developed
for such systems as netbooks-but Intel executives probably saw it was going to
take awhile before Atom chips were ready to be significant players in the
space, he said.
"Even at 32 nanometers, it wasn't cool enough to really do
the battery life needed in that space," Kay said. "They've been
aiming for this space and didn't quite hit it, and the next found [of Atom
development] is two years away."
Essentially Intel executives were able to trade several years
of Atom development for the $1.4 billion they're spending for Infineon's
established business, which he said is a good deal.
Greg Richardson, an analyst with Technology Business Research,
said the deal also once again illustrates Intel's willingness to grow its reach
in fast-growing markets, a trait that was on display less than two week ago,
when Intel announced it was buying security software maker McAfee for almost
"The acquisitions of McAfee and Infineon's Wireless
Solutions Business strengthen components of Intel's 'three pillars'-energy
efficiency, connectivity and security-a key maneuver in expanding its presence
in the growing mobile device market," Richardson
said in a research note. "By coupling technologies from both acquisitions,
Intel will target the end users' concerns of securing personal data and
reliable connectivity as a means to drive value sales and differentiate from
Demand in IT is changing, he said, as users look to such
Internet-connected devices as netbooks, smartphones and tablet PCs to use the
Web more quickly and efficiently.
"Although servers and PCs will remain cornerstones in the IT industry,
we believe end users are increasingly using smaller, lower-cost devices to
complete simple day-to-day IT tasks, such as checking email or surfing the Web,"
Richardson wrote. "Through
acquisitions, Intel is aligning its portfolio to meet this growing demand,
helping differentiate itself from its traditional competitors, such as
[Advanced Micro Devices], while simultaneously diving head-first into mobile
markets that are dominated by the likes of Qualcomm and ARM."
Intel executives for more than a year have talked about the need to grow
their business in order to rely less on the PC and server chip markets. That
need was highlighted Aug. 27, when Intel-after two quarters of significant
revenues and profits-reduced
its revenue projections
for the third quarter, noting a softening in the
consumer PC market.