Intel buys Infineon wireless arm for $1.4 billion

 

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By Reuters

Posted on 31 Aug 2010 at 09:00

Intel has bought the wireless unit of German chipmaker Infineon Technologies for $1.4 billion, as it claws its way into the booming smartphone market and cuts its reliance on personal computers.

In a move seen as key to making desktop and mobile chips safer from hackers, Intel said earlier this month it would pay $7.7 billion to buy security software maker McAfee, its largest acquisition ever.

Infineon's mobile unit, called WLS, makes mobile chips found in Apple’s iPhones as well as handsets made by Nokia and LG. Its purchase gives Intel technology in an area where it has struggled.

Without the deal, Intel was likely at the risk of being shut out of this important market

"Without the deal, Intel was likely at the risk of being shut out of this important market," BMO analyst Ambrish Srivastava said in a note to clients. "Now, the company has a fighting chance."

Intel has long dominated the market for PC processors. Its Atom mobile chips took the low-cost, no-frills netbook market by storm, but they are rarely chosen by manufacturers to be included in smartphones.

And while a shaky economic recovery may make families think twice about upgrading their desktop computers, experts say future growth in the microchip industry lies in mobile devices.

"Computing is spreading to a wide array of connected smart devices, including laptops, cars, smartphones, tablets, smart TVs, and new categories being created almost daily," Intel CEO Paul Otellini told analysts during a conference call.

With deep pockets to fund research and development, Intel said it would speed up Infineon's move into Long Term Evolution, or LTE, a high-speed wireless technology that many of the world's biggest operators are planning to use for network upgrades.

Infineon had planned to offer chips for LTE-enabled devices by 2012, but that may be late in the game with many operators already building LTE networks.

Worth the price?

Intel paid the equivalent of about a year of WLS' revenue for the unit, but the strategic benefits of acquiring the chipmaker make it difficult to say if it got a good deal.

"I think of it more as a technology purchase than a business purchase. And also a strategic purpose. Intel looked at it and said - do we want this technology to fall into a new player's hands?" said Doug Freedman, an analyst at Gleacher and Company.

Intel plans to keep Infineon's mobile unit independent once the cash transaction closes in early 2011 and expects the deal to be neutral or slightly dilutive to earnings.