Intel Corp., the world’s largest chipmaker, agreed to buy Infineon Technologies AG’s wireless unit for about $1.4 billion, gaining a foothold in the mobile - phone business it has struggled to crack for more than a decade.
Intel strengthens its position in the fast-growing smartphone market. Infineon sells its wireless unit at a time when the more cyclical business is running successfully. The transaction price is in line with expectations.
The acquisition of Infineon’s unit, on the heels of Intel’s $7.68 billion purchase of security software maker McAfee Inc., builds on Chief Executive Officer Paul Otellini’s plans to break the company’s reliance on the personal-computer market. Intel wants to get its processors into smartphones, such as Apple Inc.’s iPhone, a handset that uses an Infineon radio chip.
Infineon is selling a unit that has struggled to turn a profit, letting it focus on areas where it can grab the biggest market share such as the automotive and industrial sectors. Infineon trails San Diego-based Qualcomm Inc., which dominates the market for chips that control radio functions in phones.
In the near term, Intel could potentially equip every PC with 3G, which could accelerate its 3G volumes and directly challenge Qualcomm’s 3G dominance.
Intel Sales
Intel, which posted a record profit margin for the second quarter at 67%, gets more than 90% of its sales from the PC market. After an estimated 26% rebound in revenue this year, analysts predict that the Santa Clara, California-based company’s sales will increase about 5% next year, shy of the double-digit growth Intel itself targets.
The company generated $3.49 billion in cash from operations in the quarter and ended the period with more than $18 billion in reserve. It’s paying for McAfee in cash.
Intel is hitching its mobile ambitions to a scaled-down version of its PC chips called Atom. The company has signed agreements aimed at landing its products in devices made by Nokia Oyj and LG Electronics Inc., though it has yet to win a spot in a phone that’s currently on sale.
Intel was advised by Evercore Partners Inc., while JP Morgan advised Infineon.
The market for processors that run smartphones is dominated by technology from Cambridge, England-based ARM Holdings Plc, which licenses its designs to companies including Qualcomm, Dallas-based Texas Instruments Inc., and Samsung, in Suwon, South Korea. Qualcomm produces chips that combine the functions of applications and baseband processors, making it the largest supplier of chips for mobile phones.
Source: www.bloomberg.com
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