Intel Eyes Infineon Wireless Unit - Analyst Blog

Intel Corp., (INTC) which recently acquired security-software maker McAfee Inc. (MFE) in a $7.68 billion transaction, is believed to be nearing a deal to acquire the wireless business of Infineon Technologies. Infineon, a German semiconductor company, is known for its processors used in smartphones made by Apple Inc. (AAPL), Nokia (NOK), Research In Motion (RIMM) and Samsung Electronics.

The increased focus on the emerging mobile device market is perhaps Intel’s way of pre-empting a weakness in PC sales. In mature markets such as the U.K. and the U.S. PC demand is witnessing a shift to mobile computing devices. The Infineon wireless business, for its part, helps Intel get chips into mobile phones -- an area where Intel has yet to make a mark.
 
Samsung Electronics and Broadcom Inc. (BRCM) are also said to be in the race for the unit, but Intel appears to be the front runner. Earlier this month, Infineon had said its talks with potential buyers were progressing well. Infineon, which licenses ARM Holdings (ARMH) technology, has put a price tag of $1.91 billion on the unit and is said to have hired JP Morgan (JPM) for consultations.

Smartphones mainly run on power-efficient ARM processors, and Intel, eager to grab a share of the mobile chip business, is placing its bets on a smaller version of its Atom chips that it says will be more power efficient. If Intel is successful in buying the unit, the ARM space would see a relatively new entrant but a strong competitor. The development could be significant since Intel has strongly vouched for its x86 architecture as a superior option to ARM.

It would also be interesting to see how Intel integrates the wireless business’ ARM-based architecture into its own fold, given the fact that the chipmaker had sold its own ARM business to Marvell Technologies (MRVL) in 2006. Nevertheless, the wireless business could enable Intel to develop a more integrated wireless solution and emerge as a key supplier in the mobile chips business.

We have a Zacks Rank of #3 (short-term Hold recommendation) on Intel’s shares.
 
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