[Update 8/17/2011: A spokesperson for TI responded to this blog entry with a strong denial that the OMAP business is for sale. This denial, which came after the company initially declined to comment on the rumors, kind of casts the following speculation in a different light. Please read it with that in mind.]
Try this one on for size: Intel Corp., whose x86 architecture is locked in a struggle for supremacy with the ARM architecture, could actually be a perspective buyer of Texas Instruments Inc.'s line of ARM-based applications processors, according to speculation by an analyst.
Predictably, TI won't comment on whether or not OMAP is for sale. A company spokesperson gave the standard-issue "no comment" when asked about the speculation, citing a long-standing company policy not to discuss rumors or speculation about mergers, acquisitions or divestitures. [See updated note above regarding TI's subsequent denial of the rumors.]
As many have pointed out, the divestiture of OMAP might make sense for TI, particularly since the company has hitched its wagon more tightly to analog than ever before. Analyst Craig Berger of FBR Capital Markets recently downgraded TI's stock to "market perform" from "outperform," in part because TI is borrowing money to finance its $6.5 billion acquisition of National Semiconductor Corp. So, the $1 billion or so that OMAP might fetch would probably come in handy.
That's all well and good, but where exactly does Intel fit in?
According to Will Strauss, principal analyst at market research firm Forward Concepts (Tempe, Ariz.), if OMAP is indeed in play, Intel is a possible suitor. Here's why: Strauss believes that smartphone and tablet OEMs will increasingly look to leverage SoCs that integrate both the applications processor and the cellular baseband on the same die. Since TI is phasing out its baseband operations, the firm may have an even tougher time notching OMAP design wins going forward, Strauss believes. Intel, on the other hand, finalized the acquisition of Infineon Technologies AG's wireless chip business earlier this year, and might be interested in an ARM-based applications processor that it could marry with the baseband technology.
Strauss, who emphasized that he was speculating, noted that the price that OMAP would fetch, which he estimated at certainly $1 billion or more, means there are only a handful of companies who could pull off a deal.
"People are looking at alternatives to Intel [architecture]," Strauss said. "Maybe Intel should, too."
Intel, of course, has marketed ARM-based processors in the past. But the company sold the XScale line to Marvell Technology Group Ltd. and has phased out other ARM-based products in its catalog in favor of those based on x86. S
Strauss noted that another frequently rumored suitor for OMAP—Advanced Micro Devices Inc. (AMD)—might also be interested in a deal, but that such an offer would likely be a merger as opposed to a cash buy because AMD doesn't have Intel's deep pockets.
Strauss noted that AMD has dabbled in non-Intel-architecture chips before, taking a license from MIPS in 2002. But AMD sold its MIPS-based processor line to Raza Microelectronics Inc. in 2006. "I thought they [AMD] really missed the boat on that one," Strass said.
AMD has been widely criticized for being slow to bring to market processors for tablets and smartphones. Getting its hands on OMAP through merger or another arrangement would give the company a big boost in that department.
But in addition to not having the resources to make a straight cash buy of OMAP, any attempt by AMD to get its hands on OMAP is complicated by another matter. More than seven months after showing CEO Dirk Meyer the door (some say for being to0 slow to bring to market processors for tablets and smartphones) AMD is still looking for its next permanent CEO. It's hard to imagine AMD pulling off a deal of this magnitude without the sign off of the person who will be running the show, eventually.
I like the Broadcom rumor as it makes sense but the AMD option is very interesting as well. The OMAP family might play well with / compliment the current AMD fusion family and together AMD might be is a better position to compete with Intel and others for market share. I think this bears watching..
I think Broadcom is the front-runner here. The company has admitted they are lagging the competition in apps processors and haven't really communicated a roadmap. And we all know how aggressive Broadcom is with M&A. Broadcom could integrate OMAP with its baseband and other connectivity solutions while leveraging its position with leaders like Apple.
The only way this makes any sense is if the TI board has decided that becoming a pure play analog company is the best long term growth strategy. The acquisition of National supports this and Analog is a very high margin business with less volatility than selling processors. It takes an army of software developers to compete in processors these days and that drives down margins. However I doubt this is more than speculation, a move like this would cut off a lot of TI's growth potential and where would it leave their DSP and MSP430 businesses?
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