Intel-Infineon deal: What analysts are saying
8/30/2010 2:02 PM EDT
SAN JOSE, Calif. - Intel Corp. plans to purchase Infineon Technologies AG's Wireless Solutions Business (WLS) for $1.4 billion in cash with the deal expected to close in the first quarter of 2011.
This is yet another deal in a buying spree that has seen Intel agree to acquire Texas Instruments Inc.'s cable modem product line, on Aug 16 and willing to spend $7.68 billion on security software vendor McAfee Inc. last week.
Here's what analysts said about the Intel-Infineon deal:
Craig Berger, an analyst with FBR, said: ''Intel feels compelled to build out its mobile product suite, including ARM baseband processors for handsets, smartphones, tablets, and other mobile devices. Remember, Intel sold its ARM-based baseband product group, Xscale, to Marvell in late 2006 for $600 million in cash.
There are positive and negative implications for Intel regarding the Infineon transaction. Positives include: (1) This transaction gives Intel a well executing, sizable presence in the cellular baseband market with top customers including Apple, Nokia, Samsung, LG and others; (2) Infineon does have competitive wireless products including a 65-nm HSUPA platform (XMM 6160), an upcoming 40-nm HSPA platform (XMM 6260), and decent 4G LTE products; (3) Intel's soon-to-be acquired ARM technologies are increasingly found in smartphones and tablet PCs so that Intel can defend its CPU market share as tablets ramp.
Negatives include: 1) Execution risks loom as Intel does not have a great track record of success outside of its core Intel Architecture CPU markets; 2) Intel's management could get distracted with its baseband- and mobile-related efforts; 3) the baseband business is mixing in at lower gross and operating margins, slightly negatively impacting Intel's overall margins (but by one point or less); and 4) touting Atom chips and ARM based-chips could be somewhat confusing to customers. Net, Intel's efforts here are a 'show-me' story as we feel like we have seen this movie before (Xscale) and generally remain skeptical of Intel's ability to execute outside of core CPU market.''
Stephen Entwistle, vice president of strategic technology at market consultancy Strategy Analytics, said: "We see this as a significant development in the cellular baseband market. Infineon brings top-10 handset OEM relationships and valuable cellular radio modem expertise.''
Sravan Kundojjala, handset component analyst with Strategy Analytics, said: "Intel is likely to keep Infineon's 2G business as it provides scale which is crucial to play in the cellular baseband segment. Intel's volume play could potentially impact Qualcomm, MediaTek and ST-Ericsson. 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."
Hans Mosesmann, an analyst with Raymond James & Associates, said: Infineon ''is a leading provider of cellular platforms to top tier global phone makers, including the iPhone 4. The acquisition expands Intel's current Wi-Fi and 4G WiMAX offerings to include Infineon's 3G capabilities and supports Intel's plans to accelerate Long-Term Evolution (LTE).
Intel believes it can keep a majority of WLS’s existing customers, with the possibility of one or two customers (Apple? Samsung?) leaving due to competitive reasons.''