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VincePG
Comparing the TI Cable modem acquisition to the wireless Infineon acquisition is ...
zman_tekinsil
http://news.cnet.com/Intel-to-buy-DSP-Communications/2100-12_3-265455.html
Intel-Infineon deal: What analysts are saying
Mark Lapedus
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.''
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.''
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Me2
8/30/2010 4:31 PM EDT
Seems to me that Intel had this same pattern of buy, buy, buy at the end of 1990's under Barrett's leadership. When the economy tanked circa 2001 continuing on to approximately 2004, Intel sold of several of these firms (when Otellini to the helm) due to lack luster performance. Could this be a run up to repeating history? Of course, Intel was also plagued by a very bad business decision to push the Itanic (sic) while at the same time falling dangerously behind AMD's roll out of the x64. It will be interesting to see if the buy-and-expand-product line strategy works this time for Intel.
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Goffers
8/30/2010 6:08 PM EDT
Are we sure that the purchase includes the ARM license? Infineon bought the license only recently particularly to use trustzone for security on credit cards etc. I would be surprised if they were relinquishing this so quickly after an apparently firm strategic agreement. Also, Intel, having recently sold xScale are hardly likely to buy the same thing back at a higher price when they are so confident of beating it in the market place within the next few years.
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shub
8/30/2010 8:33 PM EDT
Coming to point mentioned by Sarvanan it will be fun to see what strategy Intel drives with it's huge exp and partnership now with Nokia and Microsoft to equip chinese/taiwanese vendor to provide one platform through which they can build Smart phone/PDA/MID/Netbook whatver you call supporting 2 operating systems Windows or MeeGo and what Infineon gives them is wireless platfrom (Modem + RF + Power Management + decent connectivity solution) and good chinese customers to kill margins of Apple and Real OEM.
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mark.lapedus
8/30/2010 8:55 PM EDT
Does anyone remember CDMA baseband maker DSP Communications? Intel bought them several years ago. Intel made a mess of it. Will history repeat itself in the Infineon deal?
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zman_tekinsil
8/31/2010 8:02 PM EDT
http://news.cnet.com/Intel-to-buy-DSP-Communications/2100-12_3-265455.html
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elctrnx_lyf
8/31/2010 12:20 AM EDT
When looking at the history I don't think many people have a positive opinion regarding this acquisition. Intel should run the Infineon WLS business without many changes. But slowly they can develop a strategy to integrate the wireless base band technologies into their motherboards as Kundojjala of strategy analytic said. It is a long way to go and I believe Intel doesn't waste this great company like what it did before.
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Warren
8/31/2010 1:20 AM EDT
Mark... a fair enough observation but too easy. Does anyone remember LANTimes?
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VincePG
9/1/2010 12:25 AM EDT
Comparing the TI Cable modem acquisition to the wireless Infineon acquisition is apples and oranges, as is looking to the past as some indicator of success going forward. Cable modem business is a requirement for Intel's cable box chip set aspirations and is part of Digital Home group. Infineon is going to be a separate subsidiary, leveraging Intel’s advanced foundry and low power processes to compete more effectively with Samsung. Cable modems are an integration piece with strategic sockets and Infineon is a new business venture that Intel can't build for themselves. Totally different. Further, Intel has failed at other things because when push comes to shove historically margins on PC processors always trumped everything else, so other businesses would die out of neglect and lack of resources. Margins for PCs are falling, growth is slowing and Samsung is breathing down their neck, so Intel needs to get serious about other businesses. Further, handheld devices with cloud computing are PC replacement technology and the writing is on the wall if Intel doesn’t aggressively pursue the market.
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