Intel has ended weeks of speculation concerning the fate of German chipmaker Infineon’s mobile unit, stating today that it is to buy the business for US$1.4 billion. The world’s largest silicon vendor will operate Infineon’s Wireless Solutions Business (WLS) as a standalone unit, with the deal expected to close in the first quarter of 2011. The WLS business unit has an annual revenue of EUR917 million, contributing around one-third of Infineon’s total revenue of EUR3 billion in the last financial year, with customers including “numerous well-known global mobile phone producers.” WLS competes with several large and established players in the mobile space, including Qualcomm and ST Ericsson.
Infineon said the sale was a “strategic decision” designed to enable it to focus on the automotive, industry and security technology sectors. For Intel, its successful bid sees off other reported interest from Samsung and Broadcom, and will mean that the silicon giant’s products are used in a wide variety of devices, including Intel Core processor-based laptops and Intel Atom processor-based devices such as smartphones, netbooks, tablets and embedded computers. Interestingly, a statement noted that the deal also “supports Intel’s plans to accelerate LTE.” Intel has long been a major proponent of WiMAX, a rival to LTE technology. However, global industry support for WiMAX appears to be on the wane. At the same time, Intel is very focused on ramping up its limited success to date in the mobile market (its current products are best suited to high-end mobile computing devices including netbooks and tablets). “The acquisition of Infineon’s WLS business strengthens the second pillar of our computing strategy – Internet connectivity – and enables us to offer a portfolio of products that covers the full range of wireless options from WiFi and 3G to WiMAX and LTE,” said Paul Otellini, Intel president and CEO. “As more devices compute and connect to the Internet, we are committed to making certain that Intel is well positioned to take advantage of the growth potential in every computing segment, from laptops to handhelds.”
Stephen Entwistle, VP of strategic technology at Strategy Analytics (SA), described the deal as “a significant development in the cellular baseband market,” noting that “Infineon brings top-10 handset OEM relationships and valuable cellular radio modem expertise.” The analysis firm ranks Infineon as the fifth largest cellular modem baseband vendor in terms of revenue, and fourth largest in unit shipment share terms. “Infineon was on track to potentially ship as many as 300 million basebands in 2010 based on our provisional estimates as Infineon continues to expand at its key 2G and 3G customers,” SA stated.
The deal is the second high-profile acquisition announced by Intel this month, following its US$7.7 billion planned buy of security software company McAfee. On Friday Intel cut its profit forecast after warning sales of computers were weaker than expected. It said it now expected revenue of between US$10.8 billion and US$11.2 billion in the July to September period, from a previous forecast of US$11.2 billion to US$12 billion.