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MarketWatch First Take

Aug. 30, 2010, 12:20 p.m. EDT

Intel hopes to make this wireless chip deal work

Commentary: Chip giant needs to boost presence in smart phones, tablets

By MarketWatch

SAN FRANCISCO (MarketWatch) -- Intel Corp. and Infineon Technologies AG finally settled on a deal for the German company's wireless chip unit, as Intel makes another attempt to boost its presence in mobile phones with technologies from outside.

Some investors have seen this movie before. During the dot-com boom, Intel (NAS:INTC) spent about $10 billion on acquisitions to boost its presence in other growing fields, including mobile phones. But it failed to make big inroads into the mobile-phone space and ended up selling off some assets it acquired from DSP Communications to Marvel Technology Group (NAS:MRVL) for about $600 million. Marvel has since parlayed the Xscale chip technology it bought from Intel into a successful position in smart phones. See report on Intel-Infineon deal.

Wall Street analysts note that Intel does not have a successful track record integrating many of its acquisitions, and the company also announced earlier this month a $7.7 billion deal to buy McAfee Inc. , a developer of computer security software. See report on Intel-McAfee deal.

With this deal to buy Infineon's wireless business for $1.4 billion, Intel immediately boosts its position in mobile devices, as Infineon (OTC:IFNNF) provides the wireless baseband chips for Apple Inc.'s (NAS:AAPL) iPhone, among other products.

Craig Berger, an analyst with FBR Capital Markets, noted that Intel's soon-to-be-acquired technologies "are increasingly found in smart phones and tablet PCs so that Intel can defend its CPU (microprocessor) market share as tablets ramp."

Intel has to make these acquisitions work this time around. With its core business now showing some signs of slower growth, Intel needs to embrace new markets.

-- Therese Poletti

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