Intel's purchase of Infineon's wireless business adds considerable support to the company's attempt to break into the smartphone market with its Atom processor--but only if Intel can manage this acquisition better than it has in previous situations. For Microprocessor Report, I did a study of Intel's 15 largest acquisitions (excluding Wind River, which is too recent to evaluate). In every one, Intel later shut down or sold off the acquired products (in most cases for much less than the original purchase price). In only one or two cases does Intel continue to use the acquired technology.
Six of these acquisitions were, like Infineon's wireless business, public companies (or units thereof) employing hundreds of people. In 1998, Intel acquired Chips & Technologies, ostensibly for its PC-graphics chips, but Intel already had its own graphics technology in house, and the impact of the C&T technology on Intel's graphics business remains unclear. Within the next few years, Intel also took on Digital Semiconductor, Dialogic, Level One, and DSP Communications. All of these business withered and were eventually sold off in a 2006 purge.
Xircom is perhaps the most successful of Intel's major acquisitions. In 2001, Intel paid $750 million for the maker of PC networking cards. Before the acquisition, the 1,900-employee company reported annual sales of nearly $500 million with a net income of 5%. Less than two years later, Intel shut down the business after revenue plummeted. But Xircom's wireless technology bolstered Intel's development of Wi-Fi chips, a market in which it remains a leader today.
Infineon ranked fourth in cellular-baseband shipments last year with 10.7% unit share, according to a recent report from The Linley Group. Infineon is a major supplier to Apple, Nokia, Samsung, and others. But Intel's focus on smartphones, and its .000 batting average with previous acquisitions, leaves the future of Infineon's non-smartphone products in doubt.
The key to this deal is not the products but retaining the Infineon engineering team. Although both vendors have a detail-oriented, big-company culture, Intel's aggressiveness may clash with German stoicism. Assuming Intel can make this combination work, it will greatly enhance the company's smartphone story. Intel will be able to develop products that combine the application CPU and cellular baseband on a single chip, offer leading-edge 3G and 4G cellular technology, and add power-management and RF components to its portfolio. The connectivity side remains a bit sketchy, but Intel now has solid FM and GPS technology and the capability to develop Wi-Fi and Bluetooth. The company needs this set of technologies to offer complete smartphone solutions that compete against Qualcomm's and ST-Ericsson's. Given the high stakes involved, Intel must find a way to make this deal succeed. --Linley
Complete coverage of this acquisition appears in a Microprocessor Report article titled "Intel Shakes Up Cellular Market."
Linley Gwennap, principal analyst

