Intel Expands Beyond PC With Wind River

Intel is ramping up its push to grow its business beyond PCs and servers by acquiring embedded software maker Wind River for $884 million (£551m).

The deal, announced on 4 June, will advance Intel’s strategy to grow in such areas as mobile handheld devices and embedded systems, sectors into which the chip maker already is making strides.

The deal is expected to close this summer. Wind River’s board of directors has already approved the purchase.

“We really have an ambitious program, and a lot of that is fueled by our Atom processor,” Intel spokesman Bill Kircos said in an interview.

Intel introduced Atom a year ago, aiming the chip at the nascent netbook market. The chip maker has aggressively pushed the chip into the netbook market and beyond, and business has been good. Though hit by the global recession like every other part of the business, Intel still generated $219 million from Atom chips and chipsets in the first quarter, down 27 percent from the fourth quarter in 2008.

The Wind River deal will boost the capabilities of Intel’s software work, which while a smart part of the company’s overall business, is a key part of its mobile and embedded devices push, Kircos said. It touches on all parts of Intel’s future ambitions, ranging from the work with Atom to Intel’s upcoming “Larrabee” graphics processor.

Wind River, which is scheduled to release its earnings on 4 June, will become a wholly owned subsidiary of Intel. While much of its business currently is around ARM and IBM Power processors, the Intel Architecture side is fast growing, and being under Intel’s umbrella will only speed up that growth. Kircos said he expects Wind River will continue its ARM and Power work after the purchase.

“It will be business as usual for them,” he said.

Renee James, vice president and general manager of Intel’s Software and Services Group, said the deal will be a win for both Intel and Wind River.

“This acquisition will bring us complementary, market-leading software assets and an incredibly talented group of people to help us continue to grow our embedded systems and mobile device capabilities,” James said in a statement. “Wind River has thousands of customers in a wide range of markets, and now both companies will be better positioned to meet growth opportunities in these areas.”

John Spooner, an analyst with Technology Business Research, said the deal makes sense for Intel.

“[Intel] has made expanding its embedded systems revenue a high priority,” Spooner said in an interview. “It signals that Intel appears to be taking a platform approach for the market and intends to hand partners an Intel hardware-software bundle that makes it that much easier to create a device. It’s a move that, at the end of the day, makes it easier for Intel to sell silicon.”

The embedded market is a multibillion-dollar-a-year opportunity, he said, “so spending a few hundred million dollars to improve its share in that market is a strategic move.”

Wind River, founded in 1981 and headquartered in Alameda, Calif., has more than 1,600 employees and operations in more than 15 countries. During its fiscal year, which ended Jan. 31, the company had revenues of $359.7 million (£224m).

Wind River’s business is around creating operating systems, middleware and software for embedded systems. Among its products is VxWorks, a proprietary and multicore-ready OS, and commercial-grade Linux platforms. According to Deutsche Bank, 75 percent of Wind River’s revenue over the past three years has come from its VxWorks OS platform, though Linux is the fastest growing part of its business. In the company’s fiscal year 2007, 4 percent of Wind River’s revenues ame from Linux; that jumped to 13 percent in fiscal year 2009, said Duetsche Bank.

In March, Intel and Wind River announced an R&D, sales, marketing and services partnership to create multicore offerings optimized for the embedded devices space. The deal initially targeted several industries—including aerospace and defense, network infrastructure, industrial, medical and print imaging markets—in which Wind River has particular strengths.

Ken Klein, Wind River’s chairman, president and CEO, said the deal will strengthen his company’s Intel Architecture work.

“As a wholly owned subsidiary, Wind River will more tightly align its software expertise to Intel’s platforms to speed the pace of progress and software innovation,” Klein said in a statement.

Intel’s Kircos said that having Wind River as an Intel subsidiary will let the chip maker branch out even farther into such areas as smartphones, consumer electronics, aerospace and robotics.

Already Intel is seeing its Atom technology spreading out from netbooks. For example, Supermicro in May announced it was putting the chip into some low-end servers.

Intel made a move in March to expand the reach of Atom through a deal with Taiwan Semiconductor Manufacturing in which Intel will port the chip over to TSMC’s technology platforms. This also gives TSMC access to Intel intellectual property and other designs.

At the Computex show in Taiwan on 2 June, Sean Maloney, executive vice president and chief sales and marketing officer, outlined some of Intel’s future plans in areas such as mobile devices and consumer electronics, and demonstrated the next-generation Atom, the 32-nanometer platform code-named Pine Trail