Fabless chip supplier Qualcomm has opened its cheque book in order to acquire Wi-Fi semiconductor firm Atheros Communications.
San Diego, California-based Qualcomm is to spend a staggering $3.1 billion (£1.98bn) in cash, as it seeks to join the growing number of companies such as ARM Holdings and Intel fighting to supply chips for the tablet and smartphone market.
Qualcomm already
But the Atheros deal will give it the expertise to develop chips for the tablet and maybe even laptop market that will incorporate networking functionality – an area where, according to Reuters, Qualcomm has struggled to make progress.
The move to acquire connectivity expertise from Atheros therefore makes sense, as Atheros is a key producer of chips used in Wi-Fi, bluetooth and Ethernet networking, as well as GPS systems.
“It is Qualcomm’s strategy to continually integrate additional technologies into mobile devices to make them the primary way that people communicate, compute and access content. This acquisition is a natural extension of that strategy into other types of devices,” said Dr. Paul E. Jacobs, CEO of Qualcomm, in a statement.
“The combination of Qualcomm and Atheros is intended to accelerate this opportunity by utilising best-in-class products for communications, computing and consumer electronics to broaden existing customer relationships and expand access to new partners and distribution channels,” Dr Jacobs added.
The deal will see Atheros’ current president and CEO, Dr. Craig H. Barratt, join Qualcomm as president of Qualcomm Networking & Connectivity.
“Qualcomm and Atheros have a long history of collaboration and share a culture of technical innovation and execution excellence,” Barratt said.
“We like the strategic nature of the deal from Qualcomm’s perspective,” Bernstein analyst Stacy Rasgon was quoted as saying in the Wall Street Journal. “Acquiring Atheros would fill a rather gaping hole in Qualcomm’s 3G-only product portfolio and grant the company access to markets they currently miss.”
Meanwhile according to Caroline Gabriel, head of research at Rethink Research Associates, the deal could be one of the largest ever purchases for Qualcomm.
“Atheros was a leading light in the Wi-Fi chip boom almost a decade ago, and unlike rivals like Intersil managed to survive and grow as an independent, despite the challenge from Broadcom and others,” said Rethink’s Gabriel. “It will bring Qualcomm a range of patents, mainly related to advanced WLan – Atheros has been a major and sometimes controversial contributor to several Wi-Fi standards including the current high speed 11n platform and future efforts geared to ultra-fast speeds and to integration with powerline.”
“The smaller firm will also enhance Qualcomm’s already important efforts to integrate many technologies tightly and power efficiently within a mobile device chipset,” Gabriel added. “Atheros has been particularly active in low energy implementations of 11n, suited to cellphones, and in combining Wi-Fi and powerline connectivity for a flexible home solution.”
Under the terms of the deal, Qualcomm is to purchase Atheros for $45 (£28.86) per share in cash, representing an enterprise value of $3.1 billion (£1.98 billion).
The deal is expected to close in the first half of 2011, subject to customary closing conditions
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The deal between Qualcomm and Atheros is a smart move and it reinforces one key fact – for all the talk of 4G, Wi-Fi is a vital part of the ‘mobile broadband’ experience. Although it’s been played down in recent news, the industry is all too aware that today’s congested networks will ultimately become an operational hazard when the bandwidth demands of 4G come into play. With current 3G networks creaking under the pressure of unexpected data traffic and the looming introduction of data driven connections in LTE, an alternative traffic channel will be necessary to decongest and free up bandwidth on the network and to provide coverage in those areas where mobile networks just cannot reach. As a result, mobile operators will look to seamlessly access Wi-Fi networks to optimise the smartphone user’s indoor mobile broadband experience.