Qualcomm buys Atheros for US$3.1bn

Telco hardware company Qualcomm acquired Atheros for US$3.1 billion in a bid to round out its wireless and networking product portfolio and move into mainstream computing.

(Car money image by Cimexus, CC BY-ND 2.0)

Word of the deal surfaced on Tuesday via reports on CNBC, the New York Times and the Wall Street Journal.

With the Atheros acquisition, Qualcomm gains access to wireless LAN, Ethernet, Bluetooth, GPS, passive optical networking and power-line technologies. Qualcomm will take those products and ultimately integrate them with its smartphone and tablet chips.

Analysts were generally upbeat about Qualcomm's plans. Piper Jaffray analyst Auguste Gus Richard said in a research note that Qualcomm will be positioned well for the "ultra-mobile era" with the Atheros purchase. Richard argued that Atheros products will integrate well with Qualcomm's Snapdragon chip. In addition, the combination of Qualcomm and Atheros, which is nearing a US$1 billion annual revenue run rate, will be better positioned to take on Broadcom or Marvell.

In the smartphone and tablet market, combination processors will be key. The Atheros deal gives Qualcomm more technologies to put into its platform.

Qualcomm CEO Paul Jacobs said on a conference call with analysts that Atheros' technology will help it connect phones with multiple emerging devices such as tablets.

"This acquisition makes sense on a lot of levels. From a vision standpoint we believe that communications capability will go into more and more devices in the world around us and that the phone will be used to interact with these devices," Jacobs said.

"From a strategy standpoint we will continue to lead in technology through significant R&D investments and this acquisition allows us to profit from those investments across a larger base of devices. From a tactical standpoint we will have access to a strong team and a new set of technologies, partners and distribution channels, and we will also be able to broaden our relationships with existing customers."

Qualcomm executive vice president Steve Mollenkopf said the move is part of a strategy to "move aggressively into silicon beyond cellular".

"It will enable us to grow a platform business in additional areas such as consumer electronics, networking and computing. You have heard us talk about our vision around the convergence of mobility computing and consumer electronics."

In the big picture, Qualcomm's purchase of Atheros illustrates how the company plans to become more of a platform provider. To Qualcomm, the future of computing is more about tablets and smartphones than the PC. Simply put, Qualcomm will be on a collision course with the likes of Intel.

Mollenkopf said smartphones will generate an "enormous pressure" on adjacent markets to adopt similar technology platforms.

"The wireless LAN that you might need to support a platform play in a tablet may be different than what you use for a handset. As we do that we either have to invest in that or we need to partner."

Atheros CEO Craig Barratt will join Qualcomm as president of networking and connectivity. The deal is expected to close in the first half of 2011.

Via ZDNet US