Qualcomm to Boost Wi-Fi Business with $3.1 Billion Atheros Purchase
Chipmaker Qualcomm agreed to buy Wi-Fi chip manufacturer Atheros for $3.1 billion to accelerate expansion to businesses beyond cellular, the companies’ executives said in a conference call Wednesday. The deal, expected to close in the first half, would create a communications platform that spans wireless, home, smart grid and sensor networks, analysts said.
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Qualcomm’s strategy is to continually integrate additional technologies into mobile devices, CEO Paul Jacobs said. The acquisition is a natural extension of that strategy into new kinds of devices, he said. Atheros would become Qualcomm Networking and Connectivity and Atheros CEO Craig Barratt would head the division, Jacobs said. Qualcomm expects the acquisition to allow it to build a platform business in consumer electronics as well as networking and computing, Steve Mollenkopf, executive vice-president and group president. Qualcomm’s products historically focused on modems and integrated application processors for cellular, he said. That will be supplemented with Atheros wireless LAN, Ethernet, Bluetooth, GPS and powerline technologies, he said.
Mollenkopf noted the convergence of cellular, computing and consumer electronics mobility. Devices like tablets call for wider connectivity than phones typically provide, he said. “With the Internet of things, there will be many more connected devices,” said Barratt. “Many will use local area technologies, some will use wide-area technology, provided we have the right level of technology and capabilities to enable them."
With the purchase, Qualcomm could get “access to the Wi-Fi mobile franchise with which it has struggled and the potential to become a big combo chip player in the handset or tablet space,” Lazard Capital analyst Daniel Amir said. BMO Capital analyst Tim Long said, “The Wi-Fi technology the company is acquiring is superior to the internal and previously purchased assets. Qualcomm should be better able to integrate Wi-Fi with Bluetooth and/or baseband, which is an increasing industry trend.” The deal could “quickly turn what’s currently a glaring weakness” in the company’s cellular portfolio into a strength and give Qualcomm strong channels into the PC market as tablets become more important, said Jefferies & Co. analyst Adam Benjamin. Nomura analyst Romit Shah warned that execution is “the biggest risk” for Qualcomm, “given that 65% of revenues are derived from networking and PC.”