Cortina Goes Home

The trip for Cortina Systems Inc. continues getting longer and stranger, as the company's latest acquisition takes it beyond its optical networking roots and into the home network.

The chip company announced today it's buying Storm Semiconductor Inc., which makes processors for home gateways. The deal is expected to close by the end of the month. (See Cortina Acquires Storm.)

About two-thirds of Storm's 60 employees are in Taiwan; they'll become Cortina's first serious outpost in that country. Terms of the deal are not being disclosed.

Consider this the sequel to Cortina's purchase of Immenstar, a PON-chip vendor. (See Cortina Buys a PON Plan .) Having gotten into the access space, Cortina thought it necessary to invade the home as well.

The reason is simply because the systems vendors see it that way. "Their customers -- service providers -- see consumers as a great opportunity for revenue," says Amir Nayyerhabibi, Cortina's CEO. "Almost all the major OEMs -- Cisco Systems Inc. (Nasdaq: CSCO) is a very typical case of this -- have these divisions, which are consumer-facing."

Certain product lines are skewing toward the home. Nokia Networks has created a hosted IPTV service for carriers to offer. And vendors of wireless LAN equipment are touting the prospects for 802.11n, with its 108-Mbit/s speeds (on paper), to carry video signals around the home. (See Nokia Siemens Preps Hosted IPTV and Ruckus Raises 802.11n Stakes.)

Back in 2003, Cortina was making multiservice chips, handling transport functions in places like the intersection of Sonet/SDH and Ethernet networks. It also dabbled in chips for resilient packet ring (RPR) systems. (See AMCC, Cortina Chip Into Multiservice and Cortina Acquires Azanda.)

Its boldest stroke was to buy the Intel Corp. (Nasdaq: INTC) optical networking business, consisting of transport chips. That gave Cortina an infusion of established reveues that made the startup into a serious player. (See Cortina's Comfortable With Intel Inside.)

Like equipment companies, chip companies need breadth if they're going to become top-tier players. Cortina's extension into the access network, and now into the home, plays into that theory, but that kind of breadth can get complicated to maintain.

"You have to compete on each one of those fronts, and in order to compete on each one of those fronts, you have to have development activity on each of those fronts," says Jag Bolaria, an analyst with The Linley Group . "I'm not saying it can't be done, but it's a challenge for Cortina. Give them credit for being able to raise funds and get all these companies."

Storm, by the way, was founded in 2002, and its processors compete against parts from Freescale Semiconductor Inc. and Marvell Technology Group Ltd. (Nasdaq: MRVL), among others. Its CEO is Stewart Wu, who was also CEO of chip company Altima, acquired by Broadcom Corp. (Nasdaq: BRCM) during that chipmaker's spending spree of 2000. (See Broadcom to Acquire Altima and Broadcom Buys Its Way In.)

— Craig Matsumoto, West Coast Editor, Light Reading