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Cable/Video

What's Intel's Next Move?

Intel Corp. (Nasdaq: INTC) is adding one more piece to the do-it-all cable video gateway puzzle by purchasing Texas Instruments Inc. (NYSE: TXN)'s cable modem business, but the chip giant may have to do more shopping if it's to match up with Broadcom Corp. (Nasdaq: BRCM)'s ability to develop super-integrated system–on-chips (SoCs) for advanced set-tops, TVs, and other broadband-connected devices. (See Intel Snares TI's Cable Modem Business .)

Companies that could top that list include Entropic Communications Inc. (Nasdaq: ENTR), the leading maker of Multimedia over Coax Alliance (MoCA) chipsets, and MaxLinear Corp. and Microtune Inc. (Nasdaq: TUNE), which make silicon tuners. Broadcom already has in-house answers to both of those components -- it makes its own silicon tuners and got its MoCA mojo going in 2007 when it bought Octalica for $31 million. (See Broadcom Jump Starts MOCA Strategy, Broadcom Stirs Up Trouble for Entropic , and MaxLinear Tunes Up Cable Power Play .)

On top of that, Broadcom also has its own wireless chipsets and video-rendering technology. By most accounts, Broadcom is the only entity that has all of those pieces in-hand and the integration prowess to bring them all together in one tight (and relatively cheap) package, create the subsequent SoCs, and plop them into consumer electronics (CE) video devices.

Until Intel came along and bought a piece of TI, the fear among industry insiders was that Broadcom would be positioned to take over the market unrivaled because no one else could mesh all of those pieces together nearly as cost-effectively. In addition to being outright cheaper, Broadcom's integration story also translates into smaller, "greener" devices that siphon less energy and give off less heat.

Intel already has the video processor piece covered and is going well with that product. The strategic acquisition of TI's cable modem business adds a Docsis front end. But it may need to do more.

The addition of Entropic and its MoCA technology could help complete Intel's whole-home networking picture, though such a deal would put a strain on Intel's connection with G.hn, an emerging home networking standard that covers powerlines, coax, and phonelines. (See Broadband Forum Gives Nod to G.hn.)

"It would make some sense," Heavy Reading senior analyst Alan Breznick says of a possible combination of Intel and Entropic. "It would give them another piece of the business and really go after Broadcom. Intel is certainly showing they are very serious about the cable space with this move to buy TI's cable modem business."

Broadcom also makes its own tuners. TI has historically partnered with third-party suppliers, most notably Microtune and, more recently, MaxLinear. TI, however, has typically viewed that as an advantage over Broadcom, touting its platform as more "open" because its gives OEM partners choices they can't get with Broadcom's über-integrated approach. It's too early to say if Intel will agree with TI's historic argument going forward, or if it adjusts its thinking and opts to snap up a tuning vendor and integrate that technology in-house.

Microtune has not indicated an interest in being bought by Intel or anyone else for that matter, but Intel's acquisition of TI's cable modem unit is something the Plano, Texas-based firm "definitely sees as a positive," says Carey Ritchey, VP and GM of Microtune's cable business, noting that he expects Intel to invest more heavily in the sector than TI was capable of doing on its own.

"We'll see some new architectures in the set-top space here pretty quickly" that factors in both IP and MPEG-based video traffic, he predicts.

Intel's warchest
Intel hasn't telegraphed its next move, but the company does have the scratch to make more. In February, reports said Intel had set up a $2 billion fund to invest in US companies and was in talks with venture capital firms to vet potential investment ideas.

If Intel were to make a move on the aforementioned, here's a financial snapshot of how they're stacking up:

Table 1:
Company 2Q2010 Revenues 2Q2009 Revenues 2Q2010 GAAP Earnings 2Q2009 GAAP Earnings Market Cap Stock Price*
Entropic $40.7 million $26.1 million $3.1 million -$4.3 million $504.34 million $6.90
Microtune $24.34 million $17.57 million $400,000 -$2.2 million $123.72 million $2.23
MaxLinear $18.2 million $11.2 million $1.8 million $153,000 $316.63 million $10.28
Source: Company data. *As of market close on August 16, 2010.




If Intel is successful in expanding its portfolio and making more inroads with cable, it could rapidly become the market favorite, Breznick predicts. "They're bigger than Broadcom, and they have a better feel for the consumer electronics market, which is where I think all of this is going."

— Jeff Baumgartner, Site Editor, Light Reading Cable

Jeff Baumgartner 12/5/2012 | 4:26:15 PM
re: What's Intel's Next Move?

I've been reminded a couple of times that Entropic has tuners, as well, coming way of its acquisition of RF Magic back in 2007.  However, some folks I've talked to are still advocating that, in addition to Entropic, Intel should also go after Microtune, because its tuning technology is viewed as superior to Microtune's. Also, if it came down to a decision between TUNE and MaxLinear, some also see Microtune as a more attractive option because of its lower market cap.

 

But this is all pure speculation. Intel hasn't indicated that it will make any such moves.  However, most people I've talked to believe Intel will need to make at least one more (ENTR is still seen as the one with the most potential) to make up some ground on Broadcom. JB

 

 

 

paolo.franzoi 12/5/2012 | 4:26:15 PM
re: What's Intel's Next Move?

 


How about Broadlogic?


 


Also, a prediction....Intel will abandon this business in 4 years (maybe 3).  Past examples of this:


8085


peripherals


80186/80188


i432


i860


i960


nxp


level 1


Basically Intel goes through waffles of "Gotta Expand into New Businesses" to "Gotta Focus on the Core" on a periodic basis.  If you buy into Intel non-core businesses, you will be left high and dry a few years later.


My favorite was when they walked in and told us (paraphrasing): "We have stopped making the 8085 and are cancelling all your orders with us on this part.  There are no last time buys.  And FU - strong words to follow."


 


seven


 

Jeff Baumgartner 12/5/2012 | 4:26:11 PM
re: What's Intel's Next Move?

That history certainly gives your argument plenty to stand on. As cable ambitions go, is this Intel's second or third bite at the cable apple? It was their missteps many moons ago that opened the door for &nbsp;Broadcom in the first place &hellip; at least that's what I've been told. &nbsp;And if this doesn't work out and they end up bailing out again, I'm sure Broadcom won't be the ones whining about it. But the MSOs might if they don't have a 2<sup>nd</sup> supplier to beat Broadcom over the head with on pricing and everything else.


Haven't thought about BroadLogic. They've been hard to figure out lately, as they don't seem to be much involved in the traditional Docsis tuner and set-top market anymore.&nbsp; I see their stuff showing up in DTA-like boxes for apartments and other MDUs.&nbsp; And it looks like they're contributing to the Comcast CMAP project, which involves more network boxes rather than consumer-side CPE.&nbsp; JB


&nbsp;

paolo.franzoi 12/5/2012 | 4:26:10 PM
re: What's Intel's Next Move?

By the way we were both wrong.&nbsp; The answer was Macafee.


:)


seven


&nbsp;

Jeff Baumgartner 12/5/2012 | 4:26:10 PM
re: What's Intel's Next Move?

No doubt. You beat me to it.&nbsp; :)&nbsp;&nbsp;

Jeff Baumgartner 12/5/2012 | 4:25:14 PM
re: What's Intel's Next Move?

Intel's&nbsp;spreading the M&amp;A around... first cable, then security, now wireless.&nbsp; Still think these others may make sense, just perhaps not right away. JB

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