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Will Broadcom's Mobilink Deal Spur More M&A?

Broadcom Corp. has announced plans to buy GSM hardware designer Mobilink Telecom Inc. for around $189 million in stock, in a bid to be the first company to produce a single chip that supports connectivity via cellphone networks, wireless LANs, and Bluetooth links. The acquisition could be beginning of a trend, as larger competitors snap up innovative startups in order to get a leg up on the emerging market for “multimode” wireless chips.

Broadcom's move shows that large wireless chip manufacturers are aiming to produce flexible chipsets that can be used in devices that handle any number of services, including GPRS (general packet radio service), 802.11, Bluetooth, and IP. Other vendors, in fact, are moving in this direction.

For example, leading handset providers have shown it's possible to create a multimode PC card using today’s technology. Nokia Corp. recently announced that it will introduce a high-rate GSM/GPRS/802.11b combo card. Integrating all of this technology onto a single piece of silicon reduces the size and power requirements of the chip, allowing a multimode chip to be built into a laptop, handheld computer, or phone. Integration also tends to (eventually) reduce the cost of the chipset. This is all important for manufacturers working with battery-powered devices that need to be delivered on a tight budget.

“Broadcom is positioning this deal as putting it in the lead for integrated GPRS, Bluetooth, and WiFi [802.11b],” says Jake Kaldenbaugh, an analyst with Unstrung’s Wireless Oracle paid subscription service. “They believe that mobile phones will become multimedia devices. Their strategy as a company has been to develop or acquire the foundation technology, then marry it with adjacent technologies and integrate it all into a single chip. The Mobilink transaction follows that formula.”

The latest Wireless Oracle highlights the race among chip designers to be the first out of the gate with multimode wireless LAN (WLAN) chips that support the a, b, and g variants of the Institute of Electrical and Electronics Engineers Inc. (IEEE)’s 802.11 standard. Now Broadcom has thrown down the gauntlet to its rivals by plotting a single chip that supports a variety of local- and wide-area connectivity modes.

One of Broadcom’s major rivals in the multimode WLAN space is startup Atheros Communications. The California company was the first to deliver chipsets based on the 54-Mbit/s 802.11a WLAN specification and have a multimode chipset in the pipeline. This could make it a prime acquisition candidate in this space. Other possible acquisition targets include U.K. startup Synad Technologies Ltd. and Resonext Communications Inc.

But developing the silicon may not be enough to win in this market, as the companies also need to deliver value-added services, which means developing reference designs that come with the IP stack and the software tools that enable manufacturers to get from the drawing board to the shelves of a store in double-quick time.

There are large players in the communications chip market such as Texas Instruments Inc., Agere Systems, and Intersil Corp., and big companies that want to have at least some part in the market, like Intel Corp.

Broadcom’s acquisition of Mobilink is expected to close before the end of June. Broadcom says it has set aside an additional 2 million shares if Mobilink meets certain unspecified performance levels.

— Dan Jones, Senior Editor, Unstrung
http://www.unstrung.com

Editor's Note: Light Reading is not affiliated with Oracle Corporation.
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