GlobespanVirata will pay around $385 million in total for Intersil's WLAN business, this includes $250 million in cash, $115 million in stock, and $20 million in accounts receivable, according to a spokeshuman for Intersil. The deal is expected to close in August or September of this year, barring any regulatory problems.
The deal will instantly make Globespan the top 802.11 chip supplier, as Intersil currently has around 50 percent of the market, beating out rivals Agere Systems (NYSE: AGR/A), Broadcom Corp. (Nasdaq: BRCM), and Texas Instruments Inc. (NYSE: TXN). Globespan says that it intends to use the chips to produce wireless LAN home networking kit and other consumer-oriented networking boxes.
Many analysts expect a more fluid market and more acquisitions over the next few years as startups and smaller companies struggle to survive the vicious price competition that already characterizes the WLAN silicon market (see It's WLAN Seduction Season, Atheros: A Tasty Target?, and Texas Fuels Price War). Wireless LAN chips are becoming a high-volume, low-margin market -- exactly the kind of place in which recent entrants like Broadcom and Intel Corp. (Nasdaq: INTC) like to play.
The coming edition of the Unstrung Insider surveys the wireless LAN chipset market. The author, Unstrung research analyst Gabriel Brown, writes that he "expects many more acquisitions in this sector, particularly of companies with a good 5GHz [802.11a] or multimode [chipsets that support different WLAN flavors] story" He also predicts a rash of intellectual property licensing deals between larger makers and the startups in this field.
"This kind of deal could become particularly attractive to startups that have great technology but just don’t have the critical mass or deep pockets to make it independently," Brown writes.
This table summarizes the previous major acquisitions in this market:
Table 1: WLAN Chipset Acquisitions
|Systemonic||Philips Semiconductor||Programmable DSP baseband/MAC and dual-band radio||December 2002||Not disclosed|
|Resonext||RF Micro Devices||Dual-band CMOS radio and multi-protocol baseband/MAC||October 2002||$133 million in stock|
|Radiata||Cisco Systems||802.11a chipset baseband/MAC and radio||November 2000||$295 million in stock|
|Alantro||Texas Instruments||�Advanced signal processors� for 802.11||June 2000||$300 million in stock|
|Mobilink||Broadcom||Cellular CMOS chips (with 802.11 �synergies�)||April 2002||$190 million in stock|
|Source: Unstrung Insider|
It's been an open secret among industry insiders that Intersil has been shopping its WLAN business around over the last few months. There had been talk that Texas Instruments was sniffing around Intersil's business [ed. note: pardon the expression!] at one point (see TI to Buy Intersil?).
An Intersil spokesman says the firm will now focus on "pure analog" components -- a higher-margin market. The spokesman couldn't comment on who else was bidding on the business, saying that he had "no information" about other companies that may have been interested in the WLAN unit.
— Dan Jones, Senior Editor, Unstrung