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Philips Buys 802.11 Startup

Dutch manufacturer Philips Electronics NV shored up its position in the 802.11 semiconductor market today by acquiring German startup Systemonic AG for an undisclosed sum (see Philips Snaps Up Systemonic). Philips is already in the wireless LAN market "with our 802.11a and 802.11b radio solutions, but we wanted to accelerate our roadmap and decided an acquisition was the best way to do that," Paul Marino, general manager of business line connectivity at Philips Semiconductors, told Unstrung. "We homed in on Systemonic because of its software programmable solution, which makes the system more flexible and adaptable, and its work in high-data-rate technologies, including an existing 802.11a/b combination product and work on 802.11g," adds Marino. "This will shorten our cycle to market and help us in our strategy to be the leader in systems that provide high-speed audio and video streaming for the home market," as well as in the office and "on-the-go." In the longer term, it will also give Philips a product set to provide multimode WLAN chips for mobile phones. "The potential for packetized voice from mobile devices is unbelievable. It's an amazing and thrilling future market," Marino proclaims excitedly. He says Systemonic's approach of having software-programmable chips makes possible last-minute changes and updates to the products, a capability which will be particularly useful in the development and production of 802.11g products, as the standard for that WLAN technology has not yet been ratified by the Institute of Electrical and Electronics Engineers Inc. (IEEE) (see Where Art Thou, 802.11g? ). "Our flexible DSP [digital signal processor] approach means additional standards can be easily integrated into existing products by a software download -- there is no need for any hardwiring of the physical platform," says Karsten Roenner, Systemonic's VP of operations. Roy Rubenstein, senior analyst at RHK Inc.'s communications semiconductor group, says this deal is great news for Systemonic. "802.11 is a hot area but already an overcrowded market, so to get an early exit though an acquisition is a great result, because not all the startups are going to survive." And Rubenstein can see why Systemonic was an attractive target for the Dutch company. "Philips likes the programmable chip approach. There are arguments for the hardware approach too -- less power consumption, smaller chip -- but I think there's greater value, especially in the developing 802.11 market, in having a programmable core that can be pulled in a number of directions. Using Systemonic's existing work to target further the streaming video and audio market also ties in with Philips' multimedia approach," he adds. The RHK man explains that the tradeoff for adopting the configurable software approach is "greater power consumption and more chip real estate, and it costs more than the hardware-oriented approach. But the benefits are in the flexibility of the product and processes." He also strikes a note of caution for the WLAN market in general. "This is a white-hot market, but there is always a question mark against technologies that work in unlicensed spectrum [such as the 2.4GHz band used by 802.11b and 802.11g products]." Philips' Marino, though, is very excited about the prospects for WLAN chip deployment in all manner of computer peripherals and consumer products, and also for the possibility of supplying manufacturers of NIC cards, access points, and other broadband access devices. As Philips is also a player in the Bluetooth components market, it naturally sees 802.11 as complementary to other short- and medium-range wireless access technologies (see Philips Offers B'tooth Module and Unstrung's current wireless poll, Bluetooth: Necessity or Luxury?). Of course, there is no shortage of competition in this space, especially from the likes of Atheros Communications, Broadcom Corp. (Nasdaq: BRCM), Intel Corp. (Nasdaq: INTC), Intersil Corp. (Nasdaq: ISIL), Resonext Communications Inc., RF Micro Devices Inc. (Nasdaq: RFMD), and Texas Instruments Inc. (NYSE: TXN), among others. But Marino is sure that the flexibility of the Systemonic product will give it an edge, while Roenner says the software-based approach it has developed is, "to the best of my knowledge, unique" in this sector. We await claims to the contrary from other players on the scene. Systemonic, then, will be "fully integrated into Philips Semiconductors," says Morino. Will there be any casualties among the 89 employees, we wonder? "In principle, I am pleased with the quality of the whole workforce," says the Philips man. We sense a "but" coming on... and we're right. "But, as with any acquisition, there may be some overlaps. Staffing will be scrutinized." With the deal set to close in the first quarter of 2003, that could give some Systemonic folk a rather uncomfortable Christmas. — Ray Le Maistre, European Editor, Unstrung
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