April 7, 2020
MaxLinear's $150 million play for Intel Corp.'s home connectivity unit will shore up its position in the market for DOCSIS modems and gateways. But gaining access to Intel's Wi-Fi technology and expertise represents an even more critical strategic piece of the puzzle, according to MaxLinear CEO Kishore Seendripu.
Wi-Fi represents "a long-sought critical missing strategic element in our portfolio," Seendripu said Monday on a call covering the strategic scope of the deal. "We expect Wi-Fi to be the catalyst for growth for the overall business."
Of particular focus for MaxLinear will be Wi-Fi 6, the next-gen version of the technology that is grabbing interest from cable operators and other service providers. MaxLinear is also bullish on the prospects of Wi-Fi 6E, an extension that will support the 6GHz band, which is being opened up by the FCC for unlicensed use.
At an anecdotal level, MaxLinear said the extension is already part of Wi-Fi product design wins involving Intel.
Seendripu said the Intel deal would also position MaxLinear to sell Wi-Fi products in integrated designs using systems-on-chip, as well as a standalone element in other products for service providers and retail equipment makers. "It's a mixed bag. It depends on the situation," he said.
And with Intel's connected home division in hand, MaxLinear will be competing in the Wi-Fi silicon market more directly with a group that includes Broadcom, Qualcomm, Celeno, MediaTek, Marvell, Quantenna (now part of ON Semiconductor) and Edgewater Wireless.
MaxLinear expects the acquisition of the Intel division, slated to close in the third quarter, to contribute $60 million to $70 million per quarter. Cable gateway products have comprised about 50% of that piece of Intel's business. MaxLinear, meanwhile, has been a long-time technology partner of Intel's for a wide range of DOCSIS modem and gateway designs.
Deal maintains a second source for DOCSIS silicon
Looking at the cable-facing side of the deal, industry sources at both modem/gateway makers and service providers were not surprised to see MaxLinear emerge as the buyer. But they were relieved that a home was found for the Intel division.
That's because the deal will maintain an important rival to Broadcom in the cable sector, as most large cable operators insist on having two sources for DOCSIS silicon so they can keep pricing in check and protect their supply chains. Comcast, for example, relies on CommScope/Intel and Technicolor/Broadcom combos for its XB6 gateways. Comcast is expected to follow a similar path for its next-gen XB7 platform that adds in Wi-Fi 6.
Seendripu brushed off a suggestion from an analyst that Broadcom will hold a scale advantage over MaxLinear. By way of comparison, the $317.18 million in revenues generated by MaxLinear for full-year 2019 is dwarfed by the $5.85 billion that Broadcom raked in during its fiscal Q1 alone.
"Don't confuse revenues with scale," Seendripu said, noting that Intel's connected home unit was operating relatively independently from the rest of Intel yet was able to compete aggressively with Broadcom. "This is a very dedicated market … Customers are highly supportive of this deal."
Buying the Intel division was a "move that they [MaxLinear] had to make," Jeff Heynen, research director for the broadband access and home networking unit with Dell'Oro Group, said.
The deal, Heynen added, will broaden MaxLinear's addressable market and expand the systems and components it makes for various fiber, cable and even DSL products. For example, what MaxLinear gains in DOCSIS, Wi-Fi, Gfast, DSL and fiber tech from Intel will also complement its current position in G.hn and MoCA (Multimedia over Coax Alliance) products, he added.
Although Wi-Fi could prove to be a tougher market for MaxLinear to break into given the sheer number of competitors there, it also represents a major opportunity, particularly with mesh routing systems that will require multiple units to be deployed on Wi-Fi home networks, Heynen said.
In terms of a broader trend, Heynen also sees some similarities between this CPE-focused deal and a recent one involving Cisco Systems and ATX Networks centered on cable amps and other pieces of the cable access infrastructure. In both cases, bigger companies ceded a relatively minor piece of their businesses to smaller companies that are motivated to take those businesses to the next level.
— Jeff Baumgartner, Senior Editor, Light Reading
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