System Builders Intrigued By Intel-Infineon Hookup

Intel on Monday acquired Infineon's Wireless Solutions Business (WLS) in a cash transaction valued at approximately $1.4 billion. The deal is expected to close in the first quarter of 2011.

Intel, which acquired McAfee earlier this month for $7.6 billion, has now strengthened two of what it commonly refers to as the “three pillars” -- energy efficiency, connectivity, and security.

Based in Germany, Infineon makes the mobile processors that run Apple's iPhone. The acquisition represents an important strategic addition to Intel's portfolio and could help the chipmaker gain a stronger hold on the wireless enterprise market, says one system builder, who requested anonymity.

“Manufacturing can only go so far in terms of income generation,” the source said. “They must continually diversify to get into new streams of revenue.” Intel says the deal won't affect its support for existing ARM customers. "WLS will operate as a standalone business. Intel is committed to serving WLS' existing customers, including support for ARM-based platform," Intel said in a statement.

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Infineon will allow Intel to add 3G to its current line of Wi-Fi and 4G WiMAX offerings, its Intel Core processor-based laptops, and Intel Atom-based devices such as smartphones, netbooks, tablets and embedded computers.

Developing an x86 smartphone processor would certainly make a lot of sense, says Todd Swank, vice president of marketing at system builder Nor-Tech, Burnsville, Minn.

"Intel has proven its ability to develop new markets with its Atom processor, and may want to do the same with the iPhone," Swank said.

Intel’s new notebook platform with security is intriguing, given the slowdown of the traditional client/server space, Swank said. The Infineon acquisition also helps put the McAfee purchase in a more logical perspective, as Intel prepares to combine chip security with wireless capability.

“McAfee does not have a better customer strategy or a better channel strategy than Intel,” Swank said. “The only reason I could see for acquiring McAfee would be to enhance its own technology.”