Why Intel's Infineon buy is a smart move

The purchase will help Intel become a player in the mobile market, one analyst says.

Intel has been on a buying binge lately. Just two weeks ago the world's largest chip maker agreed to acquire security vendor McAfee for $7.68 billion, and today it announced plans to buy Infineon Technologies' Wireless Solutions (WLS) division for $1.4 billion.

While the McAfee purchase has led to a certain amount of head-scratching from industry watchers and Intel investors who failed to see the synergy between Intel and a security software maker, the Infineon deal appears to be a better fit.

"Wireless connectivity is crucial for Intel's future," say wireless and telecom industry analyst Jeff Kagan. "They have to be a leader in that rapidly growing space, and they are not yet."

The WLS purchase is all about Intel's need to expand into growing markets such as the smartphone sector. "Infineon makes chips for smart phones like Apple's iPhone. This acquisition will help Intel move rapidly in this growing space," adds Kagan, who's followed the telecom industry for 25 years.

In a statement released today, Intel said its plans to leverage WLS' expertise in 2G and 3G cellular technologies to create low-power processors that expand the company's portfolio of wireless products. The merger would combine Intel's expertise in cutting-edge 4G wireless services, including WiMAX and LTE, with WLS' strengths in older cellular data offerings.

"This acquisition makes sense for the company. Whether it will be successful will take a while to determine," says Kagan.

The impact on consumer and business customers is less clear.

"Consumers don't buy phones and devices because of the chips," Kagan says. "They buy because of the brand and what it can do. I don't see customers going into a store and buying a device because it has an Intel logo on it, the way they do with laptops."

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