Intel spreads its wings with Wind River

Intel has made another significant move in its bid to expand into the mobile connectivity market that has often proved elusive, buying software optimization firm Wind River for $884 million. This will take it into a huge range of embedded markets, but will also raise serious dilemmas, since many of Intel's rivals are key Wind River clients.

Wind River, whose roots lie in real time operating systems for embedded technologies, has recently been prominent in both major mobile Linux initiatives, Android and LiMo. It has worked on integration and testing services to bring a common Linux platform to a range of processors – expertise that could strengthen Intel's own Moblin Linux, or could give it control of a technology that has so far been focused on spanning multiple chip architectures.

Wind River has worked with Intel on developing an open Moblin platform for mobile internet devices (MID), and recently collaborated with Qualcomm to optimize and integrate Android for the CDMA giant's Snapdragon platform, making this code available to the Android community. It was also recently chosen by the LiMo Foundation to deliver common infrastructure, tools, testing and integration services for all code contributions from LiMo members.

Pivotal position

This track record indicates the pivotal position that such technologies take, which will now come under Intel's remit, giving the chip giant enhanced position in the increasingly important world of embedding wireless into a vast range of devices. "This multibillion dollar market opportunity is increasingly becoming connected and more intelligent, requiring supporting applications and services as well as full internet functionality," Intel said in a statement.

The deal values Wind River's stock at $11.50 per share, a 44% premium over the company's Wednesday closing stock price.

It also indicates the increasing importance of software to chip majors who want to achieve influence beyond silicon sales. "It's a first step in Intel diversifying its business model outside chips," said Craig Berger, an analyst with FBR Capital Markets. However, there will be a dilemma in how far to use Wind River's software and services to boost Atom and Moblin, and how far to keep them platform neutral and potentially spread Intel's influence into rivals' territories.

Minnow next to Intel’s whale

As many analysts pointed out, Wind River may be a minnow next to Intel's whale, with annual sales of $360 million versus $38 billion, but it operates in a far wider range of markets.

This certainly should not be seen as a move geared only to Intel's smartphone and MID ambitions but to the whole embedded market where the ARM ecosystem is spreading its wings – Wind River has customers in aviation, automotive, consumer electronics, communications, industrial, medical and defense sectors, and customers are as diverse as Boeing, Ericsson and Raytheon, as well as Intel itself, which is the smaller firm's largest client in its fastest growing business.

Intel's biggest decision will be how to approach those Wind River customers that are rivals rather than potentially attractive partners. In an SEC filing, its prey said other companies with which it has a "strategic relationship" are Broadcom, Cavium, Emerson, Freescale, IBM, MIPS, NEC, NXP, Qualcomm, RadiSys, RMI, Renesas, Sun, Texas Instruments, Toshiba and Xilinx.

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