Qualcomm (NASDAQ:QCOM) will make its most expensive deal ever for WiFi chipmaker Atheros, agreeing to pay $3.1 billion, or $45 per share, for the company. The deal will take Qualcomm into a number of new markets--such as the connected home market--and bolster its competition against rival Broadcom.
"With Atheros adding only 2.2 percentage points to Qualcomm's portion of the wireless market, this acquisition is clearly not a market share play for Qualcomm. Rather, it's a pure strategic play, designed to bolster its position in the fast-growing wireless connectivity space now dominated by Broadcom," said Francis Sideco, principal analyst, wireless communications for iSuppli.
Sideco noted that Atheros' main attractiveness is its leadership in low-power semiconductor solutions that support the 802.11n standard. And while Atheros has seen limited success in selling 802.11n semiconductors into the smartphone space, it has enjoyed success in non-mobile-phone products, including Apple's iMac line, Hewlett-Packard's Pavilion PC family, Acer's Aspire PC line, the third-generation Amazon Kindle and Microsoft Corp.'s Zune MP3 player. In addition, Atheros has achieved strong design wins in home networking routers, positioning it for success in the connected home segment.
"While Qualcomm already has its own WiFi technology, this deal bolsters its design capabilities and opens up more opportunities in non-handset devices such as tablets and consumer electronics devices, particularly those in the connected home," Sideco said.
Mobile operators are banking on connected consumer electronic devices as the next big growth trend. Moreover, Broadcom currently dominates the market for wireless connectivity semiconductors for consumer electronics, Sideco said.
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