Motorola is buying U.K.-based TTP Communications for $193 million, which represents quite a hefty premium given that the 45 pence-per-share is nearly 250 percent of the closing price of TTPCom on the London stock exchange yesterday. TTPCom makes mobile-phone applications, protocols, and silicon, and Motorola is making the acquisition through a newly formed subsidiary called DP Acquisitions 2006. Given the big premium Motorola is paying and the fact that TTPCom reported some dismal results (a loss of $50.5 million) in the fiscal year ended March 31, Motorola likely has some big plans for the company's technology, which doesn't bode well for its existing chip partner Freescale. Motorola sole sources its WCDMA basebands from Freescale but is a generation behind Qualcomm, which is dominating the WCDMA chip market at this point.
Motorola has been using TTPCom's Ajar platform for most of its ultra low cost GSM phones, says John Jackson, handset analyst with The Yankee Group. But it has not used TTP's core protocol stack product or ASIC designs. "As such, $193 million is a lot of money to pay for a low-end U/I framework," Jackson says. "Further, TTPCom's Chinese handset manufacturer customer base are not scaling, and will not scale, so while Motorola is buying a 'going concern', there's little or negative cash-flow upside associated with ongoing operations. This indicates bigger plans for TTPCom's core products within Motorola's roadmap, which does not auger well for Freescale."