Intel to buy Wind River Systems for $884 million -
Chipmaker agrees to pay 44% premium in acquisition
marketwatch.com
By Benjamin Pimentel & Jeffry Bartash, MarketWatch
SAN FRANCISCO (MarketWatch) -- Intel Corp. said Thursday that it will acquire Wind River Systems Inc. for $884 million, in a move by the chip-making giant to expand into the market for wireless devices.
Under the agreement, Santa Clara, Calif.-based Intel (INTC 16.13, +0.19, +1.19%) plans to pay $11.50 a share for Wind River (WIND 11.76, +3.76, +47.00%) -- a 44% premium to the shares' Wednesday closing price of $8.
Wind River's shares soared 47% to close at $11.76 Thursday, while Intel gained 1.2% to close at $16.13.
Wind River develops software used to make wireless handsets run faster and more efficiently. Its software is also used in other electronic devices in the auto, aerospace and defense markets.
The semiconductor giant, which mainly sells chips for computers and servers, has been seeking to branch out into other markets for several years.
Stifel Nicolaus analyst Cody Acree said the acquisition "is a step in Intel's effort to diversify its offerings into markets beyond its core PC, server, or mobile markets."
"While Intel is working on chips for these diverse sectors, it will also need specialty software," Acree told clients in a note. "Additionally, Wind River is a well-established company with 'thousands' of clients, which Intel will work to sell to and then to expand into other tertiary functionality."
FBR Capital Markets analyst Craig Berger also called Intel's purchase of Wind River a "strategic shift" for the chip giant.
"We think this acquisition of Wind River is, potentially, a first step in Intel diversifying its business model towards that of IBM, a company that sells hardware, chips, software and services worldwide," Berger told clients in a note. "If Intel is beginning to diversify its business away from just semiconductors, we would expect a host of similar software or services related acquisitions in coming years."
BMO Capital Markets analyst Brian Piccioni also said the move "makes sense strategically since they want to penetrate the embedded space and that requires software support."
However, he also noted in an email interview, "History is not full of examples of tech acquisitions which have paid off financially, though, and Intel has sure made a few dubious ones."
Although Wind River has grown steadily over the past few years, the Alameda, Calif.-based company has fallen short of Wall Street estimates in recent quarters. The stock fell to as low as $5.61 in March from a 52-week high of $12.99, before partly recovering.
Wind River is slated to report its first-quarter financial results Thursday after markets close.
In the most recent fiscal year, Wind River generated $359.7 million in revenue, up 9.5% from the year before. Net income totaled $10.7 million. |
