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Technology Stocks : The New Qualcomm - a S&P500 company -- Ignore unavailable to you. Want to Upgrade?

To: RoseCampion who wrote (2353)	10/14/1999 10:34:00 PM
From: nbfm	Read Replies (2) \| Respond to of 13582

note the comments on the cdma license. comments? bullish/bearish/piggish <g>? Intel to buy DSP Communications for $1.6 billion By Therese Poletti SAN FRANCISCO, Oct 14 (Reuters) - Intel Corp. <INTC.O> has agreed to buy wireless telephone chip maker DSP Communications Inc., <DSP.N> in a $1.6 billion deal, the companies said on Thursday, the latest in a series of aggressive moves by Intel to go beyond its traditional microprocessor business. Under the terms of the deal, Intel, the world's largest chip maker, will pay $36 in cash for each share of DSPC, which is based in Cupertino, Calif. The company develops chip sets, software and other key technologies for wireless handsets. "I think the acquisition of DSP Communications absolutely fits into our strategic vision," Craig Barrett, Intel's president and chief executive, said on a conference call. "Our vision is that the Internet will increasingly go wireless ... especially in the form of handheld devices." Barrett said the cellular communications market segment was emerging as a very important element of the Internet and was bound to become much more important in the future. The deal comes just two days after Intel reported third- quarter earnings of 55 cents a share that were below Wall Street's expectations, as prices of the company's core microprocessors fell in the quarter. "Their results were horrible and unless they build up a communications business quickly, they aren't going to get any better," said Dan Niles, an analyst at Robertson Stephens. "I think they are doing exactly the right thing. This is where the growth is ... Wireless is obviously a monster area. The next set of computers will be Palm VIIs, wireless devices that give you access to the Net and that is where you put your resources." In the past year, Intel has been on a tear, making many large acquisitions in the areas of networking and Internet infrastructure, saying it wants to be the building block supplier of the Internet, as it seeks new areas of growth. Those deals include the $780 million purchase of Dialogic Corp., the $3.5 billion acquisition of Level One Communications, the $180 million purchase of Shiva Corp. and many other smaller transactions. "I think it's a good way for them to accelerate their overall business by becoming an overall supplier for one of the hottest markets for semiconductors," said Mark Edelstone, an analyst with Morgan Stanley Dean Witter. "It converts them from a tactical supplier, with their flash memory products, into a more strategic supplier, selling baseband products." Shares of DSPC jumped 6-15/16 to close at 34-15/16 a share on the New York Stock Exchange. Intel stock was off 1-7/32 at 73-11/32 on Nasdaq. Intel said DSPC would become part of its computing and enhancement group headed by Ron Smith. The company's flash memory business, the StrongArm processor for portable devices and its joint venture with Analog Devices Inc. <ADI.N> are all under this business group. Intel is already developing next generation digital signal processors with ADI. DSPC said it has about 300 employees and its revenues are at a run rate of $150 million. The company's chip sets and other technologies are used in cell telephones by companies like Sanyo and Kyocera in Asia. DSPC also said it has a license to Qualcomm Inc.'s <QCOM.O> CDMA (code division multiple access) wireless phone technology). Intel would only say it would acquire the necessary licenses to meet its business needs after many analysts asked if the company has acquired the rights to CDMA. DSP's board of directors has already approved the deal, which is conditional upon DSP shareholders offering a majority of shares in the $36 tender offer. DSP's current and former chief executive officers have already tendered their shares, the companies said. The companies said in a statement they do not anticipate any immediate changes to their respective product lines as a result of the deal. DSP will also continue to deliver products under existing agreements. With this deal, Intel will eventually become a more direct competitor with Texas Instruments Inc. <TXN.N> and Lucent Technologies Inc. <LU.N>, the two biggest players in the communications components market, analysts said. "It's high volume," said David Wu, an analyst at ABN-Amro. "They can leverage their relationships with Nokia <NOK1V.HE> and Ericsson <LMEb.ST> and Motorola (Inc.) <MOT.N>." 20:15 10-14-99 Copyright 1999 Reuters Limited. All rights reserved. Republication or redistribution of Reuters content, including by framing or similar means, is expressly prohibited without the prior written consent of Reuters. Reuters shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon. All active hyperlinks have been inserted by AOL.