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To: DaveMG who wrote (2405)	10/15/1999 4:34:00 PM
From: Ruffian	Respond to of 13582

Red Herring> ntel goes wireless with DSP Communications By Tom Davey Redherring.com October 15, 1999 The company that supplies the brains to 85 percent of all personal computers now wants to dominate the market for neurons in the Internet's central nervous system. Intel (Nasdaq: INTC) announced Thursday it plans to acquire DSP Communications (NYSE: DSP), a supplier of digital cell phone communication chips and software, for $1.6 billion in cash. The deal calls for DSP shareholders to receive $36 a share, representing a 29 percent premium over DSP Communications's closing share price Wednesday. Intel made several acquisitions over the past year that point to new horizons for the chipmaker. Although the market for PC chips is far from saturated, it has begun to slow. Intel, who carried $11.9 billion in cash in the third quarter, has been drooling over opportunities to become a key Internet building-block supplier. Other recent purchases include Dialogic, a provider of server-based voice technology, for $780 million; Level One Communications, a builder of chips inside network switching equipment, for $3.5 billion; and Shiva, a builder of equipment for so-called virtual private networks on the Internet, for $180 million. Cell phone manufacturers in Japan and Korea use DSP Communications's chips and software to build small phones with low power consumption that double as data transmission devices. DSP Communications currently doesn't have any customers in the United States, where Motorola (NYSE: MOT), Texas Instruments (NYSE: TXN), Philips (NYSE: PHG), and Qualcomm (Nasdaq: QCOM) dominate the market for such chips. INTEL'S WIRELESS TRANSITION Market research firm IDC figures the 1999 worldwide market for cell phone chips is $10.7 billion, growing at 11 percent a year through 2003. DSP Communications currently has a very small piece of that market, with $155 million in sales. Although Intel has been making investments in networking and remote-access products for the past few years, virtually all have been in wired infrastructure. "Now, Intel wants to go into wireless," says IDC analyst Allen Leibovitch. "Third-generation cell phones in 2001 or 2002 will have higher data rates than your PC at home." Mr. Leibovitch says Intel paid a high price for DSP Communications. However, the company now has the opportunity to combine DSP Communications's technology with that of its Strongarm microprocessor, currently used in palm-size computers that run Microsoft's (Nasdaq: MSFT) CE operating system, he says. That combination adds wireless capabilities to handheld devices. On the other hand, Intel processors may give mobile phones more computer-like functions.