Qualcomm Reportedly in Talks to Acquire Atheros Communications

1/4/11Follow @bvbigelow

[Updated 1/5/10 11:15 am. See below.] It’s official: Qualcomm (NASDAQ: QCOM) today announced that it has signed an agreement to acquire San Jose’s Atheros Communications (NASDAQ: ATHR) at $45 a share, or roughly $3.1 billion. The transaction has been approved by the boards of both companies, but must still clear the necessary regulatory requirements.

Atheros shares climbed 19 percent yesterday, following reports that Qualcomm is on the verge of acquiring the specialized wireless chipmaker. The New York Times broke the story earlier on its DealBook blog, citing two unidentified people with direct knowledge of the talks.

Atheros’ current president and CEO, Dr. Craig H. Barratt, is expected to join Qualcomm as president of Qualcomm Networking & Connectivity.

Qualcomm, which had $10.3 billion in available cash at the end of September, is the world’s largest maker of wireless chips for mobile phones, while Atheros specializes in making chips for Bluetooth, GPS, and wireless networks that also are used in many mobile devices. Analysts say the deal would expand Qualcomm’s share of the Wi-Fi market and intensify its competition with Broadcom (NASDAQ: BRCM) at a time when a wave of new entries is expected in the market for tablet computers, which is currently dominated by Apple’s iPad.

Qualcomm also could be aiming to expand the synergies arising from its Snapdragon family of ARM-based (Advanced RISC Machine) microprocessors developed for use in smartphones and other mobile computing devices. Qualcomm had initially targeted Snapdragon for smartphones and netbooks, the latter being an emerging market that lost much of its luster after Apple introduced its iPad tablet.

GigaOm’s Stacey Higginbotham offered some trenchant insights in her first take on the deal, saying, “Atheros buys it both a new revenue stream as well as technology that expands Qualcomm’s footprint deeper into the home and gives it more silicon inside mobile devices. Theoretically, Qualcomm could take Atheros’ silicon knowledge in Bluetooth and Wi-Fi, combine it with Qualcomm’s Snapdragon application processor plus cellular radio and put an entire cell phone on a chip.”

The acquisition, if finalized, would rank as Qualcomm’s biggest deal ever. After the Times’ story broke at mid-day, shares of Atheros shares climbed $6.98, or 19 percent, to $44 in regular trading. Qualcomm shares rose by 79 cents, or 1.6 percent, to $50.97 on the Nasdaq.

Bruce V. Bigelow is the editor of Xconomy San Diego. You can e-mail him at bbigelow@xconomy.com or call (619) 669-8788 Follow @bvbigelow

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