Why did Intel buy Avago’s Axxia network processor unit?
Exciting times are ahead for Intel – strong 4Q14 earnings (Part 4 of 16)
Intel purchased Axxia network
In August 2014, Intel (INTC) purchased Avago’s (AVGO) Axxia network processor unit. The deal was completed for $650 million in cash. The Axxia network unit was obtained by Avago when it acquired LSI. Avago is a Singapore-based vendor of analog semiconductor devices. In May 2014, Avago agreed to sell LSI’s flash product unit to Seagate (STX) for $450 million.
Overview of Axxia’s network
Axxia’s networking is focused on system on chip, or SoC, products for network infrastructure. In 2013, it reported revenue of $113 million. It had 650 employees. Axxia’s network processors use IBM (IBM), PowerPC CPU (central processing unit) cores, and ARM cores.
If you want to gain exposure to Intel, you can consider investing in the Technology Select Sector SPDR Fund (XLK). Intel accounts for about 3.55% of XLK.
As the above chart shows, analysts expect huge growth in the wireless networking space in the near future. Long-term evolution, or LTE, is a 4G technology that’s capable of handling high-speed mobile data for Apple’s (AAPL) iPhone 5 and other compatible devices.
How Axxia’s acquisition will help Intel
The acquisition of Axxia’s network is expected to broaden Intel’s product line in the network processor market. Intel believes that acquiring the Axxia networking business’ ARM and PowerPC-based processors—that are aimed for enterprise and wireless network hardware—will enhance its product portfolio. It will enable its customers and service providers to create networks that will be intelligent, efficient, and cost-effective. It will aid in the faster deployment of new services.
Back in 2011, Intel bought Fulcrum Microsystems—an Ethernet switch processor startup company. This acquisition was aimed to expand Intel’s Xeon line of server processors out into storage arrays and networking gear.
Intel believes that a “common architecture” for networks will hold fascination for operators that face challenges scaling out infrastructure to support smart cities, connected cars, and other devices. Due to the SMAC (social, mobile, analytics, and cloud) and IoT (Internet of Things) revolution, the above mentioned infrastructure is expected to come online.
The acquisition of Axxia’s network can aid Intel’s foray into the IoT market.
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