Intel aims to be a powerhouse in mobile

But it might take more than the recent acquisitions of McAfee and Infineon's wireless chip unit -- it might take a phone that can compete with the iPhone

Intel wants to be a force in the mobile computing world -- a fact that was made clear by the company's recently announced plans to acquire chip maker Infineon Technology's wireless division and security software provider McAfee.

But several analysts questioned whether spending billions of dollars on those two companies and others, and revving up the MeeGo mobile operating system in partnership with Nokia, can be enough to make much difference. Some say Intel has already fallen well behind the mobile curve and has a long way to go to catch up.

With the planned acquisitions of Infineon for $1.4 billion and McAfee for $7.7 billion and the 2009 purchase of mobile software maker Wind River Systems for $884 million, Intel likely will grow more focused on mobile, several analysts said. Those deals could help the company move beyond its primary role as a chip maker whose products are used in 80% of today's desktop and laptop computers but whose sales growth is nonetheless slower than smartphones and mobile devices.

"Becoming more vertical [in mobile] for Intel is about survival," said analyst Jack Gold of J.Gold Associates. "Intel knows it has to change with the times. The Internet of connected things means it's not just about the processor anymore. It's about connectivity -- hence the wireless acquisitions -- and it's about security to keep us safer when we are connected."

Ken Dulaney, a Gartner analyst, said Intel is "not yet a force in mobile, and historically they have been unsuccessful." Given the fact that Intel will encounter entrenched competition from Qualcomm and other chip makers that build ARM-based chips widely used in smartphones, Dulaney wasn't willing to predict how the company will do in the mobile market.

"We will have to wait and see," Dulaney said. ARM-based chips, which incorporate technology from ARM Holdings in Cambridge, England, work well at the low levels of power consumption required for smartphone and small devices. Intel has "never mastered" that energy-efficient architecture, he said, but he did acknowledge that Intel's next version of its Atom chip, called Medfield, "may be on the verge of improving power management."

Rob Enderle, an analyst at Enderle Group, said the Infineon purchase "gives Intel a foot in the door [of the mobile market], but they have to push Atom chips through that door." So far, he added, Intel "has taken an ugly approach to the [mobile] market."

The McAfee deal could help give Intel a comprehensive security approach, and mobile device makers might be interested in using future Intel chips if they had security baked in, Enderle said. "McAfee is much more than antivirus, and that includes encryption, which is arguably better than Research In Motion's," he said, referring to the maker of the popular BlackBerry smartphones.

Part of the concern about Intel's mobile future comes from its recent history. In 2006, Intel sold its unprofitable StrongARM business (whose products were based on the ARM architecture) to Marvell Technology Group for $600 million. Intel "dropped ARM prematurely," Enderle said. "They lost market momentum and have to rebuild it from scratch and acquisitions."

Infineon makes ARM-based chips used in the iPhone and other smartphones, but that business alone will not propel Intel into a strong mobile position, analysts said.

The Infineon division that Intel is acquiring has about a 5% of the mobile chip market. Qualcomm, Texas Instruments and STMicroelectronics are the biggest players, accounting for half the market for mobile processors and radio chips in cell phones, according to Gartner.

Tristan Garra, a financial analyst at Robert W. Baird & Co., said buying Infineon may be "too little, too late" for Intel in the smartphone market. And Craig Berger of FBR Capital Markets wrote a note saying he was skeptical about Intel's ability to execute in the mobile market or other businesses beyond microprocessors for personal computers.

Intel invested a great deal in high-speed WiMax technologies, but analysts said the company will also need to perform in the much bigger 4G market for LTE wireless technology. Perhaps Intel's $6 billion annual R&D budget will make a difference there, analysts said.

Even if it offered futuristic mobile chips, analysts said Intel would still need more than chips to succeed; it might need to find a hardware partner to build smartphones with its chips.

"At the end of the day, Intel has to build something that users find compelling, and they've got to find somebody to build it for them, something that's an Intel-based iPhone," Enderle said. "That's possible, but until they do that they aren't going to be successful. This market is defined by devices, not components."

Dulaney argued that any Intel-based smartphone hardware would also need to run on a major mobile operating system, not just the relatively young MeeGo. "Intel probably needs to get one of the major OSs to commit to them, like Symbian, iOS or RIM," Dulaney said. "They have Android support, but so does everyone else. And MeeGo has a long way to go."

Matt Hamblen covers mobile and wireless, smartphones and other handhelds, and wireless networking for Computerworld. Follow Matt on Twitter at @matthamblen, or subscribe to Matt's RSS feed. His e-mail address is mhamblen@computerworld.com.

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