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Qualcomm to buy Atheros

Marketplace Staff Jan 5, 2011
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TEXT OF INTERVIEW

STEVE CHIOTAKIS: A big deal announced today in the tech kingdom. Cell phone chip and accessory maker Qualcomm says it’s buying Atheros, a wi-fi and connectivity firm for more than $3 billion. Qualcomm’s CEO Paul Jacobs tells Forbes.com the addition will provide his company with an interesting growth opportunity. Just what kind of opportunity?

Let’s get some analysis from Rob Enderle, president of the Enderle Group. He’s with us live from Las Veags this morning where he’s attending the huge Consumer and Electronics Show. I’m sure there’s a little bit of buzz going on there, Rob.

ROB ENDERLE: Oh most certainly. I mean this is a show of toys.

CHIOTAKIS: Why is this deal — this Qualcomm Atheros deal — so important, aside from the fact that we’re talking $3-plus billion?

ENDERLE: It expands Qualcomms base. Atheros moves in markets where Qualcomm doesn’t — routers, PCs — Qualcomm’s primarily in cell phones and things like smart books, and tablets. And those two markets are coming together relatively rapidly. So this allows Qualcomm to get ahead of that particular wave, surround the market and continue to control it. They’re kind of the most dominant in their space.

CHIOTAKIS: Who does Qualcomm want to go up against — like Apple?

ENDERLE: In their space they’re the one that everybody else is going up against. I mean Qualcomm in affect is the Apple of their market. And so in some ways they’re trying to hold off Intel — who is trying to move over and move into their segment. On the other hand they’re trying to hold off other venders like Invida, Marvel, and others that are trying to move into their space and take some of their shares. So this makes them much stronger, much more powerful, to hold off Intel and to protect their dominants in their chosen Market.

CHIOTAKIS: Put this in a little perspective Rob. Are these deals unique to the tech sector? I mean what is this akin to — like K-Mart buying Sears? What analogy could you give us?

ENDERLE: Might be along the line of General Motors buying Ford.

CHIOTAKIS: Wow. Ok.

ENDERLE: They’re both big players. That’s probably too much overlap.

CHIOTAKIS: Don’t think too hard.

ENDERLE: Because they’re similar but dissimilar in terms of market coverage.

CHIOTAKIS: And how is consolidation like this going to affect the tech industry? I mean will this expand or shrink ingenuity in research and development?

ENDERLE: This kind of consolation doesn’t necessarily — Qualcom’s a heavy research company so it’s unlikely it’s going to reduce research and development. What it will do though is reduce common costs shared by both companies. So what it does, it allows for a similar cost basis to what Qualcom has, and then a revenue basis of the entire combined company. So fixed cost, a significant increase in the revenue basis, so it makes for a more profitable company and one that can better weather storms. We’re in a consolidation time zone. Companies are relatively inexpensive, likely to get more expensive as the market improves and so we’re going to see a lot of this go on in 2011.

CHIOTAKIS: Rob Enderle, tech analyst from Vegas. Rob thank you.

ENDERLE: Pleasure.

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