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Dialogic soars on Intel acquisition

Dialogic Corp. (Nasdaq: DLGC) shares rose 30 percent, up 10 1/8 to 43 1/2, on Tuesday after Intel Corp. (Nasdaq: INTC) said it would buy the company for $780 million, or $44 a share, in a cash tender offer.

The bid for Dialogic's 16.9 million outstanding shares is set to begin June 7 and end July 2. Dialogic will become a wholly-owned subsidiary of Intel, reporting within Intel's enterprise server group. Dialogic's 1,200 employees will continue as employees of the new subsidiary.

Dialogic is the top supplier of equipment that incorporates phone and fax functions into computers. The Parsippany, N.J company lets telecommunications networks to work more like computer networks, with several computers working on a single server.

On its face the deal seems incongruous with the business of the world's largest chipmaker. However, the market for PCs has been tightening from the advent of the low-cost PC in a time when big computer makers such as Compaq Computer Corp. (NYSE: CPQ) are dealing with a softening in demand. Also, Intel faces competition from Advanced Micro Devices Inc. (NYSE: AMD) as well.

Intel has turned to focus on networking and communications as its new engine for growth. Intel is delving in the home networking market with investments in Proxim Inc. (Nasdaq: PROX), among others. Proxim makes wireless local area network technology.

Intel's boldest move to in networking to date has been its $2.2 billion acquisition of Level One Communications Inc. (Nasdaq: LEVL), which makes networking chips.

Intel's foray into networking began with its purchase of Shiva Corp. in October. Shiva sells virtual private networks, which are secure Internet connections between local area networks. Shiva was folded into Intel's networking products unit.