Intel to buy DSP Communications

Intel Corp. (Nasdaq: INTC) said Thursday it will buy DSP Communications, Inc. (NYSE: DSP) for $36 a share in an all-cash tender offer valued at around $1.6 billion.

The semiconductor giant that just got tripped with its earnings has been aggressively moving away from its core PC chip market. The acquisition of DSP, which makes chipsets, reference design, and software for digital cellular communications products, marks Intel's latest move to branch out from PC chips and into communications chips. As cellular telephone adoption explodes, and handheld devices and mobile computers merge with other Internet clients, Intel is nudging in on the market for chips for digital and voice technologies.

Intel has also been diversifying away from PC chips with the networking-related acquisitions of Dialogic and Level One Communications.

Intel's diversification strategy is picking up on the heels of its recent earnings miss. The company said sales were by pricing pressures in the PC chip world and a flaw in the high-priced Xeon chip. Because of the manufacturing glitches its latest version of the Pentium III, dubbed Coppermine, was delayed.

"Combining DSPC's cellular expertise with Intel's semiconductor and data capabilities will create a leading provider of cellular voice products, as well as establish voice and data solutions for the future," said Davidi Gilo, chairman and chief executive officer of DSPC.

DSPC will become a wholly owned subsidiary of Intel under the terms of the agreement, reporting within Intel's Computing Enhancement Group. DSPC will keep delivering products to customers under current agreements. The companies don't see any immediate changes to their respective product lines.

Intel recently bought privately held IPivot in an all-cash transaction for $500 million to speed up its e-commerce web traffic.