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Intel to broaden networking array with VxTel buy

The dominant maker of PC processors announces a $550 million deal to acquire a producer of chips for optical networks.

Intel has added another networking company to its shopping cart as it looks toward new market opportunities.

Intel on Monday announced a deal to acquire VxTel, a producer of chips for optical networks. Intel will pay $550 million for the privately held company, based in Fremont, Calif.

The deal, Intel hopes, will help strengthen its presence in the emerging optical-networking arena as networks evolve from circuit-switched architecture, such as that used by telephone companies, to packet-based schemes similar to the Internet.

VxTel's products include a DSP (digital signal processor) and software that help deliver voice and data traffic over a single, digital, packet-based network. The basic building block of VxTel's technology, a DSP card, can handle 2,000 or more simultaneous voice connections, according to Intel.

The technology will be made part of Intel's Internet Exchange Architecture. IXA is a suite of hardware and software the company offers to the makers of networking equipment.

"The telecommunications industry is going through a major transition," Mark Christensen, vice president and general manager of Intel's Network Communications Group, said in a statement. "The convergence of voice and data traffic through a common network enables service providers and carriers to deliver a wide variety of new services without the cost of expanding and maintaining two different networks."

Intel began its billion-dollar shopping spree in 1999. Adding capabilities from the outside, as with the VxTel acquisition, is an important step in the company's move to transform itself from a PC chipmaker to a supplier of chips for networking, communications and wireless devices, as well as notebook and desktop computers.

Since 1999, the Santa Clara, Calif.-based chipmaker has acquired some 26 companies. In December, it purchased a 120-person consulting group from systems integrator Network Solutions, located in Bangalore, India. Before that, Intel acquired telecommunications-equipment maker Ziatech for $240 million.