Wi-Fi chip specialist Atheros is to acquire Intellon, which makes chips for HomePlug powerline networks. Powerline connections could become the ‘backbone of the home network’, said Atheros CEO Craig Barratt, as in-home Wi-Fi networks are charged with carrying ever higher volumes of digital content and data ‘ and as powerline gains new prominence as part of rural access and smart grid initiatives.
Atheros will pay $244 million in stock and cash for Intellon, whose powerline technology, which runs on the home power circuit, can be combined with the acquirer’s Wi-Fi and Ethernet products to create integrated home network solutions. The transaction should close in the fourth quarter, subject to approval by Intellon shareholders and regulators.
Most analysts were pleased by the synergies of the companies and Intellon’s strong gross margins and recent growth. ”Acquisition makes sense,” Daniel Amir, an analyst at Lazard Capital Markets, told EETimes, citing the complementary nature of Wi-Fi and powerline in the home, as well as future potential in smart grids. Intellon has mainly sold its chips into the European IPTV market and has made some inroads in Ethernet over coax for China and elsewhere.
The powerline market is expected to grow at more than 30% CAGR in the next few years, which is faster than the WLan segment, and margins are better too at 50%. In a research note by Amir, he said the deal should be accretive to Atheros for 2010 and introduce it to Intellon’s 50-strong carrier customer base, as well as raising the potential for ‘better system integration with WLan, Ethernet and homeplug, the most difficult component to engineer in the home networking space’.
Atheros expects its third quarter revenue to range between $145 million and $150 million, up 29% to 34% on Q209 and 5% to 9% year-on-year. This guidance was improved from a previous forecast of $129 million to $134.6 million.
Other Wi-Fi chipmakers may now be looking for a coax and/or powerline partner or acquisition. Broadcom has already acquired Octalica, a specialist in MoCA coax networking, but powerline is expected to be stronger than MoCA outside north America. GigaOm points out that other powerline and Homeplug chip specialists include Gigle Semiconductor, Coppergate and Spain’s DS2.
Also taking a keen interest in powerline is IBM, which is still pushing an aspect that has faded from the spotlight recently ‘ broadband access. While powerline has been embraced for in-home networks and smart grids, it has struggled in the access sector, despite years of being pushed as the next big thing for affordable internet coverage. Now, broadband stimulus funding plans may put new focus on this application, and IBM’s global financing arm is putting its money behind the Broadband over Powerline (BPL) approach for bridging the digital divide. It has established a financing agreement with DS2, Spain’s supplier of integrated chip technology for powerline vendors including International Broadband Electric Communications (IBEC). This supplier makes ‘smart boxes’ which are attached to an electric pole to connect rural users to the internet and is working with IBM in a $9.6 million project to deploy BPL in eastern US electric cooperatives.