Intel has made another significant move in its bid to expand into the mobile connectivity market that has often proved elusive, buying software optimization firm Wind River for $884 million. This will take it into a huge range of embedded markets, but will also raise serious dilemmas, since many of Intel’s rivals are key Wind River clients.
Wind River, whose roots lie in real time operating systems for embedded technologies, has recently been prominent in both major mobile Linux initiatives, Android and LiMo. It has worked on integration and testing services to bring a common Linux platform to a range of processors ‘ expertise that could strengthen Intel’s own Moblin Linux, or could give it control of a technology that has so far been focused on spanning multiple chip architectures.
Wind River has worked with Intel on developing an open Moblin platform for MIDs, and recently collaborated with Qualcomm to optimize and integrate Android for the CDMA giant’s Snapdragon platform, making this code available to the Android community. It was also recently chosen by the LiMo Foundation to deliver common infrastructure, tools, testing and integration services for all code contributions from LiMo members.
This track record indicates the pivotal position that such technologies take, which will now come under Intel’s remit, giving the chip giant enhanced position in the increasingly important world of embedding wireless into a vast range of devices. “This multibillion dollar market opportunity is increasingly becoming connected and more intelligent, requiring supporting applications and services as well as full internet functionality,” Intel said in a statement.
The deal values Wind River’s stock at $11.50 per share, a 44% premium over the company’s Wednesday closing stock price. The smaller firm’s shares rose a huge 47% on news of the acquisition.
Intel has tried before, with limited success, to penetrate markets like embedded communications and ASICs, but as ’embedded wireless’ comes to mean fast connections and consumer applications – not just low speed, low margin home, auto or industrial systems – it is more urgent that it makes its mark this time around. Intel has talked for years of putting its processors into the ‘any time anywhere’ world of mobile access, but until recently that was largely envisaged to mean smartphones and some media players, not a whole gamut of devices from electronic book readers right down to sensors and M2M systems with 3G-class IP connections.
Clearly this world requires not only ultra-low power silicon but a new class of software. Intel is making strides on the former, with Atom and other developments, often with Taiwanese manufacturing partners skilled in this area. At the March Embedded World conference, Doug Davis, general manager of Intel’s embedded and communications group, said that the firm’s embedded business has grown to more than $1bn, rising about 16% a year over the past several years. ‘With the Atom processor we begin to bump up against ARM,” he added. The market for internet connected embedded systems could grow to $15bn by 2015, according to IDC. It also announced ‘Embedded Atom’ – four variations of the processor that are scheduled for various apps such as cars and mediaphones.
On the software front, Linux systems like Android and real time iterations are starting to turn up in a wide range of embedded systems, but Windows, even in embedded CE mode, will not cut the mustard and so Wind River could provide a Linux platform and real time operating system for Intel processors, replacing Wintel with WindTel.
Intel said, in an interview with EETimes: ‘We have very ambitious plans to grow in the embedded area as a key part of our strategy to turn every electronic product into computing equipment. We are looking at multibillion opportunities in the embedded area, and while our software and services sales are nominal, [Intel’s software] group is more strategic for the company’s future.’ And in this scenario, it is vital to control the software, not rely entirely on partners like Microsoft ‘ hence Moblin, which at the very least Wind River will enhance as a Linux platform for netbooks and other devices. Moblin was recently handed over to the Linux Foundation and Intel is increasingly steering a skilful line between open source and full control of its platforms, reminiscent of Sun in Java.
All this indicates the increasing importance of software to chip majors who want to achieve influence beyond just silicon sales. “It’s a first step in Intel diversifying its business model outside chips,’ said Craig Berger, an analyst with FBR Capital Markets. However, there will be a dilemma in how far to use Wind River’s software and services to boost Atom and Moblin, and how far to keep them platform neutral and potentially spread Intel’s influence into rivals’ territories.
Intel’s biggest decision will be how to approach those Wind River customers that are rivals rather than potentially attractive partners. In an SEC filing, its prey said other companies with which it has a “strategic relationship” are Broadcom, Cavium, Emerson, Freescale, IBM, MIPS, NEC, NXP, Qualcomm, RadiSys, RMI, Renesas, Sun, Texas Instruments, Toshiba and Xilinx. Whether it maintains relationships with customers such as STMicro and Qualcomm, which are also competitors, will reveal whether it sees its new acquisition primarily as a technology purchase, to put Atom/Moblin ahead of the game and boost its embedded ambitions; or a way to establish an industry standard platform that it can control.
In the former scenario, where Wind River is acquired for technological differentiation, its real time operating system VxWorks could be almost as significant as its Linux developments, in boosting Intel’s expertise in embedded processors. As many analysts pointed out, Wind River may be a minnow next to Intel’s whale, with annual sales of $360 million versus $38 billion, but it operates in a far wider range of markets. This certainly should not be seen as a move geared only to Intel’s smartphone and MID ambitions but to the whole embedded market where the ARM ecosystem is spreading its wings ‘ Wind River has customers in aviation, automotive, consumer electronics, communications, industrial, medical and defense sectors, and customers are as diverse as Boeing, Ericsson and Raytheon, as well as Intel itself, which is the smaller firm’s largest client in its fastest growing business.
In the latter, VxWorks would be a legacy product and the key value will lie in the ecosystem that Wind River has built around its Linux. This could make Moblin into a strong performer alongside Android, and could also bring Intel into the fold of Android’s most credible Mobile Linux challenger, LiMo. As the LiMo Foundation’s chosen integrator, Wind River could be the route for Intel to join LiMo and integrate that platform with Moblin, extending its influence at the expense of Google’s bid to be the key driver of mobile web standards.
There will be challenges in integrating Wind River, with its fragmented business model based around individual projects and verticals, and in working out the ongoing relationships with existing customers. But Intel has acquired a company whose significance is likely to be far larger than its revenues, even if most of the concrete results of the purchase develop under the radar ‘ rather like Nokia’s hugely strategic, but apparently off-centre, purchase of Trolltech. It may lead to a bold move, like pitching Intel against Google with a wholehearted backing of LiMo, or it may result in more gradual steps that boost existing strategies, notably the increased business in SoCs for embedded and mobile markets, and the shift up the value chain into software platforms.