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Intersil quits WiFi market - "overcrowded" - finds sucker to buy

The writing is on the wall for WiFi chip suppliers. The WLAN market may be about to boom, but the main beneficiaries of the boom look like being Cisco and Intel - so Intersil has sold off its Prism line of chips to someone who thinks they can out-think those two giants.

The brave buyer is GlobespanVirata, which has agreed to pay $365 million for Intersil's WiFi chip business operation - a price which will look cheap, if GlobespanVirata can get as good a market share in the future as Intersil has today. But that doesn't look certain.

When you move house, it's important to make it clear that you'd love to stay there, because it's a great place to live. "The challenges of the WLAN evolution are resulting in even greater differences in the business models of Intersil's High Performance Analog Product Groups and its Wireless Networking Product Group," said Rich Beyer, President and CEO of Intersil.

What observers are likely to suspect is that he can see Intel eating away at the market for plug-in WiFi cards at one end of the market, and Cisco plotting to disable all competitors at the Access Point end of the market.

This takes roughly half of Intersil's revenue away. The company's 2003 first quarter sales in wireless LAN were $49 million, with remaining revenue of $51 million in its analogue electronics business, which it will retain.

Observers have suggested that the deal may work for GlobespanVirata, even if competition gets tougher, because the company has a thriving "fabless" semiconductor business making DSL chips for broadband. Increasingly, broadband modems are required to include wireless, making it a captive market.

Some observers think that Intersil has been scared by the big-time arrival of Broadcom on the market, with the early version of 802.11g late last year, six months ahead of the ratification of the standard. That was a ploy that paid off for Broadcom, increasing total market sales by a lot more than a factor of two.

Most of that growth went directly to Broadcom and its customers. GlobespanVirata is taking a big gamble.