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Intel (INTC)
Intel Acquires Wind River for $884 Million
Intel Corporation (INTC: Charts, News, Offers) has agreed to acquire the software company Wind River Systems for $884 million. Intel, the world's largest computer chipmaker, purchased the San Francisco-based software company at $11.50 a share, resulting in a 44% premium on Wind River's June 3rd closing price. The Wind River buyout is Intel Corporation's first major acquisition since 2005. After four years of sitting on the acquisition bench, why did Intel decide to buy Wind River Systems?
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| Stock Analysis |
Intel has a strong grip on the personal computer chip market, but wants to extend its scope of range to new areas. The computer chip market is experiencing a recent slowdown in growth, and Intel is anxious to enter trendier, faster growing consumer segments such as televisions and mobile devices. However, in order to do this, Intel needs an operating system to run its processor chips in these developing markets. Intel has indentified Wind River Systems as the solution to this dilemma.
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Wind River is best known for its ability to develop and manage device software for embedded systems and wireless products. The software company even has experience developing operating systems for automobiles and mobile phones. Intel believes that Wind River's competitive advantages align nicely with its own business strategy goals, specifically its objectives to enter new markets. As a result, Intel is confident that the Wind acquisition will increase company synergy and boost profit levels. It also does not hurt that Wind River's client list is littered with various companies that Intel is positioning itself to do business with in the near future.
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Overall, the Intel and Wind River combination seems like a great fit. Intel's strengths compliment Wind's weaknesses and vise versa. It is the classic marriage between hardware and software. However, was Wind River Systems worth the hefty premium? Intel would like to think so, but only time will tell if Wind River is capable of solving Intel's software problems.
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