Nvidia rocks mobile processor market with Icera buy

Graphics and CPU company Nvidia Corp. has announced its acquisition of Icera Inc., a leading innovator of baseband processors for 3G and 4G cellular phones and tablets.

Icera is a pioneer in next-generation, multiprotocol wireless baseband processors with RF components. Its technology scales from 2G to 4G networks, using a custom-built, ultra-low-power processor. Founded in 2002, the England-based company has approximately 300 employees in seven countries in Europe and Asia, as well as the U.S.

The acquisition, worth $367 million in cash, has already been approved by both companies' boards of directors and is expected to be completed subject to customary closing conditions, in approximately 30 days. The transaction is expected to be slightly dilutive on an operating basis through the first half of calendar 2012, and accretive on an operating basis in the second half of calendar 2012. This expectation does not take into account significant revenue synergies that the companies anticipate.

The market for baseband processors is one of the fastest growing segments of the technology industry, worth an estimated $15 billion a year. Nvidia's Icera acquisition will be able to leverage its momentum in the smartphone and tablet market to capitalize its growth. It will also enable the company to combine its own GPUs and ARM-based CPUs with mobile communications technology to enhance its position as a provider of chips, chipsets and software for mobile applications. The company plans to combine application processors and baseband processors, although it also said that it will continue to collaborate with existing baseband partners and respect customers' preferences in combining application and baseband processors.

"This is a key step in Nvidia's plans to be a major player in the mobile computing revolution," said Jen-Hsun Huang, President and CEO of Nvidia. "Adding Icera's technology to Tegra gives us an outstanding platform to support the industry's best phones and tablets.

Stan Boland, president and CEO of Icera, said, "Nvidia's Tegra processor has the most impressive roadmap in the industry, and it is an ideal match for Icera. As part of Nvidia, we will be able to reach a broader market. Our team has collaborated closely with Nvidia for several years on a range of projects, and we're delighted to be joining forces."

What the analysts are saying
For analysts, the Nvidia-Icera buyout will definitely rock the competitive landscape of the mobile processor market.

In-Stat believes that Nvidia's acquisition is a positive move for both companies and one that will further enhance Nvidia's competitive position.

According to Jim McGregor, chief technology strategist at In-Stat, if the recent smartphone and tablets introductions are any indication, the mobile processor incumbent, Texas Instruments, is seeing significant competition from Qualcomm in the smartphone segment, and Nvidia in tablets.