What Does Intel Want With an OS Vendor?

Since assuming the helm of Intel (NASDAQ: INTC) in 2005, CEO Paul Otellini has spent much of his time jettisoning acquisitions piled up under prior chiefs.

XScale, the communications business, and the NOR flash have all been cut loose in recent years.

So an $884 million acquisition is fairly out of character for the chip giant, which has usually chosen the build route instead of the buy route. Even more surprising was its choice of purchase: Wind River Systems (NASDAQ: WIND), the developer of operating systems for embedded processors.

“If I had to line up ten companies Intel should acquire, this wouldn’t be on the list,” joked Jim McGregor, senior analyst with In-Stat. “Most high tech companies are not good at big acquisitions, and Intel’s history is no exception. It may be an opportunity to screw up a good company or it will help them. It’s kind of a coin toss.”

One encouraging sign for McGregor is that Wind River is going into the software group, not the embedded or ultra mobile groups. That keeps it a neutral player, not taking any particular technology side.

According to Intel, the acquisition will provide the embedded group with Wind River’s very mature product line. Wind River is a successful firm with strong presence in a variety of markets, including defense, McGregor said. “They were doing just fine on their own. Intel wins more than Wind River,” he said.

Bill Kircos, a spokesman for Intel, said in a statement e-mailed to InternetNews.com that while both firms were doing well in the embedded market on their own, “net-net, both companies independently had similar strategies to grow, and combining both into one company gives us a great deal of software expertise on top of our strong processor families. It’s about speed — we are an impatient company and want to grow as quickly as possible, faster than competitors like ARM.”

He added that Wind River has thousands of customers and tens of thousands of developers supporting its operating system and middleware, and Intel won’t mess with that. “Wind River will be an independent subsidiary, with no changes to their business,” he said.

Despite buying Wind River and its Moblin Linux operating system, Kircos said Intel has no designs on the operating system market. “Intel’s existing Software and Services Group has been selling a myriad of software tools, consulting, et al for more than 10 years.”

McGregor said that Intel’s embedded group, the smallest among the groups at Intel but still a $2 billion business, has had a lot of luck breaking into those markets and there’s a huge amount of interest in the segment. Wind River could only further that group in its ambitions to be an equal partner with mobility and desktops/servers.

“It’s a huge boost for Intel’s unknown embedded group that’s over $2 billion now. How much it will benefit Intel in other areas it recently entered, like mobile? That’s still up in the air. It’s real hard to change that market,” he said.

News Around the Web