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Intel’s CEO explains his multibillion-dollar acquisition spree

Mon Aug 30, 2010 5:50pm EDT

Intel chief executive Paul Otellini just appeared on the Fox Business TV Network. In the interview with Fox’s Liz Claman, he explained why Intel is buying the wireless business of Infineon for $1.4 billion and McAfee for $7.68 billion, as well as the cable modem business of Texas Instruments for an undisclosed price. Here’s a link to the Intel video, and the highlights are excerpted below. I have also embedded the videos, part 1 and part 2, at the bottom.

On Steve Job’s reaction to Intel’s purchase of Infineon:

“Steve was very happy. The industry was abuzz that this business unit was on the market, and there were a number of competing companies for it. I think they are very happy that Intel won the bid.”

On why it took Intel so long to make this purchase:

“There were a number of these that were available. In our mind this was the best technology we could find at the right price. We are very happy with the capabilities of the company and their customer list.”

On buying Infineon wireless business:

“The key thing is the technology they have today, the customer connections they have today, and where the technology in general is going. We look forward to a period in the not so distant future where all of these functions can be on a single chip. Intel has great capabilities and applications processors today, but bringing in the capabilities for 3G and ultimately LTE (Long-term Evolution) onto the chip, that makes a lot of sense to us from an economic and power standpoint.”

On how McAfee will be integrated into their products:

“The first products will be things we have worked on before the acquisition discussions, which will come into the PC platforms next year. We will take the combination of hardware based security that Intel already produces and enhance that with software capability from McAfee. That will only get better in PCs over time. Then what we would like to do is drive that same capability not just into smartphones, but also anything that is going to get smart and get connected; your television, your cars, are all going to have internet connections. You want that same protection. We call this a third pillar of computing. We have energy-efficient performance, we have connectivity, and now we’ve got security.”

On when they will be able to put Infineon technology and atom chip technology onto a single chip:

“You will see them combined inside a phone as separate chips next year. The single chip implementation will be farther down the road.”

On whether having Apple as a client was a driving force in their desire to purchase Infineon:

“It wasn’t the overwhelming factor. These technologies today are discrete chips. We like the fact that they have a good revenue stream, but really where the technology can go over time is important to us. We have a had a multi-radio strategy for many years starting with WiFi and WiMax, this brings 3G and ultimately LTE and GPS capabilities into our portfolio to be able to use in all of our devices.”

On the strategy behind selling XScale only to reenter the wireless realm with the purchase of Infineon:

“It’s 180 degrees from what we sold. What we had was an XScale-based applications processor business with a little bit of comms technology in it. Today what we are picking up is a big comms business with the baseband technology the protocol stack and all the software that goes with it. People want the capability of Intel architecture for their apps processor and the capability of Intel Silicon, and the combination of those was something we didn’t have in the divestiture of the XScale business four or five years ago.”

On his criticism of the Obama administration not being “business friendly”:

“I wasn’t taking on the administration per say, I was taking on the trends that I have seen in the last couple of administrations. The two specific things I talked about were the R&D tax credit, making that permanent. That has not been permanent for 25 years. The same thing with corporate tax rates. Raising them in this environment is really not conducive to making  companies competitive globally, which makes them less prone to hire people here. This is not just this administration, this is talking about this trend towards what we need to be more competitive as a nation going forward.”

On what advice he would give Obama on how to create jobs:

“The most important thing the current administration can do is remove the number of variables out there. There are so many things where business leaders can’t predict what’s going to happen. Businesses don’t like uncertainty. When you start reducing the variables and putting predictability into the system, you can now make informed decisions.”

On the prediction for PC industry growth:

“We are still tracking as an industry to have a growth rate this year in the 18 to 20% range, which is the best year in the industry in quite some time.”

On whether he expects to acquire any other companies in the near future:

“This is three announcements in two weeks. We also purchased the cable modem business from Texas Instruments. All these have been in flight for some time. This is enough for us to chew on for a while. Having said that though, if the right technology company becomes available at the right price, we’ll take a look at it. We don’t have an acquisition strategy per say. We have a number of strategies around platforms, and we will use acquisition to selectively fill holes that we don’t have.”

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