Intel Grabs Xircom For $748M

Intel Grabs Xircom For $748M

By Mark A. Kellner
www.NewsFactor.com,
Part of the NewsFactor Network
January 15, 2001

Two ends of the computer industry moved closer together Monday as Intel Corporation and Xircom, Inc. announced a US$748 million deal that would have Intel acquire Xircom, a Thousands Oaks, California-based maker of PC cards and other networking products, for $25 per share in an all-cash transaction.

The deal would be completed by March 31st, Intel said, and Xircom will become a wholly owned Intel subsidiary, part of the firm's Network Communications Group.

"The acquisition complements Intel's existing desktop PC and server-based network access businesses by enabling Intel to provide new products for notebook and mobile computing uses," Intel said in a statement.

Xircom, founded in 1988, has had a long history in the mobile networking market, and introduced the Pocket LAN Adapter to connect notebooks to local area networks. While Intel has offered PC Card modems and other networking devices over the years, its sales have lagged behind Xircom's in that area.

Growing Markets

Xircom targets its products to a growing sector of the information technology (IT) market, the remote or mobile worker who needs either the ability to telecommute or is a frequent traveler.

According to an October 2000 survey from research firm IDC, the U.S. mobile and remote population will increase at a 9 percent compound annual growth rate (CAGR), from 39 million in 2000 to 55 million in 2004.

The same study projects that Latin America will experience the largest mobile and remote population growth, increasing at a CAGR of more than 28 percent, from 5.1 million in 1999 to 17.4 million in 2004. Western Europe's mobile and remote population will increase nearly 28 percent each year, from 8 million to 27 million during the same time.

"Xircom's strengths in small-form-factor design combined with our silicon expertise will allow us to provide customers with new and innovative solutions for linking mobile computing devices to corporate wired and wireless networks," said Mark Christensen, vice president and general manager of Intel's Network Communications Group, in a statement from the firm.

Financial Review

Xircom employs 1,900 people worldwide and reported four-quarter revenues of $492 million in its last fiscal year.

Xircom announced that its net sales for the first quarter of fiscal 2001, ended December 31st, 2000, of $120.1 million, compared to $124.1 million for the same period in fiscal 2000.

Net income excluding acquisition-related costs was $.2 million, or $.01 per share, compared to $15.3 million, or $.55 per share, for the same period last year.

When those acquisition costs are included, Xircom's net loss was $2.5 million, or $.08 per share. On January 12th, shares of Xircom closed at $18.063 on the Nasdaq exchange, while Intel closed that day at $31.13 per share.

Rex Fate Uncertain

But the deal calls into question the 18-month-old purchase of the REX handheld device by Xircom from New Jersey-based Franklin Electronic Publishers.

That $13.25 million deal brought the micro-sized personal digital assistant (PDA) to Xircom for a revamp and launch. The firm announced on November 6th, 2000 that it was planning to ship units, but halted shipments on December 15th, when users reported bugs in the new version.

"We will be evaluating all of the various technologies and capabilities that Xircom possesses and determine the appropriate fit for Intel moving forward," Intel spokesman Tom Beermann told NewsFactor. "That evaluation includes the REX device."

 

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Intel Beefs Up Mobile Networking With Xircom January 16, 2001 (6:23 p.m. EST) By Ken Schachter, TechWeb Finance Intel Corp.'s move to buy Xircom Inc. will bulk up the chip giant's mobile networking product line without diluting its earnings, analysts said. "Market dynamics in mobile computing are shifting to smaller, highly integrated cards and embedded solutions, both strengths of Xircom," said Robertson Sevens analyst Eric Rothdeutsch observed. "Intel should be able to integrate its core communications technologies into Xircom's cards." On Monday, Intel (stock: INTC) announced its plan to purchase Xircom (stock: XIRC) for $748 million, or $25 per share, in a cash deal that is expected to be completed in the first quarter. Intel reports fourth-quarter results after the market close Tuesday and Rothdeutsch said the acquisition isn't expected to dilute the company's future earnings. Intel hasn't officially decided what to do with either the Rex or the Xircom brand, according to a company spokesman. Xircom is already quite familiar to Intel, which has relabeled Xircom mobile adapters for some time. Also, in 1997 Intel owned a 12.5 percent stake in Xircom, which had slipped to approximately 6 percent at the time the deal was announced. With 1,900 employees and sales of $492 million over the past four quarters, Xircom, Thousand Oaks, Calif., will become a part of Intel's Network Communications Group. In midday trading Tuesday, shares of Intel, Santa Clara, Calif., were down 2.72 percent to 31 1/4, while Xircom's were up 36.16 percent to 24 19/32 -- but still far short of their 52-week high of 64 9/16. The purchase of Xircom also puts Intel in the booming PDA business. In addition to its networking cards, Xircom makes a miniature personal digital assistant-the REX 6000 MicroPDA -- whose information is synchronized with a PC by inserting it into a notebook PC card slot or into a cradle.

The tiny device, at 1.4 ounces and 3 3/8 inches by 2 1/8 inches, has an LCD display with a touch screen and a stylus.

 

 

 

 

 

 

 

Intel Gets Small In Xircom Deal

Intel will pay $748 million in cash for Xircom, which makes products that allow mobile users to connect to their office or the Internet. The notebook and handheld market is growing faster than the desktop market, and the two companies believe Intel's silicon technologies and Xircom's small-form factor design expertise will provide new opportunities.

By Rex Moore (TMF Orangeblood)
January 16, 2001

Yesterday may have been a holiday for the markets, but Intel (Nasdaq: INTC) kept the news flowing ahead of its earnings announcement, which comes after the bell today. The chip-making giant says it will acquire Xircom (Nasdaq: XIRC) for $25 per share in cash, which works out to about $748 million.

Xircom, based in Thousand Oaks, California, makes PC cards and other products that allow mobile users to connect to corporate networks and the Internet. The company has 1,900 employees and almost half a billion dollars in annual sales. However, Xircom reported fiscal first quarter 2001 earnings yesterday of $0.01 a share, badly missing consensus estimates of $0.13 a share.

During the conference call announcing the acquisition, one analyst questioned whether the announcement was timed to prevent any lawsuits that may have emerged due to the "massive earnings miss." But both sides say there is nothing to the timing, as negotiations have lasted for the better part of the quarter and were initiated well before the earnings results could have been known.

Instead, executives focused on the synergies of the deal. Greg Lang, vice president of Intel's platform networking group, says notebooks and handhelds represent one of the fastest growing PC markets. "Not only are the base notebook sales growing faster than desktop sales," he says, "but communications converge on the notebook platform for both the wide area network, the local area network, and wired and wireless means of connectivity."

Intel brings silicon capabilities to the table, while Xircom offers "small-form factor" design expertise -- the ability to get several technologies to co-exist in the small spaces of a notebook or handheld device. It also has strong sales channels for this market already in place.

Also, Xircom CEO Dirk Gates says there has been a shift in the general market dynamics for mobile computing, moving away from the PC cards and toward embedded solutions. "It becomes more critical that you have access to core IP (intellectual property) around communication solutions in the silicon, and less critical around some of the mechanical design innovations that we've been known for," says Gates. "During this shift, Intel can bring a tremendous amount of leverage and synergy to allow us to continue to grow the business profitably."

Intel's offer represents an almost 40% premium above Xircom's Friday close of $18.06. Shares of Xircom were up 36% to $24.56 in early trading today, while Intel was down about 2%.