Notebook communications specialist Xircom is to be bought by Intel for $748m (£500m) in cash. The news follows a sharp drop in Xircom's earnings for the last quarter.
Xircom currently manufactures PC cards for sale by Intel but will become part of Intel's Platform Networking Group.
Tony Lock, senior analyst with Bloor Research, expects the combination of Intel's chip development skills and Xircom's manufacturing expertise to lead to more Intel-branded products. He described the move by Intel as just "a natural progression from where they've been in the past."
Xircom has been hit by the decline in PC card sales and the growth in mini-PCI cards, as notebook manufacturers seek to integrate communications into their models. Mini-PCI products generate lower margins as they place less emphasis on Xircom's physical design expertise and more on the chip IP currently licensed from Intel.
Lock suggested that the elimination of licensing issues for Xircom "will be good for the consumer," although he pointed out this would be countered by less competition in the market.
Xircom had recently tried to diversify away from its traditional PC card modem and network card business, buying both USB accessory maker Entrega and the rights to the Rex PDA. But with its earnings for the last quarter of 2000 down to just 1 cent a share (and a loss of 8 cents a share after costs) compared to 55 cents for the same period last year, Tony Lock thinks Xircom was "relatively cheap in price".