Intel Seen Acquiring MediaTek Within Three Years

NEW YORK (TheStreet) -- RBC Capital Markets analyst Doug Freedman says Intel (INTC) can pay around $27 billion to buy wireless chipmaker MediaTek, in a deal that would benefit the company's earnings while stemming investment losses it is incurring to grow wireless market share.

Freedman said in a telephone interview he believes a deal will happen within the next two-to-three years "almost out of necessity." The analyst noted an acquisition of MediaTek is Intel's best option to grow in the wireless market. Intel may also find that the timing is improving for a large deal as the baseband market continues to consolidate, the analyst said.

Intel is spending more than $1 billion a quarter to expand into the mobile and wireless market, suffering heavy losses in the unit as it tries to boost market share beyond the single digits. An acquisition of MediaTek could be a less expensive way to drive market share gains and would entail less risk, Freedman said.

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Taiwan-based MediaTek manufactures mobile and tablet chipsets, in addition to Bluetooth, WLAN and GPS chips and NFC system on chips. In contrast to Intel, MediaTek has made steady market share gains in the baseband market.

After acquiring Infineon's wireless solutions business for $1.4 billion in 2010, Intel's baseband market share has fallen to the mid-single digits. Other companies such as MediaTek and Qualcomm (QCOM) have benefited from a consolidating market, especially as players as large as Texas Instruments (TXI) exit the market. Qualcomm's baseband market share has grown to 62% as of 2013, while MediaTek has grown to 14.4%.

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