Nvidia Buys Phone-Chip Firm

MAY 10, 2011 THE WALL STREET JOURNAL

By DON CLARK
Nvidia Corp. placed a $367 million bet on a novel technology for wireless chips to help build its foothold in smartphones and tablet-style computers.

The Silicon Valley chip maker on Monday struck an all-cash deal for Icera Inc., a start-up in Bristol, England that has spent nine years pursuing an unusual programmable technology for what the industry calls baseband communication functions.

Nvidia, a specialist in computer graphics, has added microprocessor technology to compete in mobile devices—but also needs baseband capability to match rivals such as Qualcomm Inc. and Intel Corp.
"As a result of this acquisition we have two of the most important processors in mobile computing," said Jen-Hsun Huang, Nvidia's chief executive, in an interview.

Most companies add special circuitry for each set of communications protocols. Icera, by contrast, designed more general-purpose processors that use software to handle different wireless standards.
That means the same chip could work on 2G, 3G and 4G cellular networks, for example, and be upgraded to handle new features. Each piece of silicon also tends to be smaller, a savings in space and manufacturing cost, Icera says.

Icera, founded in 2002, raised some $250 million in venture capital over the years. Stan Boland, its president and chief executive, says the company started out with accessories known as dongles that help laptop computers connect to wireless networks. He said Icera is just starting to deliver samples of its chips aimed at cellular handsets.

Mike Thelander, an analyst with Signals Research Group, said his firm recently conducted tests that found Icera's technology was within "spitting distance" of market leader Qualcomm's. But he believes Icera has struggled to get accepted by cellphone makers, because of concerns about its size and staying power.

As a result of the deal, Mr. Thelander said, Icera has the backing of a big-name company and Nvidia gets the baseband capability it needs to offer customers a more complete bundle of technology. "It's really a win-win-win," he said.

Mr. Huang said Nvidia still expects its chips to work alongside baseband processors from other companies, when customers prefer it. Meanwhile, having an in-house baseband technology makes it more feasible to create products that combine a microprocessor and baseband on one piece of silicon.
Most smartphones and tablets now keep those functions separate, Mr. Huang noted, but such integrated products are at least a theoretical possibility as a result of the deal. "We don't have any plans at the moment, but we certainly have the ability to do it," he said.

Nvidia, which reports its fiscal first-quarter earnings on Thursday, said Monday it sees the deal slightly trimming its operating profit through the first half of the 2012 calendar year, and adding to it in the second half of next year. The deal has been approved by both companies' boards and is expected to be completed in 30 days.

Icera was advised on the deal by Evercore Partners; Nvidia relied on its in-house investment team.
—Shara Tibken and Matt Jarzemsky contributed to this article.

Write to Don Clark at don.clark@wsj.com