Intel buys wireless chip tech in mobile-phone push
SAN FRANCISCO – As the world’s biggest maker of computer chips, Intel Corp. can’t afford to ignore its huge blind spot in mobile phones.
Eighty percent of today’s personal computers use Intel processors. But Intel is absent in smart phones, which are threatening PCs as gateways to the Internet. One reason is that Intel still doesn’t have good ways to design chips to use less power, so Intel’s products drain batteries more quickly — something smart-phone makers won’t tolerate.
The dynamic has put Intel at risk of missing out on the next great opportunity for semiconductor companies. That is why Intel has decided to buy the wireless-chip division of Germany’s Infineon Technologies AG for $1.4 billion. With it, Intel gets the chips used in Apple Inc.’s popular iPhone.
The all-cash deal, announced Monday, is an acknowledgment that Intel has missed the boat on mobile phones, and it gives the company an opportunity to correct its course.
The challenge is similar to the one Microsoft Corp. is facing with Google Inc. as software is increasingly being delivered over the Internet instead of being stored on PCs, the way Microsoft has long approached it. Like Microsoft, Intel is the undisputed leader in a market that’s under attack from a fast-rising force from the outside.
Intel is trying to play catch-up before it falls too far behind.
Intel bought mobile software maker Wind River Systems for $884 million last summer, and the company has spearheaded development of the open-source Moblin software, which is designed to run on mobile devices that use Intel chips.
Two weeks ago, it announced plans to buy computer-security software maker McAfee Inc. for $7.68 billion, which would be the biggest acquisition in Intel’s 42-year history once it gains the expected approvals.
As mobile phones become increasingly enticing targets for hackers, security companies have been developing ways to protect those devices. With McAfee, Intel would be able to bake security into its mobile chips — including those from Infineon.
But even as Infineon’s products give Intel quick entry into the mobile-chip business, Intel is fighting its own history with the Infineon deal, which could prove to be a costly distraction. Many analysts aren’t optimistic about Intel’s chances, pointing to its spotty track record with acquisitions.
“We feel like we have seen this movie before,” analyst Craig Berger with FBR Capital Markets wrote in a research note to investors.
Berger said Intel would gain a strong business with a “sizable presence” among big cell-phone makers and the expertise in building chips based on a low-power design that is widely used in cell phones.
However, he said he is skeptical of Intel’s ability to execute outside of its core market, which is making microprocessors that act as the “brains” of PCs.
Intel needs to branch out because that market is under pressure. Last week, Intel lowered its forecast for the third quarter, blaming weaker-than-expected consumer demand for PCs. PC makers also have been cutting prices drastically in recent years, and in lean times have been buying cheaper chips from Intel just to maintain slim profits.
Intel had a division that made chips for smart phones, but sold it off four years ago in a round of cost-cutting. Since then, Intel has focused on its core business. Meanwhile, use of the Internet on mobile phones has exploded, and companies that make chips for phones have benefited from demand for more capable — and expensive — chips.
Phone chips need to sip power instead of guzzle it, and even Intel’s energy-efficient designs are criticized as too power-hungry for today’s smart phones. Phone makers need to make awkward contortions, such as building bigger devices, to accommodate the need for a bigger battery — which most are loath to do.
With an annual research-and-development budget of nearly $6 billion, Intel is equipped to pour incredible resources into essentially any chip project it chooses. After its exit from the mobile-phone chip market in 2006, it focused on other types of communications technologies. Buying its way back into the market is the fastest way for the company to make up for lost time.
David Perlmutter, an Intel executive vice president, said in an interview with The Associated Press that the decision to sell the mobile-chip business in 2006 was “the right decision at the time,” and that Intel is buying a more complete lineup of technologies from Infineon than those available in the business it sold.
“I hope that we’ve learned our lessons and that we’re way more focused,” he said.
With Infineon, Intel would become the fifth-biggest supplier of mobile-phone processors if the deal closes as expected in the first quarter of next year.
It would get a running start in a market dominated by Qualcomm Inc., Texas Instruments Inc. and STMicroelectronics, which together own about half the total market for processors and other communications chips for cell phones, according to Gartner Inc.
Still, Intel would be a small player: the Infineon division owns only about 5 percent of the market.
Analyst Tristan Gerra with Robert W. Baird & Co. warned that the deal might be “too little, too late” for Intel’s push into smart phones, and he said that Intel will have to invest heavily to keep Infineon’s products competitive with the rollout of the next-generation cellular networks known as 4G.
Gerra noted that the mobile-phone business moves faster than the PC business.
“Whether a PC company such as Intel can move nimbly given more rapid new product cycles within the mobile-phone industry remains a significant question mark,” he said.
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Apple Meeting iPad Demand with 24-Hour Shipping
After months of lag between supply and demand, Apple has begun shipping all six versions of its iPad tablet computer within 24 hours of purchase. Apple’s online store now features the 16-gigabyte, 32-gigabyte and 64-gigabyte iPads in both the Wi-Fi-only incarnation and Wi-Fi with 3G without delay, and with free standard shipping. Don’t expect a rush, though. There’s no option for expedited delivery.
The iPad ranges in price from $499 to $829, depending on storage size and features, and the 3G version requires a data plan.
Fueled by a strong media buzz, Apple sold 300,000 iPads at launch on April 3 and has faced supply problems ever since, pushing back the dates for the 3G version and international release. Orders have been filled in seven to 10 business days.
The groundbreaking device with a 9.7-inch screen and no keyboard, essentially a marriage between an iPod and an e-reader, was so rarely seen except in media reports that Saturday Night Live’s Seth Meyers, in his Weekend Update fake newscast, quipped that the device ushered in “a new era of thousands of people buying something just to find out what it does.”
Still Popular
In a July earnings call with investors, Apple Chief Operating Officer Tim Cook said the company sold one million iPads in 28 days and 3.3 million in the second quarter. But he conceded the company underestimated demand, saying “we’re increasing capacity as quickly as we can.”
Altimeter Group analyst Michael Gartenberg noted that while late summer is not typically a time of strong device sales, there’s every indication that iPad orders are as brisk as ever.
“At this particular point we’re not seeing demand slowdown,” Gartenberg said. “Production has caught up with demand. We are only going to see demand increase as we head into Q4 as people do their holiday shopping.”
A new iPad is expected next year. Gartenberg said those who are intrigued by the device but are reluctant to buy its first generation, knowing there will be a better version around the corner, may find that a long time to wait.
“It’s always hard to say what Apple might or might not do,” said Gartenberg. “Based on when it was introduced last spring, I don’t think we’re likely to see a refresh before then, although we will see a software update.”
Why Wait?
He added that the iPad is no different than other consumer electronic devices that are constantly being released with new specifications and features. “I would have no hesitation telling people to buy the current generation,” he said.
“It does what it needs to do,” he added. “You can always say keep waiting for the 2011 model or the 2012 model. There will always be something faster, smaller, cheaper in any technology based on need. If you didn’t buy a Mac when it was first introduced in 1985 and bought one now, you would have a much better computer for your money, but on the other hand you would have gone the last 30 years without a computer.”
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New iPods, Apple TV Expected This Week
Apple will hold a press conference Wednesday, where Steve Jobs is expected to announce the birth of new stars in his product galaxy, including (probably) new iPods and (possibly) a successor to Apple TV.
As is always the case, Apple has been careful to guard its announcements. The result has been the usual widespread guessing game among Apple worshippers and members of the press. But given the timing of the event, we can make some easy guesses: Apple’s annual September event has always revolved around iTunes and iPods.
Based on a handful of credible reports and some evidence, this time around we expect some interesting upgrades. A touchscreen iPod Nano and an iPod Touch with dual cameras are almost to be expected. It’s also possible that Apple will introduce a complete do-over of the Apple TV.
Wired.com will be attending the Apple event Wednesday, which begins 10 a.m. PT, so check back at Gadget Lab for live blog coverage. To stay plugged in 140 characters at a time, follow @bxchen or @gadgetlab on Twitter.
Meanwhile, if you’re eager to know what’s coming, here are our predictions for what’s likely (and unlikely) to debut at this week’s Apple presser.
New iPods
Let’s start with the obvious. Apple’s popular iPod Touch is due for its annual upgrade, and rumors suggest the next upgrade will gain most of the features of the iPhone 4 (minus the phone, of course): a high-resolution “retina” display, dual cameras and a faster A4 processor. Because it lacks phone hardware, we can expect it to be a wee bit smaller than the iPhone 4.
Additionally, the website iLounge, which has been spectacularly accurate with Apple rumors in the past, claims that the shape of the iPod Touch is changing: “Think of the top of a MacBook Pro, only smaller, which is to say flat rather than curved at the center—closer to the look of the first-generation iPod touch’s back, only with modifications.” In other words, it’ll be flat like an iPhone 4 instead of rounded like an earlier-generation iPhone.
And let’s not forget Apple sells other iPods, too. There’s been a flurry of rumors claiming the iPod Nano will gain a square-shaped body and a touch display to eliminate the traditional click wheel. Corroborating these rumors, a few photos of third-party cases designed for a square-shaped Nano have have been popping up on the web, and test files hidden in the latest iOS beta allude to an “unknown” device.
To us, a puny touchscreen is an odd design choice, and it’s difficult to imagine how it would make sense — or be very usable, given that the entire screen of a Nano is only a few times larger than the surface area of a typical fingerprint. But the iPod Nano has had somewhat of an identity crisis, as it’s gone through a myriad of major design changes in years past (with the latest model including a camera), so a major makeover is plausible. In light of the multiple reports and leaked case designs, we’ll file this under “probable.”
Oh, and remember the iPod Classic? Each year we wonder when Apple will discontinue this device, but because the current iPhone 4 maxes out at 32-GB of capacity, and the next iPod Nano will likely be sold in 32-GB and 64-GB models, there still seems to be a “need” for a massively capacious 160-GB iPod Classic. Apple still has to serve iTunes-addicted audiophiles, after all. We’re guessing the Classic is still sticking around , and if it gets an upgrade at all, it should only be a minor boost in hard-drive capacity.
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Samsung: 1 million Galaxy S smartphones in 45 days in the US
Samsung’s Galaxy S smartphone is a blockbuster globally and recent numbers show it is poised for similar success in the US. The high end smartphone boasts a super-thin form factor with 4-inch Super-AMOLED display and a speedy 1GHz Hummingbird processor.
The knock on Android so far has been that its success rests on the fact that it is sold on Verizon, the nation’s biggest and some say best mobile network. ’If the iPhone was sold on Verizon, no one would be buying Android’ goes the argument.
Samsung says they’ve sold 1 million T-Mobile Vibrants and AT&T Captivates in less than a month and a half in the US. That emphatically proves that Android’s success doesn’t rely on AT&T’s iPhone exclusivity.
Samsung launched on August 15th against the iPhone on AT&T with almost no marketing from the US’s exclusive iPhone carrier. At the same time it launched on T-Mobile, the smallest carrier in the US. While T-Mobile did throw some resources at marketing their version, called Vibrant, their customer base is dwarfed by AT&T, Verizon and even Sprint.
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Apple releases MacBook Pro EFI Firmware Update 1.9
Folks who purchased a fancy new Core i5 or i7 MacBook Pro any time since the models were introduced in April can fire up Software Update and snag the EFI Firmware update Apple released on Thursday.
MacBook Pro EFI Firmware Update 1.9, recommended for all users of the specified models, contains a few fixes for the portable computers, most prominently the squashing of a rare issue that could cause the latest Core i5 and i7 MacBook Pros to freeze during startup or intermittently stall while running.
Apple says the update also improves compatibility with external displays, which likely includes solutions to problems such as one where the 17-inch MacBook Pro would stop recognizing a display when the machine was put to sleep.
The MacBook Pro EFI Firmware Update 1.9 is 2.16MB and should be waiting in Software Update on relevant MacBook Pro models. Installing it will require the machine to be plugged into its power source, as well as a restart.
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Reality Check: PSP 2 Phone Rumors
Some things are just too good to imagine; and this is why the rumors of the upcoming Playstation Portable 2 “Phone” simply would not go away. Merging together two of the most impressive handheld technologies have always been a great thing, so why burst the fantasy bubble?

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Defense Department Computers Attacked Via Flash Drive
The computer network belonging to the U.S. military’s Central Command was successfully infiltrated in 2008 via Flash drives, according to The Washington Post.
Deputy Defense Secretary William J. Lynn III described the attack in an article that was published this week in Foreign Affairs magazine.
The incident occurred in 2008 at a post in the Middle East and was performed via a USB Flash drive, which installed malware. “That code spread undetected on both classified and unclassified systems, establishing what amounted to a digital beachhead, from which data could be transferred to servers under foreign control,” Lynn said.
The Los Angeles Times reported in 2008 that the incursion might have originated in Russia, citing anonymous Defense officials.
“Operation Buckshot Yankee,” which countered the attack, was a turning point for military computer security. Part of the response was a temporary ban on the use of Flash drives in military computers. That ban has since been modified. The broad outlines of the attack have been reported over time, but the details had heretofore been kept secret.
The Post suggested that Lynn’s article is aimed in part at raising awareness of the problem and of the DOD’s actions in response, particularly “active defense,” which seeks out intruders on the network. It is also an exercise in public lobbying for DOD to have a role in national cyberdefense. Current legislative proposals generally give the Department of Homeland Security primary responsibility in that area.
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