LOS ANGELES (Los Angeles Daily News) — High-tech heavyweight Intel Corp. will buy mobile computing products maker Xircom Inc. for $748 million, the companies said Monday.
Intel will pay $25 a share for Xircom, whose stock jumped more than 35 percent Tuesday morning to $24.63, which was still well under its 52-week high of $74.12.
Santa Clara-based Intel already held a position in Xircom, which it sees as an important addition to the group of networking infrastructure and communications companies it has been acquiring.
"Xircom brings some very talented engineering, very strong sales channels and innovative products that fit well with our overall strategy to grow our networking communications business," said Intel spokesman Tom Beermann.
Intel said it does not plan any layoffs at Xircom, which will become a wholly owned subsidiary of the world's No. 1 chip maker, best known for its Pentium line of microprocessors. Intel will assume all existing vested and unvested employee options.
Intel also has no plans to abandon Xircom's facilities, although the Xircom name will be phased out, Beermann said.
"We've made several dozen acquisitions over the past few years and our intent with each of them is to grow that business and have it contribute to Intel's growth," Beermann said.
Xircom, with about 1,900 employees, sells and supports its products in more than 100 countries and has regional headquarters in Belgium, Japan and Singapore.
"Customers will have access to a more complete line of products and will benefit from the innovation our combined companies will apply to mobile computing and wireless networking," Xircom's chief executive officer Dirk Gates said in a statement.
Xircom makes adapters that connect portable computers to corporate networks, the Internet and commercial online services. It has also branched out into the handheld computing market with its latest REX 6000 microPDA, a credit card-size digital organizer for storing lists, phone numbers and memos.
Xircom's product line will complement Intel's existing desktop personal computer and server-based network access business.
William Becklean, an analyst at SunTrust Equitable Securities in Boston, said the deal benefits both companies. Xircom was founded in 1988 as a maker of devices that allowed laptop users to connect to local area networks.
Today that kind of a product can be built into chip sets and motherboards built by Intel. And they cost less than the stand-alone products.
"That's really quite a disaster for Xircom," Becklean said. "That transition is happening very rapidly. It just makes sense for Xircom to toss in the towel, so to speak."
Xircom on Monday also reported that it lost $2.5 million, or eight cents a share, on sales of $120.1 million in the 2001 first quarter. That compares with profits of $12.7 million or 46 cents a share on revenue of $124.1 million in the year-ago period. The company attributed the loss to acquisition costs.
This compares with net income of $15.3 million, or 55 cents, on sales of $124.1 million in the year-ago period.
Intel officials declined to reveal details of the negotiations.
The companies hope to complete the deal in the first quarter of 2001.