Will the Feds Stand in the Way of P.A. Semi?

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Apple (Nasdaq: AAPL) has the PWR today, but the Feds might take it away.

EE Times is reporting that P.A. Semi, which the iEmpire earlier this week agreed to acquire in a $278 million deal, has been embedding its low-power, high-efficiency microprocessors into advanced U.S. weaponry, and that defense contractors may object to the deal. Lockheed Martin (NYSE: LMT) and Raytheon (NYSE: RTN) are among those said to be involved with 10 defense systems that employ P.A. Semi chips.

It isn't immediately clear how big a problem this could become. But an unnamed source quoted by EE Times who has knowledge of P.A. Semi's defense work doesn't offer much in the way of encouragement.

For example, the source says that one contractor had planned to use 70,000 of the chips over the next decade. Protecting that stake might require action; he told EE Times, "I don't know how a Lockheed Martin or a Raytheon would take the news that the part might not be available after a few months or perhaps two years. Typically, these military programs last for many years."

Therein lies the problem. According to EE Times, P.A. Semi informed customers that it was being acquired and could "no longer guarantee supplies of its chips."

Talk about scary. Though no one is actually saying so, the implication here is that the Department of Defense may be asked to review the deal and make provisions to ensure that P.A. Semi doesn't favor Apple to the detriment of its existing commitments.

I suspect that's true. But I'm also confident that Apple's management team knew that P.A. Semi had substantial dealings with the government.

If so, CEO Steve Jobs likely has a plan to assuage contractors. One possibility could be to provide a technology transfer for parts relating to weapons design. Another could be to spin off chip work related to weapons into a separately owned subsidiary.

Or, perhaps most likely (and, for that matter, most rebellious), would be for Jobs and Apple to relinquish rights to existing PWR-ficient processors and planned updates. That is, after all, how P.A. Semi positioned the deal in its note to clients, saying that Apple was interested in its "intellectual property and engineering talent," reports EE Times.

All of which leads us to one simple conclusion: No matter how good we think we've become at speculating, none of us -- yours truly included -- knows exactly what Apple will do next.

Business as usual, you might say.

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