It didn't take Intel (Nasdaq: INTC) too long to put its massive cash pile to use. Barely a week after pulling the trigger on a $7.68 billion acquisition of McAfee, Intel pulled off another mega acquisition. On Monday, the company bought the wireless unit from chip maker Infineon for $1.4 billion. While Intel's McAfee purchase left many confused, its raid into wireless processors makes immediate sense.

The mobile future
Explaining why this purchase makes sense requires a little background. Having a wireless unit isn't exactly new for Intel. Back in 2006, the company sold off its own wireless business to Marvell (Nasdaq: MRVL) for $600 million. Since that time, Marvell has turned the unit into a major profit driver, while Intel has watched as the mobile market thrived without its presence.

At the time, the deal was praised as a way for Intel to get "back to the basics," as it allowed the company to focus on its core consumer and server markets. However, getting back to those basics also caused Intel to lose its toehold in a wireless industry that would soon take off with the release of Apple's (Nasdaq: AAPL) iPhone and a slew of other smartphones and small, connected devices.

Intel belatedly tried to push into these markets, but its low-power Atom processor, while perfectly capable for netbook and other kinds of slimmed-down computers, takes up too much power for ultra-small smartphones and tablets with limited battery lives. A company named ARM (Nasdaq: ARMH) seized upon Intel's absence. ARM doesn't actually manufacture processors, but instead licenses its designs to other companies that manufacture the chips and design support logic around ARM's technology.

Intel returns fire
ARM processors are now dominant across small devices like smartphones. Apple has made several acquisitions related to improving its proprietary A4 processor, which is built off ARM technology. Likewise, the dominant and aspiring smartphone processor makers all rely heavily on ARM. Qualcomm (Nasdaq: QCOM), Texas Instruments (NYSE: TXN), Marvell, and NVIDIA (Nasdaq: NVDA) all license ARM technology. Even Microsoft recently purchased an ARM license.

However, Intel (which it's worth noting, used to be an ARM licensee), is firing back now. The company has aggressively promoted its new "Moorestown" processor, which it claims can reach power levels as efficient as ARM processors. However, with an entire industry already backing ARM's designs, the battle will be extremely hard-fought

The Infineon special sauce
In the mobile processor world, aside from power consumption being a deciding factor on what designs win, there's one key difference: how well it integrates with all the communications devices needed to take in voice and data signals. Handling this process is a baseband processor, which takes in information from the phone's radio frequency chip and converts it to something the central processor can use.

Qualcomm has scored several large wins from its expertise combining these communications chipsets with the processor into a single design. Intel hopes that by combining Infineon's wireless unit with its own processor designs, it can create a superior product that better matches the needs of handset manufacturers like Motorola and HTC, and gets it back into the mobile race.

Bottom line
Dominating the mobile world is a tall order for Intel; it has a powerful row of companies that have poured significant design efforts into ARM's architecture. To incentivize companies to abandon their ARM-based processors and adopt its chips, it'll need a technology that's extremely powerful and well in excess of current offerings. Combining wireless capabilities and processing has been shown to be a winner in the wireless world, and might be necessary to jump-start Intel's efforts.

However, buyer beware, by Intel jumping into the segment and trying to package wireless capabilities with its processor, that's a shot across the bow of powerful wireless companies such as Qualcomm, Texas Instruments, and Broadcom.

Don't expect Intel's dominance of smartphones to be a foregone conclusion. With a number of large companies entrenched with ARM and risking loss of wireless business to Intel if it succeeds, they'll fight tooth and nail against Intel's ambitions.

So, the deal makes sense. Intel needs wireless to succeed; it's just already pretty late in the wireless game. If you're an Intel shareholder, get ready for a long, hard fight. This one is going to get ugly.