It was merely a market-moving New York Times article yesterday, but confirmed fact today: Qualcomm (Nasdaq: QCOM) is buying longtime Motley Fool Hidden Gems recommendation Atheros Communications (Nasdaq: ATHR) for $45 of pure cash per Atheros share.
The deal price is just a smidge higher than the $43 52-week high that Atheros set last April after a stellar earnings report with equally rosy guidance numbers. But then macroeconomic jitters damaged the stock badly, and last night's $44 closing price was an 81% boost from the bottom of the barrel, four months ago.
The combination adds Atheros' Wi-Fi and Ethernet networking acumen to Qualcomm's wide-area radio solutions. The companies claim to have "a long history of collaboration," which is obviously true in the sense of working up networking standards together, but I'm having a hard time finding smartphones or tablets with Atheros Wi-Fi alongside Qualcomm radio or central processor chips.
I bet that will change quickly, though. The acquisition is expected to close in the first half of 2011 and add to Qualcomm's earnings next fiscal year. Don't expect to see magical Atheros-and-Qualcomm combinations showing up before then -- it takes months and sometimes years to push a new chip design through design, manufacturing, sales to gadget builders, and then Federal Communications Commission approvals for said pieces of consumer-ready electronics.
But by next year, the Qualcomm Snapdragon will feature new and presumably improved networking powers, and the company just became a closer competitor to Broadcom (Nasdaq: BRCM) and Texas Instruments (NYSE: TXN) than it ever was without the Atheros addition. This is a smart buy.
