UPDATE 3-Intel to buy Wind River for $884 mln
* Intel to buy Wind River for $884 mln, 44 pct premium
* Acquisition to help Intel in embedded systems space
* Wind River shares up 47 percent (Adds quotes, dateline, bylines, updates share price)
By Clare Baldwin and Anupreeta Das
SAN FRANCISCO/NEW YORK, June 4 (Reuters) - Intel (INTC.O) agreed to buy Wind River Systems Inc WIND.O for about $884 million, growing its software business in order to tackle new a market.
The world's top chipmaker Intel will pay $11.50 a share in cash for all outstanding shares of Wind River, whose software speeds up and connects devices made by Samsung Electronics (005930.KS), Apple Inc (AAPL.O), Hewlett-Packard Co (HPQ.N) and Motorola Inc MOT.N.
The price is a 44 percent premium to Wind River's Wednesday closing price of $8, before news of the acquisition pushed the software designer's shares up by nearly half to $11.76.
The acquisition underscores Intel's strategy of expanding its presence beyond the traditional personal computer and server computer markets that it dominates.
"When you've got 80 percent or more share in a market like PCs or servers, then it's really hard to grow faster than the market," said Insight 64 analyst Nathan Brookwood.
"If the market's not growing, or... has been shrinking because of the economic turmoil in the world, then you're looking for other markets."
The technology industry has pushed for years for the so-called convergence of electronic devices, and as smartphones become ubiquitous, people seek seamless connections between their computers and mobile devices.
Intel has said embedded computing systems, such as those found in car audio and communications systems that can synchronize with computers and smart phones, are a $15 billion growth opportunity.
Intel said it plans to keep all parts of the Wind River's business.
"The bulk of Wind River's revenue is from ARM and Power chips and MIPS chips, and they will be a subsidiary and will continue their business as usual," said Intel spokesman Nick Knupffer in an interview.
"Regarding the other architectures . . . they will carry on maintaining their products across all platforms as they are today."
Wind River's chief marketing officer John Bruggeman said the multi-platform approach was essential to remaining competitive.
"In certain segments PowerPC is the dominant player and in other segments ARM is it, and in others it's MIPS. These are segments that we need to maintain our leadership position," he told Reuters.
Wind River's entire executive staff and product structure will remain in place, Chief Executive Ken Klein said in a conference call with employees.
Analysts earlier in the day said they were concerned that Intel's purchase of Wind River could give it leverage over its competitors' technology - so-called ARM, PowerPC and MIPS architecture - which competes with Intel's x86 architecture in the embedded market.
"The question mark I think today in the minds of folks who are using some of Wind Rivers' operating systems on non x86 platforms is 'hm, wonder what this means for me,'" Brookwood said, but added that cutting non x86 parts of the business would gut the investment.
The deal is expected to close this summer and Wind River will become a subsidiary of Intel upon closing.
Intel's shares ended Thursday up 1.2 percent at $16.13.
Wind River reported first quarter non-GAAP earnings of $600,000, a jump from $500,000 a year ago. It had revenue in the fiscal first quarter of 2010 of $82.5 million, but withdrew its previously issued guidance for fiscal year 2010 and said it would not provide a second quarter outlook due to Intel's acquisition. (Reporting by Clare Baldwin in San Francisco and Anupreeta Das in New York; Additional reporting by Sayantani Ghosh in Bangalore; Editing by Leslie Gevirtz and Carol Bishopric)
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