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(Reuters) - Touchscreen chipmaker Atmel Corp said it would buy Newport Media, a maker of low-power Wi-Fi and bluetooth gear, for $140 million to gain ground in a technology that helps connect everything through the Internet.
Atmel's shares were down 1 percent in early trading on Thursday.
With the deal, the chipmaker joins a list of semiconductor companies that are acquiring technologies to position themselves for the trend known as the Internet of Things (IoT).
"Low-Power Bluetooth was a technology Atmel planned on buying or building during CY14," Feltl & Company analyst Jeffrey Schreiner told Reuters.
The technology adds to the company's product base which supports IoT, Schreiner added.
Atmel said its chips paired with Newport's gears can be used in a variety of products ranging from home and building automation equipments to consumer devices that require longer battery life.
A growing number of companies - including Google Inc, Apple Inc, Qualcomm Inc, and Microsoft Corp - are working alone or in groups to promote protocols for how smart devices should work together.
Tech companies such as Qualcomm believe the quick establishment of standards across home-connected gadgets, cars and wearable computing devices will accelerate the introduction of new devices by manufacturers.
The deal includes an additional earn-out of up to $30 million which is to be paid if future revenue thresholds are achieved over the next two years. The chipmaker expects the deal to add to its adjusted financials in the second half of 2015.
"With the deal being dilutive for a year or more, it suggests to us that opportunities for IoT based revenues within Atmel are likely more long-term in nature," Schreiner added.
Schreiner, who expects IoT product volumes ramping up in 2017-2018, said the purchase price is "somewhat expensive".
Atmel said it would fund the deal with cash on hand and borrowings under its existing credit facility. The transaction is expected to close in the third calendar quarter.
Newport Media reported revenue of $43 million for 2013, Atmel said in a statement.
Additional reporting by Lehar Mann; Editing by Saumyadeb Chakrabarty