Atheros Buys Intellon to Give Wi-Fi a Powerline Backbone

Intellon_logoAtheros, a Wi-Fi chipmaker, said today it’s agreed to buy Intellon, a maker of chips that turn the home’s electrical network into a conduit for broadband, for $244 million. While most of us use Wi-Fi for our home network, it needs a stronger — and more reliable — wired infrastructure to aggregate and move the ever-increasing amount of HD video streams, music and telephony around. Which is why Atheros CEO Craig Barratt, while discussing his company’s proposed acquisition of Intellon on a call with financial analysts, described powerline networking technology as the backbone of the home network.

Indeed, today’s announcement makes clear that Wi-Fi is not everything to everyone. Of course, Intellon’s strong gross margins and talk of sequential quarterly growth helped endear it to Atheros (and to the analysts on today’s call) as well. Intellon said in July that gross margins for its most recent quarter had exceeded 50 percent, and that revenues had increased 14 percent on a sequential basis. Intellon has done well selling its powerline chips into the European IPTV market, and has seen increasing interest in them for smart grid applications.  It’s also been hawking Ethernet over coax solutions into China, and has been investing in the upcoming wired home networking standard.

Given all this, the combined company will be positioned strongly for the future, as more carriers in the U.S. and in other markets look for both wired and wireless network capabilities to integrate into their residential gateways and set-top boxes in order to move digital content throughout the home.

So what does this acquisition mean for other Wi-Fi providers? Most will need a wired solution to leverage in-home wiring, such as coax or powerline. While Broadcom has already made a big strategic acquisition of MoCA (coax-networking) provider Octalica, this move by Atheros might pressure the company to shore up its powerline technology, especially given that MoCA is largely a U.S.-centric play. Other HomePlug players include Gigle Semiconductor and Coppergate (which acquired the HomePlug assets of Conexant), while Spain’s DS2 offers a competing powerline technology in UPA.

One way or another, the home network will continue to evolve, as I wrote about in a recent analysis over at GigaOM Pro (subscription required). In the meantime, Atheros’ acquisition of Intellon is just more proof that we are indeed moving towards the vision of a multilayered media network first envisioned so many years ago.