In a land grab for sophisticated cell phone chip technology, Motorola said on Thursday it will pay $192 million for TTP Communications, which makes 3G software and chip technology.
Motorola, the world’s second-largest wireless phone maker, said it will pay 45 pence ($0.84) per share for the British company—more than three times TTP’s closing price on Wednesday of 13 pence.
The announcement shot the money-losing TTP’s shares up to 43 pence on the London Stock Exchange. Motorola’s shares climbed $0.21 to $21.30 on the New York Stock Exchange.
Cambridge, U.K.-based TTP Communications, formed in 1988, currently has 575 employees, and holds intellectual property for valuable third-generation, or 3G, cellular technology. The company licenses technology both for chips and customized cell phones.
Motorola has been using TTP’s “AJAR technology” to customize software for its low-end phones, and buying the company could have been cheaper than continuing to pay licensing fees.
But analysts like John Jackson from Yankee Group say that Motorola is likely most interested in TTP’s chip designs for 3G phones. And that could mean bad news for chip technology company Freescale, which sells 3G chip technology to Motorola.
“It’s a good day for TTP. But Motorola’s decision to acquire TTP puts Freescale in a tenuous spot,” explained Mr. Jackson. “Getting this 3G chip technology right is really difficult. There is a land grab going on for 3G technology. It could be really disruptive for Freescale.”
For now Wall Street doesn’t agree. Freescale’s shares were up $0.29 to $31.50, perhaps reflecting the suddenly higher value of TTP’s technology.
Losing Money
TTP posted a pre-tax loss from continuing operations of £27.0 million in the fiscal year that ended March 31, down from a profit of £4.0 million a year earlier.
Most of TTP’s business is made up of its technology to customize cell phone software, and design and manufacture technology for wireless infrastructure. “Motorola did not buy TTP for their operations, which are cash-flow negative,” said Mr. Jackson.
That leaves TTP’s silicon designs, which Mr. Jackson predicts Motorola has found to be very valuable.
Contact the writer:KFehrenbacher@RedHerring.com