Intel Makes Move into New Market

Intel Corp. (INTC) announced plans to buy software firm Wind River Systems Inc. (WIND) for $884 million on Thursday in a move that will help it to step out of the traditional semiconductor market and expand into the consumer electronics space.

Intel is paying $11.50 in cash for each share of Wind River, valuing the company at a 44% premium to its Wednesday close. Wind River makes software systems for wireless devices and a host of other embedded computing gadgets, two key areas Intel has been eying for growth.

The acquisition of the Alameda, California-based company is the first major deal signed by Paul Otellini since he became chief executive of the world's largest semiconductor maker back in 2005. The deal is also being considered by industry experts as a strategic move on Otellini's part amid a large-scale consolidation spree in the technology sector.

As cash-strapped consumers cut back spending on personal computers, Intel's revenue slumped 26% in the latest quarter. Thus, the company is now seeking alternative sources of income and looking to diversify through acquisitions.

Shares of Wind River, a Zacks #2 Rank ("BuY") company, shot up 45% on the news, while Intel, a Zacks #3 Rank ("Hold") company, gained more than 1%.

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