World and Nation

Qualcomm said to be near 
deal to purchase chip maker

Qualcomm, the pioneering wireless technology company, is near an agreement to buy the chip maker Atheros Communications for about $3.5 billion, according to two people with direct knowledge of the talks, in a deal that underscores the emerging dominance of smart phones and tablet computers. The transaction is expected to be announced on Wednesday morning, said these people. They added the negotiations were in their final stages but could still fall apart.

For Qualcomm, which has traditionally focused on developing its proprietary technologies for cell phones, the acquisition — its largest ever — would signal a major shift. Qualcomm has been looking to expand beyond its core market of providing chips for wireless voice technology and move more aggressively into chip making for smart phones and tablets.

An announcement of a Qualcomm-Atheros tie-up would coincide with the start of the Consumer Electronics Show in Las Vegas, where the two companies will be displaying their products.

Qualcomm is offering $45 a share, said the people with direct knowledge of the talks. That represents a premium of 29 percent to Atheros’ average stock price over the last month and a premium of 21 percent to its trading on Tuesday afternoon. Shares of Atheros jumped after the report, closing up almost 19 percent, at $44.

Qualcomm has long been one of the dominant players in supplying chips to wireless phones for voice communications. But in recent years, Paul E. Jacobs, its chief executive, has expressed a keen interest in diversifying and improving its product line as cell phones have evolved into smart phones and tablets. These devices require more processing power and myriad types of connectivity, like Wi-Fi, Bluetooth and GPS.

Atheros, based in San Jose, Calif., is one of the top chip makers for these new technologies, so an acquisition would allow Qualcomm, which has a market value of $82.5 billion, to make further inroads in these markets.

This week, Atheros announced several new wireless products that bring Wi-Fi and Bluetooth technology to tablets while reducing power consumption and increasing the longevity of batteries in such devices.

Through the first nine months of 2010, Atheros earned $77.6 million on $700 million in revenue. The company, whose chief executive is Craig H. Barratt, has about 1,700 employees. Atheros was founded in 1998, partly by John L. Hennessy, now president of Stanford.