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Thursday October 14 12:03 PM ET

Intel To Buy DSP Communications For $1.6 Billion

SAN FRANCISCO (Reuters) - Intel Corp (Nasdaq:INTC - news). has agreed to buy wireless telephone chip maker DSP Communications Inc (NYSE:DSP - news)., in a $1.6 billion deal, the companies said Thursday, the latest in a series of aggressive moves by Intel to move beyond its traditional microprocessor business.

Under the terms of the deal, Intel, the world's largest chip maker, will pay $36 in cash for each share of DSP, which is based in California but does most of its research and development in Israel.

DSP's shares jumped 7-1/8, more than 25 percent, to 35-1/8 in morning trading on the New York Stock Exchange.

The deal, which Intel says is part of its plan to develop more Internet products, comes just two days after Intel reported third-quarter earnings of 55 cents a share, 2 cents below the analysts' consensus estimate of 57 cents a share excluding acquisition costs.

Intel's stock was off 1 at 71-1/8 on Nasdaq.

``DSPC brings tremendous experience in cellular digital and voice technologies which, when combined with Intel's data and Internet expertise, will provide a more complete solution to the broad cellular market segment,'' Intel Chief Executive Officer Craig Barrett said in a statement.

``Cellular technology is emerging as a new high-speed method of connecting to the Internet and we believe over time will become increasingly important for connecting PCs to the Internet,'' he said.

Mona Eraiba, senior vice president at Gruntal & Co. said DSP was a good piece in Intel's expansion plan.

``It just fits with a strategy they have been pursuing which is to build a whole broad range of products related to networking and communications,'' Eraiba said in a telephone interview. ``It is a good company.''

Intel has made other acquisitions this year in the telecommunications industry, including the $780 million purchase of Dialogic Corp., the $3.5 billion acquisition of Level One Communications, and the $180 million purchase of Shiva Corp.

DSP's board of directors has already approved the deal, which is conditional upon DSP shareholders offering a majority of shares in the $36 tender offer. DSP's current and former chief executive officers have already tendered their shares, the companies said.

``Combining DSPC's cellular expertise with Intel's semiconductor and data capabilities will create a leading provider of cellular voice products, as well as establish voice and data solutions for the future,'' DSP Chairman Davidi Gilo said in a statement. ``The industry needs suppliers that can deliver solutions such as chipset, design and software to meet customers' cellular technology needs.''

The companies said in a statement they do not anticipate any immediate changes to their respective product lines as a result of the deal. DSP will also continue to deliver products under existing agreements.