[Updated: 9AM] — Intel announced it has entered into a definitive agreement to acquire Wind River Systems, one of the top providers of embedded Linux distributions and tools. Intel plans to acquire Wind River for $11.50 per share in cash, or about $884 million, making it a wholly owned subsidiary.

The Wind River board of directors has unanimously approved the transaction, which is expected to close this summer, says Intel Corp. The deal is said to be subject to “certain regulatory approvals and other conditions specified in the definitive agreement.” Wind River will report into Intel's Software and Services Group, headed by Renee James, says the company.

The $11.50 per share cash offer represents an approximately 44 percent premium to Wind River's $8 closing price yesterday.

In addition to offering the recently upgraded Wind River Linux, one of the top two embedded Linux distribution and development environments along with MontaVista Linux, the company also has a major business with its proprietary, real-time VxWorks operating system (OS), which is especially big in networking equipment, as well as aerospace and defense. Wind River sells OS distributions, middleware, and embedded design tools, as well as providing services that include custom-built solutions, development tools, and device testing products.

Intel described the pending acquisition as part of its “strategy to grow its processor and software presence outside the traditional PC and server market segments into embedded systems and mobile handheld devices.” Applications of interest are said to include smartphones, mobile Internet devices (MIDs), in-car infotainment systems and other automotive devices, networking equipment, aerospace and defense, energy, plus a variety of general consumer electronics equipment and other devices.

The publicly held Wind River was founded in 1981, and is based in Alameda, Calif., with more than 1,600 employees working in 15 countries, says Intel. Major Wind River customers are said to include Alcatel-Lucent, BMW, Boeing, Bombardier Transportation, Mitsubishi, Motorola, NASA, Sony, and Verizon.

During its fiscal year ending Jan. 31, Wind River reported annual revenues of $359.7 million. In that same earnings report, the company reported 4Q revenues of $88.4 million, up five percent from the $84.3 million of the previous year's fourth quarter. However, the stock has suffered over the last nine months or so, and projections were for flat growth over the coming year.

Business as usual for Wind River?

The acquisition will boost Wind River's Intel-architecture focused sales, says Intel. A story in our sister publication, eWEEK, quotes Intel spokesperson Bill Kircos as saying he expects Wind River will continue its ARM and PowerPC work after the purchase. “It will be business as usual for them,” he is quoted as saying.

Down the line, however, it is unclear to what extent the new subsidiary might support development on other platforms. Wind River has long-standing relationships with semiconductor companies including ARM, Texas Instruments, Freescale, and Cavium. The formal statement from Wind River CEO Ken Klein below, mentions that, “As a wholly owned subsidiary, Wind River will more tightly align its software expertise to Intel's platforms.”

While Intel will no doubt use the opportunity to encourage developers to move over to Wind River's fast-growing Intel-focused business, the acquisition also gives Intel considerable expertise — and revenue-rich business — in multiple processor architectures. Should Intel decide to move beyond x86 to ARM and other architectures, it is now in a better position to do so.

Intel moves toward software, embedded, and Linux

The acquisition pushes Intel even further toward Linux, while further developing its interest in software, a move that was recently advanced with the beta release of the Intel-sponsored, Intel Atom-targeted Moblin v2 distribution for Linux netbooks. Neither development would seem to please Microsoft, which supports its own substantial embedded business with its Windows Mobile and Windows CE distributions, and which is hoping to hold onto the netbook market with Windows 7.

Intel and Wind River companies have had numerous partnerships over the years, including one most recently on an Intel Atom-based automotive infotainment reference design based on the new Genivi Alliance specification. In March, the two companies signed a major deal on supporting multi-core designs in aerospace and defense, network infrastructure, industrial, medical, and print imaging market segments, spanning Wind River's Linux and VxWorks platforms. The deal calls for integrating Intel compiler and performance primitives into Wind River's Linux and VxWorks distributions. Intel also promised support for Wind River's upcoming hypervisor for virtualization applications.

Wind River's growing move toward Linux

Although overtaken by Microsoft in 2004, Wind River was the top revenue gatherer for many years in the market for embedded OSes and tools. Hit hard by the downturn in telecom at the beginning of the decade, Wind River worked to diversify its business model, and Linux became a growing part of that effort.

Compared to rival MontaVista, Wind River arrived late to Linux, introducing its first Linux tools in 2003. For several years, Linux was something of a stepchild to its real-time VxWorks and BSD operations. By 2005, however, the company had dropped BSD and embarked upon a major strategic shift toward embedded Linux.

As Linux matured, along with is real-time capabilities, and as major new markets opened up in mobile phones and devices, the company has focused increasingly on Linux across a wide range of processors and applications. Major releases of the general Wind River Linux platform have included version 1.3, which arrived in July 2006, adding telecom-related features and updating its Eclipse-based Workbench development tools. (For more on Wind River's recent history, follow the links listed at the end of the article.)

Wind River Linux 3.0 boosts virtualization, multi-core support

In March, the company released version 3.0 of its commercial embedded Linux distribution, which re-integrated its vertical distributions, including networking, into one core Wind River Linux product. The new version upgrades to kernel 2.6.27 and GCC 4.3, speeds boot-time, adds 250 applications, upgrades real-time and multi-core support, and launches a Kernel-based Virtualization Machine (KVM).

Wind River's reintegration of its vertical distributions closed a circle begun in 2002, before its first Linux products were introduced, when the company announced a platform strategy, that included verticals for consumer electronics (Platform CD, later PCE), Network Equipment (NE, then PNE), industrial devices (ID), Server Appliances (SA), and aerospace and defense (DO-178B). These versions eventually migrated over from VxWorks to also support Linux. Perhaps its most successful vertical has been its PNE networking product. Like MontaVista's competing Carrier Grade Edition (CGE), Wind River Linux PNE is compliant with Carrier Grade Linux 4.0.

In the mobile world, meanwhile, Wind River still appears to lag MontaVista's installed base by a considerable margin. However, its mobile business appears to be growing quickly, and it has become a major player in both the LiMo and Android efforts. Like MontaVista, it has also signed on as a supporter of Intel's Moblin.

Wind River said that the version 3.0 system profiles support “different device types.” That diversity probably does not (yet) include IVIs (in-vehicle infotainment devices), nor MIDs (mobile Internet devices). In those verticals, Wind River has made some fairly recent stack announcements, with Wind River Linux Platform for Infotainment, and Platform for MIDs. Both of these stacks target Intel's Atom processors.

Stated Renee James, Intel VP and GM, Software and Services Group, “This acquisition will bring us complementary, market-leading software assets and an incredibly talented group of people to help us continue to grow our embedded systems and mobile device capabilities. Wind River has thousands of customers in a wide range of markets, and now both companies will be better positioned to meet growth opportunities in these areas.”

Stated Ken Klein, Wind River Chairman, president and CEO, “Our combination of strengths will be of great benefit to Wind River's existing and future customers. As a wholly owned subsidiary, Wind River will more tightly align its software expertise to Intel's platforms to speed the pace of progress and software innovation. We remain committed to continuing to provide leading solutions across multiple hardware architectures and delivering the same world-class support to which our customers have grown accustomed.”

The eWEEK story on the Wind River acquisition, including analyst observations, may be found here.

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