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Wednesday, April 23, 2008, 05:00 am PT (08:00 am ET)

Apple buys chip designer PA Semi for $278 million

An Apple spokesman confirmed Tuesday evening that the company has agreed purchase a boutique microprocessor design company known for sophisticated but low-power designs, Forbes is reporting.

The acquisition of the 150-person company, P.A. Semi, may outline a new direction for the Cupertino-based company's iPhone and iPod products while dealing a considerable blow to chip maker Intel, which has long been courting the electronics maker to adopt its own low-power processor family, dubbed Atom.

"Apple buys smaller technology companies from time to time, and we generally do not comment on our purposes and plans," said Apple spokesman Steve Dowling. He declined to go into the specifics of the agreement, but a person familiar with the matter speaking to Forbes said the deal would consist of a $278 million cash transaction.

Both Apple chief executive Steve Jobs and Apple iPod chief Tony Fadell are said to have been instrumental in the deal, which included negotiations that took place at Jobs' home in Palo Alto, Calif.

Forbes speculates that move on Apple's part is a strategic one aimed at assuring it can continue to differentiate its next-generation handheld products amongst a growing fleet of competitors, many of which may choose to base their designs around Intel's widely available offerings.

P.A. Semi was founded in 2003 by Dan Dobberpuhl, who was among the lead designers for the Alpha and StrongARM microprocessors put forth by Digital Equipment in the 1990s, according to the report.

In February 2007 the chip maker released a 64-bit dual core processor which it claimed was 300 percent more efficient than any comparable offerings, consuming only 5 to 13 watts while running at 2 gigahertz.

The efficiency of mobile processors has been of particular concern for Apple, particularly as it embarks in new business directions such as mobile phones where battery life is critical. As such, the power savings offered by P.A. Semi's designs may have been amongst the firm's most compelling assets in Apple's eyes.

In a report published Monday by Lehman Brothers, analyst Ben Reitzes cited sources in saying that Intel’s Atom chip (Silverthorne) may have failed to produce the kind of battery life that that Apple was seeking for its ultra-portable designs.

Apple is expected to formally announce its acquisition of P.A. Semi during this afternoon's quarterly earnings call, of which AppleInsider will provide its usual coverage.