Apple Continues to Ripen

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Apple watchers speculate that the device will be released in Italy, Belgium, and Australia before long. Talk of an iPhone debut in China has also resurfaced in recent weeks.

No Comment on PA Semi Deal

Apple executives declined to address reports that it bought PA Semi, a small chip company in Santa Clara, Calif., for $278 million. The acquisition was initially reported by Forbes. "We occasionally buy smaller technology companies," Cook said. "It is our established practice to not comment on purpose or plans."

The deal represents about 1.4% of Apple's cash hoard, which had swelled to $19.4 billion by the end of the second quarter, and Apple considers it of insufficient size to merit a press release. Still, the deal left many analysts scratching their heads.

PA Semi, founded in 2003 by Dan Dobberpuhl, a onetime chip designer at Digital Equipment Corp., now a unit of Hewlett-Packard (HPQ), has specialized in chips that consume power efficiently. Backed by investments from Bessemer Venture Partners, Focus Ventures, Highland Capital Partners, and Venrock Associates, the company had landed business with Mercury Computer Systems (MRCY) and NEC (NIPNY).

Chip Could Power New Products

Tony Fadell, head of Apple's iPod Div., is said to have led the deal. But Nathan Brookwood, an analyst at Insight64, a Silicon Valley consulting firm, doesn't think that means PA Semi's chips will be headed for iPhones or iPods any time soon. "I don't know of any handheld devices today that can take PA Semi's parts," Brookwood says. PA Semi's chips, he says, tend to consume about 5 watts, whereas a handheld device like the iPhone needs a chip that consumes less than 2 watts.

The chip could be used in a line of future consumer electronics products. Alternatively, Apple may simply have wanted to get its hands on PA Semi's design team or on some technology it had been developing. PA Semi has about 150 employees, suggesting Apple paid about $1.8 million per employee. "It's a puzzle," Brookwood says. "You don't spend nearly $300 million because you feel like it. I'm sure Apple has something very specific in mind, but it sure is hard to figure it out."

At least for now, some analysts will also continue to grapple with how well Apple will withstand the economy's ills.

Hesseldahl is a reporter for BusinessWeek.com.