"What we're seeing now is a thinning of the herd," said Roger McNamee, general partner with Integral Capital Partners, at the Next Generation Networks Conference in Boston this past week.

The purchase of Resonext and its dual-band, multiprotocol products will complement RF Micro's 802.11b WLAN products. To close the deal, RF Micro will issue $133 million in stock for all outstanding shares of Resonext's capital stock.

RF Micro is betting on analyst forecasts that say the WLAN integrated circuits market will grow to more than $1 billion in 2006, with an increasing percentage comprised of 802.11a and multiband products. Resonext had recently begun sampling a dual-band IEEE 802.11a/b/g chip set. Between 30 and 60 companies are vying for a slice of that pie. "The market can't possibly support all of them," said Craig Mathias, principal with Farpoint Group, (Ashland, Mass.). "A shakeout is long overdue."

Almost all the major analog front-end generalists compete in this field, which has a history of collaboration and consolidation. Atheros Communications Inc. and Radiata Inc. announced a CMOS 802.11a solution in 2000. Radiata was subsequently acquired by Cisco Systems Inc. in 2001 and the technology's profile lessened, though it resurfaced in some Aironet WLAN devices.

Competitors on the dual-band front include Envara Inc. and a host of companies offering DSP-based solutions, such as Systemonic AG of Germany, which last year purchased the products and intellectual property of Raytheon Co.'s RF Networking group, including its 5-GHz Tondelayo RF chip set.

The current consolidation follows a period when startups and venture capitalists rushed to capture a piece of the fledgling WLAN chip market. Speaking at venture capitalist plenary panel at the Next Generation Networks Conference in Boston last week (for print), summed up the current shakeout situation best: "Every time a hot technology appeared [in the late 1990s], the venture capital was available to support 20 companies right away, and so the slice of the pie shrunk for everyone involved," said David Helfrich, a partner at ComVentures, in a Next Generation Networks Conference panel session. Now there are fewer startups, fewer venture capitalists, and the VCs that remain are more cautious.

"There's a reluctance to put too much money into this now," Helfrich said. The venture capitalists are "digesting the money they've already invested. Those that are lasting are the ones that have been in this for many years and actually understand it [the technology]."

Krish Prabhu, venture partner with Morgenthaler Ventures, said: "Convergence is happening, but we're looking at more companies now before we jump on one."

Only one in 20 companies seeking venture funding have a chance of receiving it, the panelists said.

So who's getting the money? "The carriers look scary now, but the enterprise has many opportunities," McNamee said. "If I had to pick one area to invest in it would be wireless. This is where it's going to be' Moore's Law is kicking butt."

Helfrich agreed. "We like the enterprise, it'll drive some of the carrier changes by driving VoIP [voice over Internet Protocol] with services," he said. He was wary of 802.11 WLANs, however. "It's too hard to find the applications in .11 that will give the return. Instead, we're making investments in technologies that are addressing cellular basestation inefficiencies."