Now televisions, digital cameras and game consoles commonly link to the world without those physical ties.
Atheros Communications (NasdaqGS:ATHR - News) is helping cut the tethers.
The Santa Clara, Calif., semiconductor company develops chips for laptops, routers and other electronics that seamlessly link them to the world.
Intel (NasdaqGS:INTC - News) still dominates the market for wireless chips in laptops and routers. Analysts say it has about 70% of the space, with companies such as Atheros and Broadcom (NasdaqGS:BRCM - News) splitting the rest.
But analysts say Atheros is chipping away there and gaining market share. And as wireless Internet connections proliferate in cell phones and game systems, Atheros chips are finding new markets.
An Atheros chip on a digital camera memory card beams the photos to computers or printers without cables.
Its chips are inside Netflix's (NasdaqGS:NFLX - News) new set-top box, which lets viewers stream movies from the Internet to their TVs.
"The game in this segment is all about bringing in innovation and bringing down the cost curve. Atheros has been good at doing that," said Adam Benjamin, a semiconductor analyst with Jefferies & Co.
Faster Connection
The semiconductor industry is transitioning from the 802.11g network standard for wireless local area networks to the next-generation 802.11n.
Those 11n chips promise huge growth for the industry, since they can potentially transmit and receive more data, faster -- critical when beaming high-definition TV and other data-rich files.
And 11g chips are still selling briskly.
Atheros has reported 11 straight quarters of double-digit year-over-year sales growth.
It had record 11g sales in the first quarter.
Most of its chips go to electronics manufacturers in Asia.
Taiwanese hardware manufacturer Hon Hai Precision Industry is its largest customer, accounting for a quarter of last year's sales.
Atheros has deals with major PC makers such as Acer, Hewlett-Packard (NYSE:HPQ - News), Lenovo and Toshiba. This month, Atheros said Advanced Micro Devices (NYSE:AMD - News) would bundle its 11n chip with some of its notebook processors.
Atheros chips were dropped recently by a major PC maker. The company didn't name it, but most analysts think it was Apple (NasdaqGS:AAPL - News).
In part because of that, as well as seasonal fluctuations, Atheros sales were flat between the first and fourth quarters.
But year-over-year sales rose 20% in the first quarter to $114.5 million. Earnings per share climbed 22% to 28 cents.
Atheros' 11g chips gained market share in wireless local area network routers, used to set up Internet hot spots and home networks.
Those 11g sales should taper off in coming years.
But sales should pick up on the higher-priced 11n chips as laptops, wireless routers and cell phones increasingly use the faster next-generation standard.
Those PC and Wi-Fi networks remain a big part of Atheros' business.
The company is also reaching into other communications technology platforms.
It's gaining bigger physical footprints within traditional laptops and wireless routers.
And it's getting into cell phones and portable game players.
"If you think that Atheros is just focused on wireless LAN, frankly we shouldn't be all that interesting to invest in," Atheros Chief Financial Officer Jack Lazar said during an investors conference. "What we're really trying to do is a variety of communications platforms that address the markets that we've already started to open up or the customers that we've already started to open up."
In 2006, Atheros bought Attansic Technology, a Taiwanese developer of ethernet integrated circuits. Last December, it bought u-Nav Microelectronics, a private developer of Global Positioning System chips and software for cell phones and other personal handsets.
Atheros internally developed its own Bluetooth products, which it started selling last year.
The company expects growth in Bluetooth, ethernet and the Global Positioning System. The mobile wireless LAN business is one of its fastest growers.
High-volume consumer items lead the way. Its chips are reaching cell phones, digital music players and other handheld electronics, as cost per chip and power consumption fall. Atheros claims more than 30 design wins for handsets.
One win is likely Nintendo's handheld DS game system, analysts say, though the company won't confirm it.
Atheros says wireless LAN chips in the unnamed game system should drive revenue in the second half of this year.
Analysts at Piper Jaffray think the deal could mean 4 million chips per quarter, at $3 to $4 each.
But Abdul Saleh, an analyst at Zacks Investment Research, thinks those games and other wireless LAN chips might not deliver much until the December quarter.
"It's probably an end-of-the-year story, rather than a second-half story," Saleh said.
So barring some big news when second-quarter results are announced next month, Saleh thinks much of those wins are already priced into the stock.
Competition And Risks
Risks exist. Purchases of wireless routers and PCs could slow. There's the chance of slower-than-expected adoption of wireless technology in handheld electronics.
Competition remains a key challenge. Atheros faces off against larger players, such as Intel , Broadcom , Texas Instruments (NYSE:TXN - News) and Marvell Technology (NasdaqGS:MRVL - News). Smaller firms include Conexant Systems (NasdaqGS:CNXTD - News).
Other competitors might arise as the handset market and the overall 11n market grow. That competition is already pushing prices lower for Atheros' legacy 11g chips, which are still more than half its sales.
Most analysts think sales and revenue should hold up. Those surveyed by Thomson Reuters project 20% top- and bottom-line boosts in the second quarter.
For the year, the consensus is for earnings per share to rise 17% in 2008 to $1.31. For 2009, analysts expect a 19% increase to $1.56.
