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MontaVista, the original big hitter in Mobile Linux, has been acquired for $50m by Cavium, maker of network processors, which looks set to make the smaller firm's Carrier Grade Linux a major contender, but with an uncertain future for its mobile and embedded OS.

MontaVista was the first Linux firm to get any wide acceptance on handsets, though as a low level embedded OS, well before Android and LiMo took Linux to the upper layers occupied by Windows and Symbian. Founded in 1999, its OS was used by Motorola for the world's first Linux phone, the A760, launched for China in 2003, and by Japanese vendors.

Cavium's purchase means that both major embedded Linux players will now be owned by semiconductor firms (Intel acquired Wind River earlier this year). As in that far larger deal (worth $884m), Cavium gains two potential strategic advantages by owning its own embedded Linux firm. One, a well regarded operating system technology that it can optimize for its own processors to gain competitive edge and push into new markets. And two - if it keeps the OS multivendor - a chance to control a widely adopted software platform.

MontaVista has been enhancing its Linux Carrier Grade Edition on the server/router side. Cavium, whose processors and boards go into base stations, switches, routers and network servers, will pay $16m in cash and $34m in stock, largely for this product. CEO Syed Ali told analysts that customers increasingly want Cavium to provide complete solutions, with hardware and software pre-integrated, especially as carriers move to new technologies like LTE and as vendors differentiate themselves via IPR and software. Ali noted that MontaVista will enable Cavium to start to generate revenue at an earlier stage of a vendor design win, by selling software tools even before the customer has finished a product and delivered it to carriers - a process that can take 2-3 years.

Only a couple of weeks ago, MontaVista upgraded its CGL offering to include LTE and WiMAX protocol capabilities with release 5.1, its first major update for two years, and preserving almost all the features of the kernel of 5.0.

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