Moving into handheld computing, AMD yesterday announced the acquisition of Alchemy Semiconductor. The buyout allows the processor manufacturer to expand its business to handheld devices such as PDAs (personal digital assistants), the company said.

The new business will be part of a recently created business unit, dubbed Personal Connectivity Solutions, which will focus on non-PC connectivity devices, AMD said.

This seems to be just another area where AMD is taking on archrival Intel — one of Intel's recent strengths has been in sales and applications of its StrongARM chips, licensed from ARM in the UK.

"This is quite an exciting announcement," said Andrew Brown, research manager for mobile computing at analyst firm IDC. "It allows AMD to [go into] the low-power handheld processor market, where its presence has been pretty much zero."

Alchemy Semiconductor sells MIPS-based processors. However, the company's founders also have a history in chips based on ARM's core, AMD said.

ARM-based processors are gaining popularity in PDAs. Most Pocket PC (Microsoft's PDA operating system) devices have processors based on ARM, and Palm, which currently uses Motorola's DragonBall processor for its handhelds, is moving to ARM-based processors.

IDC's Brown expects AMD to get into the ARM-based market. "I think that is the only way forward," he said. "Mips had a greater presence in the past, but the market (now is) divided up into DragonBall and ARM."

"There are no big plans to start with ARM or to stay away from it," AMD said, though it added that AMD does want its processors in PDAs and that the company will likely make whatever chip the PDA vendors want.

The acquisition is expected to be completed in the first quarter of this year, AMD said. Terms of the deal were not disclosed.

IDC is a member of the IDG group of companies, as is PC Advisor.