The move is seen as Intel's attempt to widen its wireless offerings.
In a $748 million deal, Intel will pay $25 per Xircom share - a 38 per cent premium over Xircom's $18.06 close on Friday - and assume all existing employee options.
Network connections Xircom supplies modem and network cards to connect mobile computers to corporate networks and the Internet. It purchased USB specialist Entrega in September last year.
Xircom also began releasing a series of Mac products last year, most recently the company announced its NetStation – which was awarded a Macworld Editors Choice at Apple Expo, Paris, in September 2000.
The acquisition complements Intel's existing network-access businesses because it broadens its reach in the notebook and mobile-computing markets, Intel said. Xircom will become a subsidiary of Intel, and the organization will be part of Intel's Network Communications Group.
Wireless computing Mark Christensen, Intel vice president and general manager of Intel's Network Communications Group, said: "Xircom's strengths in small-form-factor design combined with our silicon expertise will allow us to provide customers with new and innovative solutions for linking mobile computing devices to wired and wireless networks."
Intel expects the acquisition to be completed in the first quarter of this year. The board of directors of Xircom has approved the definitive agreement and has unanimously recommended that Xircom stockholders tender their shares.
Intel issued a profit warning to investors today.