Last updated: August 30, 2010 6:56 am

Intel to buy Infineon’s wireless chip business

Intel, the US chipmaker, has agreed to buy the wireless chip business of Germany’s Infineon.

Under the deal announced on Monday, Intel said it will pay approximately$1.4bn for the unit, which makes the chips used in Apple’s iPhones.

Intel’s move to bulk up in wireless comes on the heels of the company’s $7.7bn agreement this month to buy McAfee, the US security software company.

Intel is attempting to diversify away from its core business producing the chips that are used inside most personal computers.

It last week said that the purchase of McAfee, which puzzled analysts, would boost its efforts in mobile wireless, where it is already beginning to produce chips for smartphones.

The company sees security becoming a key area as billions of new devices are connected to the internet over the next few years and customers seek to access data on the move.

Underlining the logic behind its efforts to diversify, the chipmaker last week downgraded its sales outlook, warning that consumer demand for computers was slackening amid a lacklustre economic recovery. Intel now expects its third-quarter revenues to be about $11bn, down from the $11.6bn it forecast in its quarterly earnings report just six weeks ago.

Infineon this month confirmed it was talking to a number of parties about its wireless solutions business, which also counts Nokia and RIM among its customers. According to the German company’s annual report, its business ranks fourth in the market for wireless chips, with a 5.9 per cent share.

The unit had sales of €346m ($441m) in the last quarter to June, up about 38 per cent from the previous year, and an operating result of €24m.

Wireless solutions account for about 30 per cent of Infineon’s overall revenues, but was lossmaking at the operating level in the last fiscal year to September 2009.

Intel recently settled charges brought against it by the Federal Trade Commission, resulting from worries about how the chipmaker uses its dominance of the PC microprocessor market to restrict competition. The company makes the microprocessors used in four of every five of the PCs sold globally.

Evercore advised Intel on the deal while JPMorgan and Citigroup advised Infineon.

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