Intel sells communications business

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Intel has finally admitted defeat in its attempts to become a major player in the mobile phone market, selling its communications and applications processor business to Marvell Technology for $600m.

The world’s biggest chipmaker has achieved the dominant position in supplying microprocessors for personal computers, but it has been no more than a niche supplier in mobile phones, where chips from its US rivals Broadcom, Freescale, Qualcomm and Texas Instruments hold sway.

The sale announced on Tuesday is the first indication of the restructuring taking place at Intel. Paul Otellini, chief executive, announced in April a 90-day strategic review of the company’s operations that would “leave no stone unturned” and would particularly scrutinise loss-making parts of the corporation.

While Intel will not break out numbers, the communications division is believed to be unprofitable. Marvell is expected to take on the “vast majority” of its 1,400-strong workforce and will pay $600m in cash, although Intel has the option to take $100m in stock of its Silicon Valley neighbour, which specialises in storage and communications chips.

Marvell will acquire Intel’s Xscale technology, including the “Hermon” processor that powers the Blackberry 8700 device. Its “Bulverde” processor is used in the Palm Treo smart phone, the Motorola Q and other devices.

Intel began its assault on the cellphone market after it acquired the technology in 1998 in a complicated deal with Digital Equipment Corporation. This also included its IXP network processor business, which is also understood to be up for sale, with private equity groups appearing to be the most likely buyers.

Intel has no plans to abandon its successful wi-fi business that has enabled wireless internet access through its Centrino mobile platform for notebook PCs. It is also continuing to support a new wireless standard that would give broad wi-fi coverage known as Wimax.

“We are still big proponents of wi-fi and Wimax, but with cellphones, we decided this was a better fit for Marvell,” said Robert Manetta, Intel spokesman, on Tuesday.

Intel shares were up 0.2 per cent in midday trading on the news at $18.32, while Marvell’s fell 13.4 per cent to $44.92.

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