Intel Sells Communications Unit

Intel will sell its communications and application processor business to Marvell Technology Group for $600 million, the companies announced today.

The move is part of an Intel effort to shore up its core business in the face of increasing competitive pressure from Advanced Micro Devices and a slowing global PC market. Intel identified mobile computing, in addition to the traditional PC market, as an area that it will focus on.

In April, Intel announced that it expected a 3 percent drop in revenue for 2006, and said it would undertake a reorganization that could include layoffs within 90 days. A layoff announcement is widely expected around the time Intel makes its next earnings announcement, on July 19.

Intel expects profits to decline from $12.1 billion last year to $9.3 billion this year. Speaking to Wall Street analysts in New York in April, Chief Executive Officer Paul Otellini said the company will cut spending this year by $1 billion, cut capital expenditures by $300 million and begin a 90-day structural reorganization of "nonperforming business units."

Going Mobile

On Marvell's part, the buy will give it a leg up in the market for handheld computing devices such as PDAs and smart phones. The deal is expected to close in the fourth quarter. Marvel will also assume some of the unit's liabilities.

The Intel unit produces processors built on the company's XScale technology, including the PXA9 processor used in Research in Motion?s (RIM) Blackberry device. The unit employs about 1400 employees, most of whom are expect to work for Marvell after the purchase is complete, according to the companies.

The acquisition marks Marvell's entrance into the cell phone market, said Sehat Sutardja, chairman, president and chief executive officer of Marvell, speaking during a conference call to discuss the acquisition. "The cell phone business, even though it's a big business opportunity it's a very challenging market to enter," he said. Marvell acquired the technology from Intel rather then invest time and development effort to build it internally, he said.

With the acquisition, Marvell will focus solely on third generation mobile technologies and beyond, he said. The company is based in Santa Clara, California.