Marvell buys Intel`s handheld processor unit for $600 million

Spencer Chin

EE Times

(06/27/2006 10:17 AM EDT)

SANTA CLARA, Calif., — Struggling Intel Corp. agreed to sell its communications and application processor units to Marvell Technology, a storage, communications and chip developer, for $600 million.

Marvell, whose U.S. subsidiary Marvel Semiconductor Inc. is based here, is expected to pay Intel $600 million in cash and assume unspecified liabilities. However, Intel has the option to take up to $100 million of the $600 million purchase price in Marvell common stock. Upon closing, Marvell may record a one-time charge for purchased in-process R&D expenses.

The move signifies Intel`s expected restructuring following several quarters of sluggish sales and earnings. The company was rumored to be unloading several of its communications chip businesses as well as lay off thousands of workers.

Intel`s communications and application processor business develops and sells processors for handheld devices including smart phones and personal digital assistants. The business processors, based on Intel XScale technology, include the Intel PXA9xx communications processor, codenamed Hermon, which powers Research in Motion`s (RIM) Blackberry 8700 device. The Intel PXA27x applications processor, codenamed Bulverde, is used in the Palm Treo smart phone, the Motorola Q and other devices.

Intel expects the sale to help focus investments on its core businesses, including high-performance, low-power Intel Architecture-based processors and emerging technologies for mobile computing, including Wi-Fi and WiMAX broadband wireless technologies.

``Marvell and Intel have built a very strong relationship over the past six years and we are very excited to work closely with Intel in transitioning this business into Marvell,`` Sehat Sutardja, Marvell`s chairman, president and CEO, said in a statement. ``This transaction presents Marvell with a tremendous opportunity to become a long-term leading supplier in the cell phone and consumer electronics market segments.``

Marvel is expected to absorb most of the 1,400 employees in Intel`s communications and application processor business. After the close of the transaction within five months, Intel intends to continue manufacturing products currently sold by this business for handheld devices and embedded applications, and to manufacture products that are being designed into upcoming devices.

This arrangement is expected to continue while Marvell arranges other manufacturing resources. Intel and Marvell do not anticipate disruptions in the supply of these products due to this planned sale.

This planned sale does not impact the ability of other Intel businesses in the networking and storage market segments to continue to use ARM-based, Intel XScale processors. Those Intel businesses will be able to continue licensing chip designs directly from ARM Holdings PLC and modifying the designs for their needs.