By Dawn Kawamoto and Tom Krazit
Wednesday, June 28 2006 09:48 AM
URL: http://www.zdnetasia.com/news/hardware/0,39042972,39371024,00.htm

Intel on Tuesday announced that Marvell Technology Group will acquire its communications and application chip business for about $600 million.

Intel's sale of its chip business for mobile handhelds and cell phones, which had been rumored in recent months, is intended to enable the company to get back to basics. The sale will also remove a business that struggled to take off and has weighed down the company's overall financial performance, despite billions of dollars in investments.

As part of the Marvell deal, Intel is selling its PXA9xx communications processor, code-named Hermon, which is found in BlackBerry 8700 devices but has not been widely adopted by other handset makers and wireless carriers.

Hermon is the second effort produced by Intel's attempt to enter the cellular handset business, which is dominated by Texas Instruments. It is a combination of an application processor, a communications chip for cellular networks and flash memory. The first chip, code-named Manitoba, was a flop. Only one phone was ever released to the public featuring the chip, and only then after a significant overhaul of the design. Hermon at least captured the high-profile BlackBerry design win, but Intel had few other successes to tout in this market.

Intel has had better luck with its PXA27x application chip, code-named Bulverde, which is used in Palm Treo smart phones, Motorola's Q and other devices, the company said. But that chip is also heading off to Marvell.

"The communications and application processor segments continue to present an attractive market opportunity, and we believe this business and its assets are an optimal fit for Marvell," Sean Maloney, Intel general manager of its mobility group, said in a statement.

At one point, Intel envisioned the communications market as a hedge against the expected maturation of the PC market. But building chips for PCs is much different than building chips for communications networks.

Intel spent billions of dollars acquiring companies, technologies and personnel designed to get its communications business up and running, but as early as 2003, it admitted that things weren't working out as planned. Late that year, Intel wrote down the value of its communications businesses by US$600 million, the same price Marvel paid for the business.

Intel will continue to sell chips that connect to Wi-Fi networks and long-range WiMax networks, said Robert Manetta, an Intel spokesman. The company bundles Wi-Fi chips with its Core Duo and Pentium M processors in the Centrino notebook package, which has paid off handsomely for the chipmaker.

WiMax networks are designed to deliver wireless broadband connections to a metropolitan area. Intel wants to eventually bundle WiMax chips into notebooks, but the networks aren't there yet.

Intel will also keep its networking and storage processors, which bear the XScale name, Manetta said. This means Intel will maintain its architectural license with ARM, a designer of processor cores for mobile phones and embedded devices.

However, Intel is expected to develop extremely low-power versions of its x86 processors, which can run standard PC software, over the next few years. Those chips could serve as new entrants into the handheld-computing market at a later date.

The deal, which is expected to close in the next four to five months, will enable Intel to focus on its main businesses, PC and server processors. On Monday, Intel formally unveiled its Xeon 5100 series of server processors, formerly known as Woodcrest, one of the company's most anticipated and important products in recent years.

The majority of the approximately 1,400 employees affiliated with Intel's communications and application processor business will likely become Marvell employees, Intel noted in its announcement. The employees are scattered all over the world, with some based in Chandler, Ariz.; Folsom, Calif.; and Israel, Manetta said.

Following the sale, Intel will continue to manufacture these product lines--as well as ones expected to be designed into upcoming devices--until Marvell secures other manufacturing resources. This is expected to take up to two years, Manetta said.