Intel to Sell Its Most Famous XScale Chip Line

Intel will part with its XScale application processor chips.

The chip maker will sell the line, best known for powering some Palm and Research in Motion BlackBerry handhelds, to Marvell Technology Group for $600 million. The June 27 deal, which is subject to regulatory review, is expected to close in four to five months, the companies said in a statement.

The move, in which Intel will also transfer most of the 1,400 employees who administer the chip line, comes as the company is conducting a broad review of its business in an effort to increase its efficiency in the face of rising competition from rival Advanced Micro Devices and slowing growth in PCs, its main market.

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CEO Paul Otellini, speaking at Intels annual financial analysts meeting in New York on April 27, hinted that the chip maker may reduce its 100,000-employee work force and jettison underperforming businesses before the end of 2007, in addition to speeding up product launches, as it seeks to become more nimble. Indeed, on June 26 Intel unveiled its Xeon 5100, an all-new dual-core server chip that uses less power and offers more performance. Intel expects the new processor to increase its competitiveness in the server space.

As part of the sale, Marvell will gain the Intel PXA9xx family of communications processors, used in RIMs BlackBerry 8700, as well as the Intel PXA27x family of processors, which are used in the Palm and Motorola phones. Intel will continue to manufacture the chips for Marvell at least for a time, the company said.

Going forward, Intel said it intends to focus on low-power Intel Architecture-based or x86 processors, as well technologies such as Wi-Fi and WiMAX broadband wireless technologies.

However, the transaction does not affect Intels XScale chips for networking or storage, the company said.

While the company continues its strategic review, the remainder of its XScale business may also be on the block. Reports have said Intel was shopping both chip lines simultaneously.

Intel has also reorganized its Flash Memory Group by NOR flash memory manufacturing, research and development as well as product support into its NOR Flash Products Group, one half of the wider flash group.

Ultimately, "the result of this … is that youll see a leaner, more agile and more efficient company," Otellini told analysts at the meeting. "No stone will be left unturned."

The review, which comes after Intel reported lackluster first-quarter 2006 financials and cut its revenue outlook for the year due to excess inventory, will look at every business.

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