Intel to Shed Communications Chips?

The chip maker is shopping around some of its communications processor products.

Intel may sell off two communications processor product lines, exiting a major portion of its communications chip business, a published report says.

A San Jose Mercury News report says the chip maker has been shopping a package consisting of its xScale processor and IXP network processor lines to prospective buyers.

Intels xScale is best-known for powering handhelds from companies such as Palm. The IXP line, based on xScale, offers several chips for devices such as network routers and security appliances.

An Intel spokesperson declined to comment on the report.

That Intel might be looking to divest some parts of its businesses isnt a surprise. The company, which has posted lackluster financials over the past several quarters, announced on April 27 that it had begun a broad strategic review in an effort to remake itself into a more nimble company.

/zimages/4/28571.gifRead more here about Intels plans to speed the launch of new PC chips.

Intel CEO Paul Otellini said at the time that the review would leave no stone unturned and hinted strongly that Intel might restructure, sell or shutter its internal groups. It is paying special attention to those that lose money, he indicated.

The strategic review has already lead to moves such as a reorganization of the Intel Flash Memory Group.

The move consolidated manufacturing, research and development and product support related to NOR flash memory into the flash memory operations NOR Flash Products Group.

But the review has also inspired large amounts of speculation. Various reports have said the company might spin off its flash memory group, or enact broad layoffs in an effort to refocus around its PC chip business.

The Intel spokesperson declined to comment on either prospect.

Otellini, however, said during a meeting with analysts that simply enacting a large layoff would be too simplistic.

While he indicated job reductions werent off the table, he said a more exhaustive look would be required first.

The Mercury News report says Intel has indicated that other areas of its communications business are also for sale for what it would consider to be the right price.

Should Intel sell the pair of processor lines, it would be taking another step away from what was once a bold effort by to gain a major foothold in the communications market.

Intel went on an acquisition spree, starting in 1998, designed to bolster the effort.

It acquired more than 35 companies and spent more than $10 billion in an effort to become a major provider of chip components for communications equipment.

Although it has traditionally done well in some communications markets—its flash memory is used widely in cellular phones and its wireless modules now go into millions of Centrino-brand notebooks—Intel hasnt fared as well in the wider communications space. Many of its efforts lost money, versus contributing to the companys bottom line.

Like most technology companies, Intel was affected by the simultaneous economic downturn, PC market and telecom downturns of 2001.

But, following the downturn, Intel shuttered several divisions, including its Intel Online Services Web hosting group and sold many of its recently acquired assets.

By divesting several of its communications buys along with its spinning off businesses such as its LANDesk software group it sought to refocus on its core PC chip business.

The chip maker has said it would offer the first major progress report on its ongoing strategic review in July.

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