German chipmaker Infineon Technologies AG is selling a unit that makes products for wireless telephones to California’s Intel Corp in a US$1.4 billion cash deal, the companies said yesterday.
Germany’s Infineon said the sale of the wireless solutions (WLS) unit would allow it to focus on its core business, such as the automotive and industrial sectors.
Intel said the acquisition would strengthen its hand in Internet connectivity.
WLS will operate as a standalone business, the companies said in a joint statement. The deal, which still requires regulatory approval, is expected to close in the first quarter of next year.
The acquired technology will be used in Intel Core processor-based laptops and other devices including smartphones, netbooks, tablets and embedded computers.
The deal came weeks after an Aug. 2 announcement by Infineon that it was “in discussions with interested parties about a transaction” involving WLS.
“We can now fully concentrate our resources towards strong growth in our core segments,” the automotive, industrial and chip card and security divisions, Infineon chief executive Peter Bauer said. “We all stand to benefit enormously from this deal.”
“The global demand for wireless solutions continues to grow at an extraordinary rate,” Intel president and CEO Paul Otellini said.
“As more devices compute and connect to the Internet, we are committed to making certain that Intel is well positioned to take advantage of the growth potential in every computing segment, from laptops to handhelds,” he said.
WLS had annual revenue of 917 million euros (US$1.66 billion) in the last financial year, which ended last September — about 30 percent of Infineon’s total of just over 3 billion euros.
“It’s a good deal for both companies,” said Marco Guenther, an analyst with Hamburger Sparkasse in Hamburg. “Intel strengthens its position in the fast-growing smartphone market. Infineon sells its wireless unit at a time when the more cyclical business is running successfully. The transaction price is in line with expectations.”
The acquisition, on the heels of Intel’s US$7.68 billion purchase of security software maker McAfee Inc, builds on Otellini’s plans to break the company’s reliance on the personal-computer market.
However, “despite the strategic rationale behind the deal, we fear the equity market will give Infineon only brief credit for the disposal,” Bernd Laux, a Frankfurt-based analyst with Cheuvreux, wrote in a note to investors.
Intel generated US$3.49 billion in cash from operations in the second quarter and ended the period with more than US$18 billion in reserve.
Intel, which posted a record profit margin for the quarter at 67 percent, gets more than 90 percent of its sales from the PC market. After an estimated 26 percent rebound in revenue this year, analysts predict that the company’s sales will increase about 5 percent next year, shy of the double-digit growth Intel itself targets.
Intel is hitching its mobile ambitions to a scaled-down version of its PC chips called Atom. The company has signed agreements aimed at landing its products in devices made by Nokia Oyj and LG Electronics Inc., though it has yet to win a spot in a phone that’s currently on sale.
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