Intel to sell off parts of business

Intel is planning to sell several of its communications businesses as part of a restructuring of the world’s biggest chipmaker, according to people close to the negotiations.

Paul Otellini, chief executive, announced in April a 90-day strategic review of the company’s operations that would “leave no stone unturned” and would particularly scrutinise loss-making areas of the corporation.

The sale of Intel’s loss-making communications divisions was first reported over the weekend in the San José Mercury News.

Intel has made a success of wi-fi wireless internet access through its Centrino mobile platform for notebook PCs.

It is also pushing a new wireless standard that would give broad wi-fi coverage known as Wimax.

Intel is not considering selling these operations, but is understood to have earmarked for disposal its loss-making Xscale and IXP chips made for mobile phones, portable devices and network equipment.

Intel has so far failed to crack the cellphone market, which is led by Texas Instruments, a chip supplier.

Intel’s Xscale application processors, originally acquired from Digital Equipment Corporation as part of a $700m deal, have been largely confined to the smartphone segment, including BlackBerry devices.

Its IXP network processor business is also understood to be up for sale, with private equity groups appearing to be the most likely buyers.

Bill Kircos, Intel spokesman, said: “We’ve been pretty upfront about our focus on looking at all aspects of our business, we’re not going to speculate on this and it would be inappropriate while we are still in the midst of [this review].”

But Terry Garnett, partner at Garnett & Helfrich, a venture buyout group that recently helped Computer Associates and Nortel Networks spin off unwanted divisions, said: “I think it makes a lot of sense [to shed some business units]. This is a huge company that fits the profile.”

“They’ve bought a lot of companies over time, and they’re going through the process of what we saw at Computer Associates and Nortel. They’re saying ‘we need to do a strategic review of everything’.”

Analysts have also speculated that Intel could dispose of its “Nor” flash memory business, which was reorganised under a new head last month in a move that would make it easier to be sold or spun off.

Mr Otellini has promised $1bn in cost savings this year and a $300m reduction in capital spending to boost the company’s performance.

Revenues in 2006 are expected to be 3 per cent down on 2005 after a three-year run of double-digit sales growth and Intel’s shares have lost more than a quarter of their value this year.