Intel to buy Infineons mobile unit for $1.4 bn

Written by Reuters | Frankfurt | Updated: Sep 1 2010, 04:47am hrs
Intel will buy German chipmaker Infineons wireless unit for $1.4 billion, enabling the US chipmaker to boost its presence in the smartphone market. The cash transaction is expected to close in the first quarter of 2011 and the mobile unit will remain as a standalone business, the companies said in a statement on Monday.

This is the second major deal for Intel within two weeks after the company announced its $7.7-billion offer for McAfee on August 19, its largest acquisition, bolstering the appeal of its chips as it tries to expand further into the mobile market.

Intels Atom mobile chips took the low-cost, no-frills netbook market by storm but are rarely found in smartphones where other chipmakers dominate. Infineon would make Intel an instant heavyweight (in the mobile space) and buy them three, four years in R&D, IDC analyst Flint Pulskamp has said. But analysts also caution that while an acquisition such as Infineons mobile chip unit is a step in the right direction, it will take time to produce results.

Meanwhile, rivals based on UK-listed ARMs chip designwhich is said to be more power-efficient than Intels offeringscontinue to grab market share.

Infineon shares fell 1.4% to 4.54 euros by 0812 GMT in Frankfurt, widening losses they posted on Friday after Intel warned its third-quarter revenue would fall short of its own expectations due to weak consumer demand on personal computers.

The positive effects of the (mobile chip) transaction have already been priced in. The sale has been discussed for months, said German market analyst Heino Ruland of Ruland Research.