Intel sells XScale handheld production rights to Marvell for $600 million

Posted by Scott M. Fulton, III

Santa Clara (CA) - The first stage of Intel's latest reorganization got under way today well ahead of schedule, with an announced deal to sell its applications and communications processor unit - responsible for producing XScale processors for handsets and BlackBerrys - to Marvell Technologies (not two miles away from Intel) for a reported $600 million in cash, plus the assumption of liabilities.

The move confirms a majority of the account of San Jose Mercury News reporter Dean Takahashi, who reported earlier this month that Intel was scouting for a buyer for its underperforming applications processor business and communications processor business. Intel's XScale business reportedly generated only about $250 million in sales last year, though to influential clients including Palm and Research in Motion (BlackBerry).

As Intel spokesperson Robert I. Manetta told TG Daily this morning, Marvell will acquire the rights to produce XScale communications processors from Intel, which itself licenses the technology from UK-based ARM Holdings. Specifically, Marvell acquires production rights for XScale in cellular communications and handheld devices; Intel will continue to be able to utilize XScale for other purposes. So XScale was not sold outright to Marvell - it wasn't Intel's technology to sell. However, both Marvell and Intel may continue to conduct research and develop new products, in their respective coverage areas, based on XScale. Marvell is not acquiring Intel's research facilities - just its production resources, which include 1,400 employees. Marvell may or may not, at its discretion, continue to use the XScale trademark, which will continue to be owned by Intel.

Not included in this deal, Manetta assured us, is Intel's IXP network processor business, which Takahashi's story revealed was also for sale.

This deal will take four to five months for the two parties to close, TG Daily was told, after which Intel will either receive $600 million in cash or exercise an option to receive part of that amount in Marvell stock. In addition, Marvell agreed to assume an undisclosed amount of Intel debt, presumably related to its XScale business.

In recent weeks, Intel advised reporters that further details about its reorganization plan that CEO Paul Otellini set in motion last April, would be made available in July. This deal went down sooner than that. When asked why, Manetta told TG Daily there was no point in both sides waiting, saying, "When they're done and ready to go, they have to go." He pointed out that Intel and Marvell already have a close relationship - not just geographically - which dates back at least six years, during which time Marvell has been a principal supplier of gigabit Ethernet controllers for Intel.

Stay with TG Daily throughout the day for more details on the first stage of Intel's reorganization.