In an attempt to focus on its core businesses, Intel Corp. said Tuesday it would sell its division which developed processors for handhelds and other application-specific chips to Marvell Technology Group for $600 million. The move streamlines Intel and gives more technology power to Marvell.

“The sale will enable Intel to focus its investments on its core businesses, including high-performance, low-power Intel Architecture-based processors and emerging technologies for mobile computing, including Wi-Fi and WiMAX broadband wireless technologies,” a statement by Intel reads.

Intel's communications and application processor business develops and sells processors for handheld devices including smart phones and personal digital assistants. The chips are based on Intel XScale micro-architecture and are ranked among the most powerful options for handheld devices.

Martin Kariithi, an analyst with Technology Business Research said that that, being a part of the restructuring program, the sell off the division will allow Intel to reduce expenses by cutting down the workforce and also by spinning off of the loss-generating communications chip business to boost overall profitability. Additionally, this will allow Intel to spend more on its core businesses and introduce microprocessors “ahead of schedule to counter the technology and price advantages enjoyed by AMD”.

Intel’s communications and application processor business includes approximately 1,400 employees involved in a variety of functions, including engineering, product testing/validation, operations and marketing. It is expected that the vast majority of these employees will become employees of Marvell.

Intel currently intends to receive the entire purchase price in cash. However, Intel has the option to take up to $100 million of the $600 million purchase price in Marvell common stock. Upon closing, Marvell may record a one-time charge for purchased in-process research and development expenses. The amount of that charge, if any, has not yet been determined. Intel will provide information regarding the financial impact of the transaction at a later time. The transaction is expected to close in approximately four to five months and is subject to regulatory review and other normal closing conditions.

After the close of the transaction, Intel intends to continue manufacturing products currently sold by this business for handheld devices and embedded applications, and to manufacture products that are being designed into upcoming devices. This arrangement is expected to continue while Marvell arranges other manufacturing resources. Intel and Marvell do not anticipate disruptions in the supply of these products due to this planned sale, the companies said.

This planned sale does not impact the ability of other Intel businesses in the networking and storage market segments to continue to use ARM-based, Intel XScale processors. Those Intel businesses will be able to continue licensing chip designs directly from ARM Holdings PLC and modifying the designs for their needs.