At Intel, Everything's Considered on the Table

Not faring much better was the wireless communications and computing group with $432 million in operating loss on revenue of $1.8 billion, results that followed losses in 2002 and 2001.

In other words, Intel's core microprocessor business delivers operating margins as high as 39%, while its other two chip businesses carry negative double-digit margins. According to a recent report in the San Jose Mercury News, Intel has already begun shopping around portions of those businesses.

CIBC World Markets analyst Allan Mishan says Intel plays in the least-desirable section of the Wi-Fi chip market, as a notebook-chip supplier. By contrast, competitors, including Broadcom(BRCM Quote) and Marvell Technology(MRVL Quote), sell higher-priced Wi-Fi chips for products such as routers and access point equipment.

Mishan, whose firm does not have any banking relationships with Intel, adds that Intel has less need to be in the Wi-Fi and ethernet chip businesses, because it "essentially entered the market to drive penetration into PCs and that mission has been accomplished."

Intel's mobile application processors business, however, which is also rumored to be on the auction block, appears less expendable.

To date, Intel's XScale application processors have not made much of a dent in the cell-phone market, where Texas Instruments(TXN Quote) rules the roost, although the business has achieved some measure of success in the handheld PDA market.

Last year, Research In Motion(RIMM Quote) announced that it would use an Intel XScale-based processor in the next-generation version of its popular BlackBerry device. With the tech market's shift toward PDAs for everything from gaming to communications, the XScale chips could prove to be a strategic asset.

Intel's Mulloy says that the benefits and tradeoffs of remaining in businesses such as XScale are precisely the questions the company is asking itself.