LSI Sells Cell Phone Chip Unit

Updated from 5:23 p.m. EDT

SAN FRANCISCO -- LSI(LSI Quote - Cramer on LSI - Stock Picks) rubbed out the last remaining trace of its consumer ambitions Monday, with the sale of its cell-phone chip business.

The Milpitas, Calif., chipmaker said it has inked a $450 million deal to sell its mobility division to Germany's Infineon Technologies(IFX Quote - Cramer on IFX - Stock Picks).

The deal comes two months after LSI announced the sale of its consumer video chip business to Magnum Semiconductor, and it represents the latest about-face in the company's strategy since its $4 billion merger with Agere last year.

Monday's deal to sell the mobility chip business, which accounted for 14% of LSI's $670 million in revenue last quarter, leaves the company as a pure storage and networking player.

"The sale of our mobility business will allow us to further focus our efforts on attractive market opportunities in storage and networking, where we have a strong presence, significant differentiation and the scale needed to be successful," said CEO Abhi Talwalkar in a statement.

In addition to the $450 million in cash, LSI said the deal's terms include a $50 million performance-based payment that would be payable in the first quarter of 2009.

LSI also announced a $500 million stock buyback program to be funded from the proceeds of the sale.

Shares of LSI were up 3.5% at $6.40 in extended trading Monday. Infineon shares were up a penny at $14.06.

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