LSI Sells Cell Phone Chip Unit

LSI inherited the mobility chip business in its Agere merger. While the business had the advantage of counting cell phone handset maker Samsung as a key customer, the mobility division was always something of a misfit within LSI's product lineup.

Since the Agere deal, LSI's sales have stalled and losses have mounted, forcing the company to cut its workforce and sell its chip packaging facilities to save costs. Putting the mobility division on the auction block is a move analysts had long expected.

"It's a piece of business that they've made pretty obvious that they weren't that interested in funding," said American Technology Research analyst Doug Freedman.

While the mobility chip business is profitable, LSI was only investing about half of what it should have been, Freedman said.

LSI said it will save $25 million a quarter in operating expenses as a result of the sale, and that 700 of its workers will be transferred to Infineon under the terms of the deal.

The deal is expected to be "roughly neutral to non-GAAP earnings per share by the end of 2008," which suggests that it will probably have a negative impact on earnings in the short term, Freedman said.

Even so, he described the deal as a win-win for both LSI and Infineon.

LSI said the deal is expected to close in the fourth quarter of 20907, subject to regulatory approval.

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