Updated from 5:23 p.m. EDT
SAN FRANCISCO --
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
The deal comes two months after LSI announced the sale of its consumer video chip business to
, and it represents the latest about-face in the company's strategy
since its $4 billion merger with
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.
LSI inherited the mobility chip business in its Agere merger. While the business had the advantage of counting cell phone handset maker
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.