LSI Sells Mobile Biz for $450M

Component specialist LSI carved off some more of its business last night, selling off its mobility products division to Infineon for $450 million in cash. (See LSI Sells Mobility Products to Infinineon.)

In addition to the cash transaction, Infineon will make a performance-based payment of up to $50 million to LSI in the first quarter of 2009. LSI has not disclosed the terms of this payment.

Under the terms of the deal, Infineon will purchase LSI's Mobility Products Group (MPG), which designs semiconductors and software for cellphone handsets and solutions for satellite digital audio radio.

When the acquisition closes in the fourth quarter, some 700 LSI employees will move over to Infineon, according to LSI spokeswoman Kristen Hyland.

The deal represents the latest move in LSI CEO Abhi Talwalkar's long-term plan to streamline the vendor's business, narrowing its focus onto storage and networking technologies. (See CEO Talks of 'Refounding' LSI and LSI Announces Board Changes.)LSI has had to weather something of a financial storm in recent quarters, absorbing blows from mergers, weakness in its networking business, and a slowdown in IT spending. (See LSI Promises Better, LSI Completes Agere Merger, and LSI Promises Better.)

As result, the proceeds from the sale of the mobile products division will be used to finance a stock repurchase program of up to $500 million.

"The Street was clamoring for this," says Tayyib Shah, a senior analyst at Longbow Research. "LSI was under pressure to do this, although it came somewhat sooner than expected."

The analyst explains that the deal is a shrewd move by LSI, removing the need to invest significantly in a mobile silicon market dominated by the likes of Texas Instruments. "Now they can focus on storage," he says, adding that this is more in line with Talwalkar's background as an Intel exec.

LSI nonetheless still has its work cut out, particularly in a tough spending climate. (See Sun Slips on Storage, Overland Struggles With 'Softness', Isilon: The Honeymoon's Over, and HP's Storage Sneaks Up.) "IT spending is recovering, but, so far, its impact on LSI has been lackluster," says Shah.The Infineon deal comes hot on the heels of LSI's $4 billion acquisition of Agere Systems earlier this year, which prompted the firm to reposition itself around storage and networking. (See LSI to Buy Agere for $4B.) This led to the sale of LSI's consumer products division to Magnum Semiconductor last month. (See LSI Completes Sale.)

Recent months have seen LSI slowly add more flesh to the bones of its storage strategy. Earlier this year, for example, the vendor bought semiconductor startup SiliconStor in an attempt to link Serial Attached SCSI (SAS) and Serial ATA (SATA). (See LSI Lassos SiliconStor and LSI Pays $55M for SiliconStor.)

The SiliconStor deal followed the acquisition of storage management and virtualization specialist StoreAge, which is expected to form the basis of a forthcoming data management offering tied to Solid State Disk (SSD) and traditional magnetic disk technology. (See LSI Looks Ahead, IDC: SSDs to Go Mainstream, LSI Annexes StoreAge, LSI Buys StoreAge, and LSI Sniffs Out StoreAge.)

In trading today, shares of LSI rose 46 cents (7.61 percent) to $6.65.