Infineon to Sell Business

Infineon Technologies ADS (IFNNY.PK) has entered into an agreement with Intel Corporation (INTC) to sell its Wireless Solutions (WLS) business for a cash value of approximately $1.4 billion. The company’s WLS business will continue to operate as a separate business with its existing customer base.

The transaction has been approved by the board of directors of Intel, and the supervisory board and management board of Infineon and is expected to close in the first quarter of 2011.

The Infineon’s WLS business, a worldwide supplier of cellular solutions to leading phone manufacturers, facilitates Infineon to expand its leading position in markets for automotive, industry and security technologies. Infineon believes Intel is an ideal buyer for its business, under whom the WLS business is expected to prosper in future. Intel is committed to serve WLS’ existing customers, including support for ARM-based platforms.

The technology of WLS will support Intel’s stratagem to produce omnipresent smartphones and laptops as well as its computing strategy, Internet connectivity. The acquisition also helps Intel to offer a portfolio of products that covers an entire collection of wireless solutions from WiFi and 3G to WiMAX and LTE. Demand for wireless solution has increased tremendously in recent times.

Infineon’s Wireless Solutions business generated about €917 million of revenue in FY09, accounting for about 30% of Infineon’s total annual revenue of €3.03 billion.

Infineon Technologies ADS designs, develops, manufactures, and markets semiconductors and complete systems solutions that are used in a variety of microelectronic applications, including computer systems, telecommunications systems, consumer goods, automotive products, industrial automation, control systems, and chip card applications. The company’s products include standard commodity components, full- and semi-custom devices and application-specific components for memory, analog, digital, and mixed-signal applications.

We currently maintain our Neutral recommendation on Infineon Technologies ADS, with a Zacks #2 Rank (Buy recommendation) over the next one-to-three months.

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