LSI has sold the mobility products group (MPG), which it inherited with its December 2006 acquisition of Agere, to Infineon Technologies for $450m in cash, plus a performance-based payment of up to $50m.
The deal comes hard on the heels of LSI’s June sale of the consumer business, which originated in both LSI and Agere, and was bought by audio and video chip specialist Magnum Semiconductor for an undisclosed sum. Both deals are a result of a study of its products portfolio following the Agere purchase.
To pacify its long-suffering shareholders, LSI it had authorized a new stock repurchase program of up to $500m, partly funded by proceeds of the MPG sale. Over the past year LSI’s stock has slid from $11.08 to $6.18 and the company’s current stock market value of $4.43bn only just exceeds the $4bn it paid for Agere.
Neubiberg, Germany-based Infineon said that in the first six months of this year, MPG had sales of 150m euros ($202m). It expects the acquisition will be positive to earnings at an EBITA level in 2008. MPG mobile radio baseband processors and platforms would complement Infineon’s existing portfolio and 700 LSI employees will join Infineon.
Though 1.1 billion mobile phones are expected to be sold this year and annual growth over the next three years is forecast at 6.5%, the MPG did not bring in sufficient returns for LSI to justify its retention. But LSI expects to cut operating expenses by $25m per quarter as a result of the sale.
Apart from the stock repurchase program, LSI said it would look for strategic acquisitions in its core markets of storage and networking.
Infineon, a spin-out from Siemens, has bounced back after the Siemens handset business collapsed when it was acquired by BenQ, and it has won deals with Nokia, LG-Electronics, Panasonic, and Samsung.
Since the spin-out of its Qimonda memory business in 2006, Infineon has focused on the areas of energy efficiency, communications, and security, and has been looking for acquisitions to strengthen these sectors.