updated 6/27/2006 8:52:38 AM ET 2006-06-27T12:52:38

Intel Corp., facing rough competition and slowing demand for personal computers, is selling its division that makes processors for handheld devices in a $600 million deal announced Tuesday with Marvell Technology Group Ltd.

Marvell will be acquiring the business that makes processors based on Intel’s XScale technology, which has produced the chips used in the popular BlackBerry and Treo handheld devices. The unit employs 1,400 people, and Marvell said it expects to retain the “vast majority” of them.

The sale comes after Intel lost 5.3 percentage points of share for PC and server microprocessors to competitor Advanced Micro Devices Inc. in 2005. In April, Santa Clara-based Intel reported a 38 percent decline in first-quarter profit as gross margins fell below forecasts.

Intel Chief Executive Paul Otellini a few days later vowed to restructure the company in an attempt to create a “leaner, more agile and more efficient” company. The deal allows Intel to focus more on other kinds of processors, such as chips for notebook computers.

Marvell, also based in Santa Clara, is to pay cash, although Intel has an option to receive $100 million of the purchase price in Marvell stock. Marvell said it may take a charge for research and development costs when the deal closes.

Copyright 2006 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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