Time to Sell, Intel

It's been common knowledge since April that Intel (Nasdaq: INTC  ) was planning an efficiency review of its operations. Back then, CEO Paul Otellini said that an overhaul would affect every part of the company, leading to speculation that layoffs wouldn't be far behind.

But then, in May, Gordon Graylish, Intel's vice president and general manager for Europe, told Reuters that Otellini wasn't considering layoffs among the available options. I'll admit that had me wondering. I mean, come on, what kind of restructuring doesn't involve layoffs? Well, apparently, the kind that involves selling losing businesses.

Over the weekend, San Jose Mercury News reporter Dean Takahashi published an illuminating story that suggested Intel's strategy is to shed losing businesses it, at one time, paid $10 billion to acquire. The list includes its Xscale unit, which provides chips used in Research In Motion's (Nasdaq: RIMM  ) BlackBerry and Palm's (Nasdaq: PALM  ) Treo, and its communications processors, which are used to power network devices.

Together, these two groups accounted for $400 million in 2005 revenue, according to the Merc. There's no word on how many personnel would be cut from Intel's rolls if a sale went through, but I doubt the number would be significant. After all, $400 million is hardly more than a rounding error for Intel, which booked $38.8 billion in business during 2005.

Still, if the Merc has it right, I give Intel and Otellini credit for getting focused. Advanced Micro Devices (NYSE: AMD  ) has been taking market share from its larger rival in the key server market and, come next year, will have an overhauled mobile chip architecture aimed at making inroads into Intel's very lucrative laptop business. Beating back those twin threats while funding growth will require all the focus and resources Intel can muster.

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Fool contributorTim Beyersthinks Intel has been sleepwalking through much of the past three years. He wonders what will happen when the giant finally awakens. Tim didn't own shares in any of the companies mentioned in this story at the time of publication. You can find out which stocks he owns by checking Tim's Foolprofile. The Motley Fool has an ironcladdisclosure policy.


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