Intel's Marvell-ous Venture

Well, that didn't take long.

Weeks after the San Jose Mercury Newsfirst reported that it would shed some of its losing businesses, Intel (Nasdaq: INTC  ) yesterday sold its communications and applications processor division to Marvell Technology (Nasdaq: MRVL  ) for $600 million.

Marvell will pay cash to acquire the unit and its 1,400 employees, though Intel will have the right to accept up to $100 million in Marvell stock as partial compensation. The deal is expected to close in the next four to five months.

The news helps top off a pretty big week for Intel. On Monday, the chip maker officially rolled out its new Xeon 5100 processor for servers, based on Intel's new Core Microarchitecture. The chip formerly known as Woodcrest is earning some fans, including well-known chip analyst Nathan Brookwood, who recently told BusinessWeek that Woodcrest could "make AMD's (NYSE: AMD  ) life more difficult than it has been in the last two years."

Maybe so, but early tests mean little. More important for investors is how customers react to the new Xeon, and how Paul Otellini's plans to restructure the chipmaker translate into profits. And that brings us back to Marvell.

There's a lot to like about the deal. On the plus side, it shifts needed resources from a market where Intel was being soundly beaten by Texas Instruments (NYSE: TXN  ) and Freescale Semiconductor (NYSE: FSL  ) , among others. On the minus side ... well, actually, I don't see a minus side. Intel will still get to make products for the high-growth smartphone market, although it will probably confine itself to concentrating on Wi-Fi and WiMax wireless technologies, where it already has a lead. Better still, the extra cash is likely to come in handy if the reports of a broad-based price war with AMD are true.

So is Intel's stock a buy? Some investors seem to think so, but the chipmaker will be receiving exactly none of my money. Why? Intel is restructuring to become leaner and meaner not because it can, but because it must, in order to preserve a rich franchise that is under serious threat from a hungry competitor. Color me crazy if you'd like, but to me that sounds about as appealing as spam and relish on week-old rye.

Allow us to chip in with related Foolishness:

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Fool contributorTim Beyerslikes Marvel better than Marvell most days. Today, he's not sure. 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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