Intel to Buy a Wireless Division of Infineon

By CHRIS V. NICHOLSON and ANDREW ROSS SORKIN

Less than two weeks after saying it would buy McAfee, Intelannounced Monday that it would acquire the wireless business of the German chip maker Infineon for about $1.4 billion in cash.

Paul S. Otellini, the head of Intel, said that more and more devices were connecting to the Internet and that wireless connectivity was a sector where the company saw “growth potential.”

The Infineon unit makes chips used in laptops, netbooks and smartphones, including the AppleiPhone, and will strengthen Intel’s lineup of 3G, 4G, Wimax and Wi-Fi cards.

Intel expects the deal to close in the first quarter of next year, pending regulatory approvals.

Bernd Laux, a research analyst with Cheuvreux in Frankfurt, said the price tag was “fair,” and called the deal “smart and well-timed,” but predicted “the equity market will give Infineon only very brief credit for the disposal.”

Shares of Infineon fell 20 cents to close at 4.45 euros ($5.63) in trading in Frankfurt. Shares of Intel fell 41 cents, or 2.23 percent, to close at $17.96.

The deal would give Intel a powerful foothold in the market for smartphone chips, a segment of the business that is experiencing strong growth. Smartphone sales worldwide in the second quarter of 2010 rose 50.5 percent from the same period in 2009, according to the research firm Gartner.

Infineon said the wireless unit accounted for about 917 million euros in earnings — about a third of the company’s revenue — in the last fiscal year. Its sales in the third quarter increased 38 percent.

Intel’s own efforts to build a wireless chip business through its Atom processors have faltered, analysts say. Intel has deals with LG and Nokia to provide wireless chips. Mr. Otellini has been seeking ways to get into this market and diversify the company beyond PC chips.

Infineon said this month that it was seeking “a potential transaction” for the wireless chip unit.