Intel's long-rumored search for a buyer for its communications and applications processor business is over. Marvell Technology has agreed to purchase the cell phone unit for $600 million in cash, effectively ending the world's biggest chipmaker's bid to become a major player in mobile handsets, where it never made much of an impact compared to dominant companies like Broadcom, Freescale, Qualcomm and Texas Instruments.

As part of the deal, Intel has the option to purchase $100 million in Marvell stock as well. Marvell is a 2,200 employee-sized company that specializes in chips for networking, communications and storage.

Intel will manufacture mobile chips for Marvell for up to two years, an arrangement the companies expect to continue until Marvell arranges other manufacturing resources.

With the sale to Marvell, Intel says goodbye to a line XScale processors, including the PXA9xx communications processor and PXA27x applications processor, that can be found in a plethora of high-profile PDA and smartphones from the likes of Palm, RIM, Motorola, HTC, Dell HP and many others. The PXA9xx runs RIM’s BlackBerry 8700 series and the PXA27x the Treo smartphone models from Palm, for example.

Intel acquired the technology used in its XScale line of mobile processors as the result of a 1998 patent infringement settlement with Digital Equipment Corp.

Yet even with sales estimates of around $300 million per year, the unprofitable chip division accounted for less than a percent of Intel's $38.8 billion in revenue for 2005. It is said to have proved a drag on the company.

Concerns about whether Marvell could turn a profit with the purchase sent that company's shares spiraling down 13 percent upon the news of the agreement.

Marvell CEO Dr. Sehat Sutardja said, "This transaction presents Marvell with a tremendous opportunity to become a long-term leading supplier in the cell phone and consumer electronics market segments."

He expects his company will continue to advance the XScale line by reducing chip sizes from the 130 nanometers used today to 65 nanometers, as competitors do. This would improve performance, lower costs and increase sales volumes, the AP reports.

Intel's mobile processor business is made up of approximately 1,400 workers involved in a variety of functions, including engineering, product testing/validation, operations and marketing. Marvell said that the vast majority of these people should become employees.

This sale is the first of what analysts expect will be many cost-saving measures on the part of the Intel, which reported a 38 percent decline in first-quarter profits in April. The company is in the middle of a 90-day restructuring review to, as CEO Paul Otellini puts it, create a "leaner, more agile and more efficient" company.

Profitable Intel businesses like chips for PCs and servers should benefit from the influx of cash and resources. According to the AP, ThinkEquity Partners analyst Eric Ross wrote in a report, "Intel is not as profitable as it once was, and times are looking tougher in the immediate future. Intel needs the cash to compete with Advanced Micro Devices and build the massive amount of capacity they plan."

In the end, Intel may end up reducing its 100,000-person workforce by as many as 10,000 jobs, according to Ross.

Today's deal doesn't include Intel's successful Centrino Wi-Fi or WiMax broadband technology. And Intel will be able to continue to use ARM-based Intel XScale processors for its networking and storage products, as it'll license and modify chip designs for those purposes directly from ARM Holdings PLC.