LONDON — Struggling German chip group Infineon Technologies AG is selling its wireline communications operation to an affiliate of U.S. private equity firm Golden Gate Capital for 250 million euro (about $350 million).

Infineon says the deal marks a further step in the refinancing of the company and its strategic direction. The move means the group will now focus on four application segments: automotive; industrial and multimarket; chipcard and security and wireless.

The company had already spun out its memories business which subsequently became Qimonda, but this group is also struggling and is close to bankruptcy.

Infineon said it expected to close the deal with Golden Gate in autumn 2009. Infineon said that the new owners would continue with all products, locations and development projects.

The new company is set to be led by current division head Christian Wolff, who said that it is "well positioned to stand on its own feet."

Employment contracts for approximately 600 employees in the wireline operation will be transferred to the new company. Furthermore, an estimated 300 employees from Infineon central functions who already work on behalf of the wireline communications segment will also join the new entity.

"Golden Gate Capital is extremely excited to be partnering with Wireline management to build upon the advanced technologies, innovative products, and collaborative customer relationships that make Infineon Wireline a leader in its markets," said John Knoll, Managing Director of Golden Gate Capital, in a statement issued by Infineon.

Peter Bauer, CEO of Infineon, said the divestiture of the wireline communications operation is an important step in the company's overall refinancing process.

"Our stronger focus enables us to expand our leading technological position in the three key sectors energy efficiency, communications and security," added Bauer.

The operation being disposed of focuses on semiconductors and systems for wireline access and Voice over IP gear.

Infineon says that despite the economic downturn, the segment achieved a positive result in the past few quarters.

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