Here's a bit of ancient history: this group all started out as Agere (which was a spinoff of Lucent, which, in turn, was a spinoff of AT&T). Do you remember the Agere Orca FPGA? That is now part of Lattice.
This division makes network processors, similar to EZ-chip. Intel has always been in the Ethernet switch chip business, especially after buying Fulcrum, and they had their own family of XScale network processors. They sold part of this family, the PXA to Marvell in 2006, but they still own the rest of the family.
I think XScale is actually based on ARM, believe it or not. Intel has been making ARM processors longer than almost anyone! certainly long before Qualcomm, TI, or Samsung.
So maybe this purchase of LSI/Avago's Axxia ARM based network processor division is a way to enhance and extend the Xscale family.
This still seems like a bit of a stretch for Intel. I find it hard to believe that they would just acquire the group for the relationships. I'm sure the IP will be of some value, but this may also mark a change in Intel's CPU core strategy for certain market segments. It will be interesting to see what becomes of the product family.
From Jag Bolaria, senior analyst at the Linley Group:
It's not quite clear what Intel is really getting from this deal, but the company's acquisitions haven't historically resulted in huge returns. It will be difficult, but the company will have to be better about integreating LSI and wireless infrastructure into its wireless business.
"LSI was transitioning from Power to 32 bit ARM cores. And now the market is all shifting to 64 bit," Bolaria said, adding that LSI's value is in a modular architecture and complete SoC. "It would be logical for Intel to put in its own Atom cores. They've been trying to get into virtual architecture with x86...but haven't made a big bang in it yet."