SAN FRANCISCO – As the world’s biggest maker of computer chips, Intel Corp. can’t afford to ignore its huge blind spot in mobile phones.

Eighty percent of today’s personal computers use Intel processors. But Intel is absent in smart phones, which are threatening PCs as gateways to the Internet. One reason is that Intel still doesn’t have good ways to design chips to use less power, so Intel’s products drain batteries more quickly — something smart-phone makers won’t tolerate.

The dynamic has put Intel at risk of missing out on the next great opportunity for semiconductor companies. That is why Intel has decided to buy the wireless-chip division of Germany’s Infineon Technologies AG for $1.4 billion. With it, Intel gets the chips used in Apple Inc.’s popular iPhone.

The all-cash deal, announced Monday, is an acknowledgment that Intel has missed the boat on mobile phones, and it gives the company an opportunity to correct its course.

The challenge is similar to the one Microsoft Corp. is facing with Google Inc. as software is increasingly being delivered over the Internet instead of being stored on PCs, the way Microsoft has long approached it. Like Microsoft, Intel is the undisputed leader in a market that’s under attack from a fast-rising force from the outside.

Intel is trying to play catch-up before it falls too far behind.

Intel bought mobile software maker Wind River Systems for $884 million last summer, and the company has spearheaded development of the open-source Moblin software, which is designed to run on mobile devices that use Intel chips.

Two weeks ago, it announced plans to buy computer-security software maker McAfee Inc. for $7.68 billion, which would be the biggest acquisition in Intel’s 42-year history once it gains the expected approvals.

As mobile phones become increasingly enticing targets for hackers, security companies have been developing ways to protect those devices. With McAfee, Intel would be able to bake security into its mobile chips — including those from Infineon.

But even as Infineon’s products give Intel quick entry into the mobile-chip business, Intel is fighting its own history with the Infineon deal, which could prove to be a costly distraction. Many analysts aren’t optimistic about Intel’s chances, pointing to its spotty track record with acquisitions.

"We feel like we have seen this movie before," analyst Craig Berger with FBR Capital Markets wrote in a research note to investors.

Berger said Intel would gain a strong business with a "sizable presence" among big cell-phone makers and the expertise in building chips based on a low-power design that is widely used in cell phones.

However, he said he is skeptical of Intel’s ability to execute outside of its core market, which is making microprocessors that act as the "brains" of PCs.

Intel needs to branch out because that market is under pressure. Last week, Intel lowered its forecast for the third quarter, blaming weaker-than-expected consumer demand for PCs. PC makers also have been cutting prices drastically in recent years, and in lean times have been buying cheaper chips from Intel just to maintain slim profits.

Intel had a division that made chips for smart phones, but sold it off four years ago in a round of cost-cutting. Since then, Intel has focused on its core business. Meanwhile, use of the Internet on mobile phones has exploded, and companies that make chips for phones have benefited from demand for more capable — and expensive — chips.

Phone chips need to sip power instead of guzzle it, and even Intel’s energy-efficient designs are criticized as too power-hungry for today’s smart phones. Phone makers need to make awkward contortions, such as building bigger devices, to accommodate the need for a bigger battery — which most are loath to do.

With an annual research-and-development budget of nearly $6 billion, Intel is equipped to pour incredible resources into essentially any chip project it chooses. After its exit from the mobile-phone chip market in 2006, it focused on other types of communications technologies. Buying its way back into the market is the fastest way for the company to make up for lost time.

David Perlmutter, an Intel executive vice president, said in an interview with The Associated Press that the decision to sell the mobile-chip business in 2006 was "the right decision at the time," and that Intel is buying a more complete lineup of technologies from Infineon than those available in the business it sold.

"I hope that we’ve learned our lessons and that we’re way more focused," he said.

With Infineon, Intel would become the fifth-biggest supplier of mobile-phone processors if the deal closes as expected in the first quarter of next year.

It would get a running start in a market dominated by Qualcomm Inc., Texas Instruments Inc. and STMicroelectronics, which together own about half the total market for processors and other communications chips for cell phones, according to Gartner Inc.

Still, Intel would be a small player: the Infineon division owns only about 5 percent of the market.

Analyst Tristan Gerra with Robert W. Baird & Co. warned that the deal might be "too little, too late" for Intel’s push into smart phones, and he said that Intel will have to invest heavily to keep Infineon’s products competitive with the rollout of the next-generation cellular networks known as 4G.

Gerra noted that the mobile-phone business moves faster than the PC business.

"Whether a PC company such as Intel can move nimbly given more rapid new product cycles within the mobile-phone industry remains a significant question mark," he said.

WASHINGTON – Two years ago, the Federal Communications Commission stumbled as it tried to create a nationwide wireless broadband network for police officers, firefighters and emergency medical workers, delaying the construction of what everyone agrees is an urgently needed system.

Now the agency is hoping to rework the plan, which relies on a prime slice of airwaves called the D Block. But many public safety officials say the commission is, once again, going about it the wrong way.

In 2008, the FCC attempted to auction off the block to the wireless industry, with a requirement that the winning bidder help build out a sturdy communications network that would be shared with first responders and give them priority in an emergency. But those conditions proved too onerous, and the auction failed to attract any serious bidders.

So this time around, the agency hopes to auction off the D Block to wireless carriers and use the proceeds — projected to be as much as $4 billion — to help pay for a public safety network on a separate slice of spectrum already set aside for first responder broadband use. In frequency terms, the existing public safety airwaves are right next door to the D Block and just as big. Both pieces of spectrum were freed up in last year’s transition from analog to digital TV signals.

The existing public safety block, the FCC says, provides plenty of capacity for day-to-day operations — letting first responders access everything from surveillance video to fingerprint databases using laptops and handheld devices in the field. And in an emergency, the FCC proposal would give public safety users priority access to the D Block and other airwaves from the digital transition.

The FCC says its proposal would fulfill a Congressional requirement to auction off the D Block and ensure public safety benefits from the latest wireless technology.

"We have a brief technological window to get everybody on the same page from the beginning and build a 21st Century … broadband system," says Rear Admiral James Barnett, head of the FCC’s Public Safety and Homeland Security Bureau.

But the FCC proposal has run into fierce resistance from public safety leaders who warn that their current spectrum holdings are not big enough to meet their needs. They are wary of relying on commercial networks to fill the gap, particularly in emergencies, and are calling on the government to give the D Block to them so they can combine it with the adjacent airwaves and double the amount of spectrum dedicated to public safety broadband.

"If they auction this spectrum, we’ve lost it forever," says Rob Davis, head of the San Jose Police Department and president of the Major Cities Chiefs of Police Association. "We need to control this network ourselves."

Public safety officials have powerful allies in Congress, including Senate Commerce Committee Chairman Jay Rockefeller, D-W.Va., and Sen. John McCain, R-Ariz. But House Commerce Committee leaders are drafting legislation based on the FCC plan.

The big wireless carriers have also joined the fray. T-Mobile USA and Sprint Nextel Corp., eager for more spectrum, support the FCC proposal. Verizon Wireless and AT&T Inc., both flush with spectrum from 2008 auctions of other airwaves from the digital transition, want to see the D Block go to public safety. So does Motorola Inc., which dominates the market for first responder communications equipment and handsets.

The one thing everyone agrees on is the need to bring nation’s public safety communications networks into the digital age.

The shortcomings of the existing networks became apparent after the 9/11 attacks and Hurricane Katrina, when police officers, fire fighters and other first responders could not talk to one another because they were using incompatible — and sometimes antiquated — systems. One recommendation of the 9/11 Commission was the construction of a nationwide "interoperable" wireless network that would let public safety workers across agencies and jurisdictions communicate with each other.

The FCC insists its proposal, part of its national broadband plan, would meet the needs of first responders. The spectrum already dedicated to public safety, Barnett says, can handle day-to-day operations since advanced 4G wireless technology can make far more efficient use of airwaves than public safety networks do today.

And in a big emergency, he warns, even the bigger block of spectrum envisioned by the public safety plan might not be enough. The FCC’s proposal would give public safety first dibs on at least three times more spectrum in a crisis.

But Chuck Dowd, deputy chief in the communications division of the New York City Police Department, says commercial networks are just not reliable enough for first responders who deal with life-and-death matters. Richard Mirgon, president of the Association of Public-Safety Communications Officials International, adds that in a mass emergency, commercial networks are often already overwhelmed — making it impossible for first responders to even connect to them.

With the dispute now heading to Congress, the focus is on funding.

Bruce Gottlieb, chief counsel to FCC Chairman Julius Genachowski, says the FCC plan would drive down the cost of a first responder network by allowing public safety to piggyback on the massive investments being made by commercial wireless carriers as they upgrade their technology.

The agency’s plan puts the cost of building the public safety network at roughly $6.5 billion and the cost of operating and maintaining it at between $6 billion and $10 billion over 10 years — less than half the cost of a stand-alone network, the FCC says.

In the face of a ballooning federal deficit and state and local budget cuts, Barnett insists, the FCC plan offers the best way to come up with this funding.

But public safety officials are confident they can find the resources to pay for a broadband network even without D Block auction proceeds. If they get the D Block, they say, they would be able to lease excess airwaves to commercial carriers since they would not always need all of it.

What’s more, another key recommendation in the FCC’s national broadband plan is a proposal to free up a lot more spectrum for wireless broadband over the next 10 years. That, public safety officials say, will produce plenty of revenue to pay for a first responder network.

CUPERTINO, Calif. – A perfect iPhone? There’s no app for that. Apple Inc. will give free protective cases to buyers of its latest iPhone to prevent reception problems that occur when people cover a certain spot on the phone with a bare hand.

CEO Steve Jobs apologized Friday to people who are less than satisfied with the iPhone 4, even as he denied it has an antenna problem that needs fixing.

"We’re not perfect," Jobs said at a news conference. "Phones aren’t perfect."

The more than 3 million people who have already bought an iPhone 4 can go to Apple’s website starting late next week and sign up for a free case, he said. Apple can’t make enough of its $29 "Bumper" cases for everyone, so the company will let people chose from several case styles.

New buyers through Sept. 30 will also be eligible. Apple will send refunds to people who already bought a Bumper.

Jobs, expressing irritation with the critical coverage of the phone’s reception problems, echoed an earlier statement from Apple that no cell phone gets perfect reception. He played a video showing competing phones, including a BlackBerry from Research in Motion Ltd., losing signal strength when held in certain ways. He talked for 45 minutes and took 45 minutes of questions with Apple’s chief operating officer, Tim Cook, and Bob Mansfield, a senior Apple executive in charge of hardware engineering.

Phones usually have an antenna inside the body. In designing the iPhone 4, Apple took a gamble on a new design, using parts of the phone’s outer casing as the antenna. That saved space inside the tightly packed body of the phone, but meant that covering a spot on the lower left edge blocked the wireless signal.

Consumer Reports magazine said covering the spot with a case or even a piece of duct tape alleviates the problem. It refused to give the iPhone 4 its "recommended" stamp of approval for that reason, and on Monday it urged Apple to compensate buyers and fix the problem. The company had been criticized about spotty iPhone service in the U.S. on AT&T Inc.’s network even before the newest model came out.

On Friday, in the company’s first remarks following the magazine’s report, Jobs said Apple was "stunned and upset and embarrassed."

Jobs said the iPhone 4’s antenna issue isn’t widespread, with just over five out of every 1,000 complaining to Apple’s warranty service and less than 2 percent returning the device. Jobs also said that while the iPhone 4 is dropping calls slightly more frequently than its predecessor, the iPhone 3GS, it’s "less than one additional dropped call per 100."

"We’re not feeling right now that we have a giant problem we need to fix," Jobs said. "This has been blown so out of proportion that it’s incredible."

Analysts have criticized Apple’s responses to reports of reception problems as dismissive, and cautioned that the company shouldn’t come across as arrogant. A curt note attributed to Jobs told one early iPhone buyer to either hold the phone a different way or buy a case.

Apple has also said the main problem is actually with software, not antenna design. Apple said it recently discovered that iPhones display more cell phone signal "bars" than they should, leaving people who believed they had a strong signal frustrated by dropped calls. Apple issued a software update Thursday that it said would make the number of bars shown on the phone’s face more accurate.

But Consumer Reports painted the problem as much broader. On Friday, the magazine said the free cases were "a good first step toward Apple identifying and finding a solution for the signal-loss problem of the iPhone 4."

No phone owner wants a gadget that doesn’t work. But many people who have bought an iPhone 4 or are considering one seem willing to forgive the antenna problem because they like its other features so much.

"It’s not really my concern because I hardly make calls," said Ross Beck, a 22-year-old student in Seattle. "Honestly, it doesn’t faze me. I know Apple and I know they fix their mistakes."

Helen Ferszt walked out of Apple’s flagship store in New York City on Thursday after ordering the iPhone 4, her third model, despite having heard of the reception problems.

"I love the iPhone," said the 78-year-old psychotherapist from New York. But she added that Apple needs to do better than giving away a free case.

"No, I want it to be fixed," she said. "They can’t just hang us out to dry."

Jobs apologized Friday to buyers who had less-than-perfect experiences with the new device.

"We’re going to do whatever it takes to make them happy and if we can’t make them happy we’re going to give them a full refund and say we’re really sorry we inconvenienced you, and we’re going to do better next time," he said.

The refund applies even for those who have long-term contracts with AT&T Inc., the iPhone’s exclusive U.S. wireless carrier.

Apple shares slipped $1.55, less than 1 percent, to close Friday at $249.90.

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Mintz reported from Seattle. AP Technology Writers Barbara Ortutay and Peter Svensson in New York contributed to this report.

CUPERTINO, Calif. – Apple Inc. will give free protective cases to buyers of its latest iPhone to alleviate the so-called "death grip" problem in which holding the phone with a bare hand can muffle the wireless signal.

Apple CEO Steve Jobs announced the giveaway Friday during a news conference at the company’s headquarters, even as the company denied that the iPhone 4 has an antenna problem that needs fixing. The more than 3 million people who have already bought the iPhone 4 and new buyers through Sept. 30 will all be eligible.

People who already purchased the $29 "Bumper" cases will be refunded.

Jobs began the event by saying, "We’re not perfect," but was quick to point out that no cell phone is perfect. He played a video showing competing smart phones, including a BlackBerry from Research in Motion Ltd., losing signal strength when held in certain ways.

Phones usually have an antenna inside the body. In designing the iPhone 4, Apple took a gamble on a new design, using parts of the phone’s outer casing as the antenna. That saved space inside the tightly packed body of the phone, but means that covering a spot on the lower left edge of the case blocks wireless signal.

Consumer Reports magazine said covering the spot with a case or even a piece of duct tape alleviates the problem. It refused to give the iPhone 4 its "recommended" stamp of approval for this reason, and it had called on Apple on Monday to compensate buyers.

On Friday, in the company’s first remarks following the magazine’s report, Jobs said Apple was "stunned and upset and embarrassed."

Jobs said the iPhone 4’s antenna issue isn’t widespread. He said just over five out of every thousand users have complained to Apple’s warranty service, and less than 2 percent have returned the device.

"We’re not feeling right now that we have a giant problem we need to fix," Jobs said. "This has been blown so out of proportion that it’s incredible. I know it’s fun to have a story, but it’s less fun when you’re on the other end of it."

Analysts have criticized Apple’s first responses to reports of reception problems as dismissive, and cautioned that the company shouldn’t come across as arrogant.

Earlier, Apple said the problem with the phone was primarily a software issue, with iPhones displaying more cell phone signal "bars" than they should have been — leaving people who believed they had a strong signal frustrated by dropped calls. Apple issued a software update Thursday it said would make the number of bars shown on the phone’s face more accurate.

But Consumer Reports painted the problem as much broader. On Friday, the magazine said the free cases were "a good first step toward Apple identifying and finding a solution for the signal-loss problem of the iPhone 4."

Jobs apologized to buyers who had less-than-perfect experiences with the new device.

"We’re going to do whatever it takes to make them happy and if we can’t make them happy we’re going to give them a full refund and say we’re really sorry we inconvenienced you, and we’re going to do better next time," the CEO said.

The refund applies even for those who have long-term contracts with AT&T Inc., the iPhone’s exclusive U.S. wireless carrier.

Jill Small, an iPhone 4 owner who runs a fashion consignment business in Los Angeles, said she was of two minds about the antenna issue. On the one hand, she hadn’t noticed any problems with the phone. On the other hand, if there really is a problem, she finds Apple’s response inadequate.

"A case you can get for $10, but the antenna issue you’ll have for the life of the phone," she said. "If it was my business, I’d do a recall."

Ed Brown, who sells accessories for Apple products from a table set up on the street outside an Apple store in New York, said he’s had people come hunting for cases for the iPhone 4 because they’ve heard of the antenna problem. But they’re not mad at Apple.

"They love Apple and they’re dedicated customers," Brown said. "I haven’t heard much negative feedback."

Jobs, a cancer survivor, also addressed a question about his health Friday.

"I’m doing fine. I was even better earlier in the week (when) I was having a vacation in Hawaii, but I decided this was important enough to come back for," he said. "I’m doing great."

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AP Technology Writers Peter Svensson in New York and Jessica Mintz in Seattle contributed to this report.