Apple Discussed Acquiring Intel's Smartphone-Modem Chip Business
April 26 2019 - 2:59PM
Dow Jones News
By Tripp Mickle, Cara Lombardo and Dana Cimilluca
Apple Inc. held talks with Intel Corp. about acquiring parts of
its smartphone-modem chip business, according to people familiar
with the matter, a potential multibillion-dollar deal that would
accelerate the iPhone maker's efforts to develop wireless
technology for its devices.
The talks started around last summer and continued for months
before halting recently, around the time Apple reached a multiyear
supply agreement for modems from Intel rival Qualcomm Inc., some of
the people said.
Intel is now exploring strategic alternatives for its modem chip
business -- including a possible sale -- to Apple or another
acquirer, the people said. It has already received expressions of
interest from a number of parties and has hired Goldman Sachs Group
Inc. to manage the process, which is in an early stage. Should
there be a deal, it could yield as much as a few billion dollars
for Intel, some of the people said.
The Intel-Apple talks, which haven't been previously reported,
reflect growing openness by the iPhone maker toward the idea of big
acquisitions, people familiar with the company's operations said.
The talks also are part of broader tumult in the smartphone sector
as sales growth has stalled, squeezing the iPhone business that has
long driven Apple's profits.
Apple's supply deal with Qualcomm -- previously the sole
supplier of iPhone modems -- was part of the resolution of a
two-year legal fight over Qualcomm's royalties for wireless
technology. Intel had gained the iPhone business as that feud
worsened, then announced after the settlement that it was
abandoning development of modems for 5G smartphones.
Asked in an interview Thursday whether Intel is considering
selling the 5G smartphone modem business, Chief Executive Bob Swan
said it is "evaluating alternatives on what's the best course for
our IP and our people." He spoke after Intel lowered its financial
expectations for the year, which sent Intel's stock plunging by
about 10% Friday, one of its worst drops in years.
Selling the modem business would allow Intel to unload a costly
operation that was losing about $1 billion annually, according to
another person familiar with its performance. Any sale would likely
include staff, a portfolio of patents and modem designs related to
multiple generations of wireless technology, said Patrick Moorhead,
principal at Moor Insights & Strategy, a technology firm.
Besides Apple, other potential buyers could include Broadcom
Inc., ON Semiconductor Inc., Samsung Electronics Co., or China's
Unisoc Communications Inc., which is working on 5G modems, Mr.
Moorhead said.
"For Intel, the clock is ticking," Mr. Moorhead said. "It's not
pouring more money into this business, so the value goes down with
every second."
Apple has been reluctant to cut big deals in the past,
preferring to acquire about 15 to 20 small companies annually that
have technology it can easily integrate into future businesses. Its
biggest deal -- a $3 billion acquisition of Beats Electronics LLC
in 2014 -- helped the company jumpstart its music-streaming
business, but almost all of the Beats senior leadership
departed.
--Asa Fitch contributed to this article.
(END) Dow Jones Newswires
April 26, 2019 14:44 ET (18:44 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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