Apple yesterday confirmed reports that it was acquiring Intel’s smartphone modem business, to aid its efforts to create its own 5G radio chip. Apple said it was paying $1B, but analysts say that this was a lowball offer …
Apple gets quite a lot for its money.
Through this acquisition, Apple will beef up its wireless technology patent portfolio to over 17,000 patents. Apple also says that approximately 2,200 Intel employees will join Apple, as will Intel’s equipment and leases that pertain to the smartphone modem business.
However, while Intel had initially hoped for several billion, it was losing money at such a rate that it may well have felt forced to accept the first offer on the table, say analysts.
Business Insider cites three different analysts all sharing the same view.
Intel is essentially giving its technology away in selling its failing smartphone modem chip business to Apple for $1 billion, but the chip giant had no choice in order to get rid of a thorn in its side, analysts say.
“At $1 billion, they are basically giving the IP away,” Bernstein Research analyst Stacy Rasgon told Business Insider. Wedbush analyst Daniel Ives echoed this view in a note to clients: “The $1 billion is below the ‘few billions’ that were initially contemplated” […]
Analyst Rob Enderle of the Enderle Group said Intel found itself in a a “horrid bargaining position,” against Apple, at a time when the chip giant is also struggling to regain its footing in other key arenas, particularly the data center market.
It’s been estimated that Intel was at one point losing a billion dollars a year on the project, and even now is expecting to save up to $500M this year through the sale, meaning that it had little choice but to sell quickly.
“We are now expecting 2019 savings from our modem exit to rise to approximately $400 to $500 million dollars from our earlier estimates of $200 to $300M dollars,” Chief Financial Officer George Davis [told analysts yesterday].
“Intel’s probably happy just to get out of it,” Ragson said.
Earlier speculation indicated that it was going to take Apple until at least 2024 to ready its own 5G radio chip, but a report today suggests that the company might be able to hit this milestone in at least some devices by 2022.