APPLE NEGOTIATES WITH INTEL. “..talks to buy assets from Intel’s modem chip business, potentially acquiring patents and staff valued at $1 billion or more..” By Todd Horwitz, Bubba Trading.

 

Apple is in advanced talks to buy assets from Intel’s modem chip business, potentially acquiring patents and staff valued at $1 billion or more, the Wall Street Journal reported on Monday. The deal could be announced as soon as next week, according to the report. Intel shares rose over 1% in extended trading on the news. Qualcomm, the leading smartphone modem maker, dropped over 2%. Apple was flat.

Intel currently provides LTE modem chips for Apple’s latest generation of iPhones. But after Apple and Qualcomm settled a legal battle in April over patent licensing practices, the two companies announced that Apple would again start buying modem technology from Qualcomm. Hours after the settlement, Intel announced that it would no longer develop its next generation 5G modem chip.

Several analysts have said that 5G is a critical technology for Apple that could spur a major increase in upgrades when the technology is integrated into iPhones, perhaps as soon as 2020. Qualcomm is continuing to build its own 5G chip, and job listings digest that Apple is hiring staff to make its own 5G modem, although it’s unclear whether that technology is close to making it into an iPhone.

Apple’s supply deal with Qualcomm, previously the sole supplier of iPhone modems, was part of the resolution of a two-year legal fight between the companies over royalties Qualcomm collects for its wireless technology.

Intel had made inroads with Apple as that feud worsened but announced after the settlement that it was abandoning development of modems for 5G smartphones—an effort it had spent a decade and billions of dollars on—citing no clear path to profitability. Intel had bought its modem business in 2011 from Infineon Technologies AG for $1.4 billion.

The Apple-Intel discussions began last summer, around the time former Intel Chief Executive Brian Krzanich resigned, people familiar with the matter have said. Mr. Krzanich championed the modem business and touted 5G technology as a significant future revenue stream. When Bob Swan was named to that job in January, analysts said the odds of a deal rose because his focus on cleaning up Intel would require addressing the losses in the modem business.

Todd “Bubba” Horwitz

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Todd Horwitz - Author of “Average Joe Options“. Todd began his trading career in 1980 at the CBOE. He was one of the original traders in the OEX & helped start the SPX. He is a member the CME where he trades S&P futures as well as foreign currencies & is a regular contributor to CNBC, Bloomberg, BNN, Fox & many other major news networks.