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Cash rich Apple is in advanced talks to buy Intel’s 5G modem chip division the Wall Street Journal reports. The value of the deal could be $1 billion or more as 5G iPhones come into focus. Intel reports later in the week.

Intel 5G

The WSJ said deal could be announced as soon as next week.

Back in April the WSJ reported that Apple Inc. held talks with Intel Corp. about acquiring parts of its smartphone-modem chip business, a potential multibillion-dollar deal that would accelerate the iPhone maker’s efforts to develop wireless technology for its devices. The journal aid the talks started around last summer and continued for months before halting in April, around the time Apple reached thw multiyear supply agreement for modems from Intel rival Qualcomm.

Intel. Qualcomm and Apple shares all reacted to the report Qualcom is  the leading smartphone modem maker. Intel currently provides LTE modem chips for the latest generation of Apple iPhones.

Market Reaction

  • Intel Corporation NASDAQ: INTC $51.35 +1.08 (2.15%) Closed: Jul 22, 2019 After hours 52.04 +0.69 (1.34%)
  • Apple Inc. NASDAQ: AAPL $207.22 +4.63 (2.29%) Closed: Jul 22, 2019  After hours 207.69 +0.47 (0.23%)
  • QUALCOMM, Inc. NASDAQ: QCOM $75.95 +0.95 (1.27%) Closed: Jul 22, 2019 After hours 74.19 −1.76 (2.32%)

In April Apple and Qualcomm settled a patent techlogy case with Qualcomm. Intel announced almost immediately after that settlement it would no longer develop its next-generation 5G modem chip. Qualcomm is continuing to build its own 5G chip.

It has been touted by sell side analysts that 5G is a critical technology for Apple upgrades when the technology is integrated into iPhones, perhaps as soon as 2020. Apple followers have been reporting that job listings suggest 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 has money to spend with a war chest of $225 billion in cash and marketable securities. Apple’s biggest deal to date has been $2.6 billion purchase of Beats Electronics and Beats Music in 2014. Last year, Apple bought staff and patents from British chip maker Dialog Semiconductor for $600 million. 

Intel Earnings

Intel Corp is set to report its second quarter 2019 results on July 25, Thursday after the market close. On average, analysts expect the chipmaker to earn $0.90 per share on revenue of $15.69 billion, representing a year-over-year decline of 13% in EPS from $1.04 and a 7.5% drop from revenue of $16.96 billion in the 2018 June quarter.

Shares of Intel were up 2.15% at $51.35 today.

Intel had planned to introduce a wide range of 10nm-based products in 2019 and 2020 and the company is expected to launch its first 7nm-based product in 2021. During the Investor Meeting, the semiconductor giant also revealed its plans to introduce new products in the areas of AI, 5G and autonomous driving. Intel also described a three-year financial plan to achieve 2021 total revenue between $76 billion and $78 billion while growing free cash flow and reducing spending.

The company signaled its ambition to achieve $85 billion in total revenue by 2022-2023.

Last Friday, Reuters reported that POTUS Trump is expected to meet the heads of Intel and Broadcom (NASDAQ: AVGO) today and discuss the ban on Huawei Technologies and other topics.

Apple and Intel each declined to comment.

From The Traders Community Research Desk

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